THE EFFECT OF CORPORATE GOVERNANCE MECHANISM ON EARNINGS MANAGEMENT ACTIVITIES (Empirical Study in Manufacturing Companies of Food and Beverage Sub Sectors Listed On Stock Exchange of Indonesia 2012-2016)

Abstract

ABSTRACT

The phenomenon of the manipulation of earnings management raises a sense of distrust of investors against financial statements presented by the company. The number of cases concerning earnings management in Indonesia based on the balance sheet (2012) the financial services authority suspect the manipulation of financial statements on 2012 conducted management of Bakrie group, PT Bakrie Bumi Resources Tbk (BUMI).This research aimed to examine the effect of corporate governance mechanism on earnings management activities. Corporate governance mechanism used in this research are the structure of managerial ownership, institutional ownership structure, the proportion of independent board, audit committee.Types of research used in this study is verificative research. The object of this research is corporate governance mechanism. The datas are collected by using literature study methods and documentation. The data sources of this research used datas of manufacturing firms listed on the Indonesia Stock Exchange (IDX). And the datas are taken from financial statements report and annual report 20122016. The results showed that : (1) partiallymanagerial ownership structure has no significant effect on earning management, (2)partiallyinstitutional ownership structure has no significant effect on earning management, (3) partiallyproportion of independent board has no significant effect on earning management, (4) partial, audit committee has a significant positive effect on earning management, (5) simultaneouslythe structure of managerial ownership, institutional ownership structure, proportion of independent board and audit committee, have a significant effect on earnings management.

Key Words: Corporate Governance, The Structure of Managerial Ownership, Institutional Ownership Structure, Proportion of Independent Board, Audit Committee, Earning Management