The Influence of Agency Conflict Types I and II on Earnings Management

International Journal of Economics and Financial Issues, Vol. 6 (S4), Pp. 126-132, July 2016

10 Pages Posted: 19 Jul 2016

See all articles by Vince Ratnawati Marbun

Vince Ratnawati Marbun

University of Riau

Mohamad Abdul-Hamid

Universiti Utara Malaysia - School of Accountancy

Oluwatoyin Muse Johnson Popoola

Universiti Utara Malaysia

Date Written: July 5, 2016

Abstract

This study examined the influence of agency conflict Type I (as represented by managerial ownership and institutional ownership), and agency conflict Type II (as represented by Control Rights, Cash Flow Rights, Cash Flow Rights leverage) on earnings management. A model was developed and tested using a sample of 108 pyramidal structure companies listed on Indonesian Stock Exchange from 2008 to 2012. Data were collected and analysed using least square regression model. The result showed that there is a significant association between managerial ownership and Control Rights. However, Control Rights (in agency conflict Type II) have the greatest influence on earnings management. Consequently, Type II agency conflict have the largest influence on earnings management compared to Type I agency conflict. The significance of the study is the potentials to assist the institutions and investors know the actual company performance and provides a better understanding of the agency theory more broadly vis-a-vis the relative impacts of Type I and Type II agency conflicts.

Keywords: Earnings Management, Agency Conflict Type I and Type II, Developing Nation

JEL Classification: G32, G23, M410

Suggested Citation

Marbun, Vince Ratnawati and Abdul-Hamid, Mohamad and Popoola, Oluwatoyin Muse Johnson, The Influence of Agency Conflict Types I and II on Earnings Management (July 5, 2016). International Journal of Economics and Financial Issues, Vol. 6 (S4), Pp. 126-132, July 2016 , Available at SSRN: https://ssrn.com/abstract=2810752

Vince Ratnawati Marbun

University of Riau ( email )

Kampus Bina Widya, Jl. HR Subantas KM 12.5
Riau, Kota Pekanbaru 28293
Indonesia

Mohamad Abdul-Hamid

Universiti Utara Malaysia - School of Accountancy ( email )

TISSA-UUM, College of Business
Universiti Utara Malaysia
Sintok, Kedah Darul Aman 06010
Malaysia
+61450641422 (Phone)

Oluwatoyin Muse Johnson Popoola (Contact Author)

Universiti Utara Malaysia ( email )

Sintok, Kedah 06010
Malaysia
+60164354874 (Phone)
+6049287216 (Fax)

HOME PAGE: http://ssrn.com/author+2390979

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