PENGARUH MANIPULASI AKTIVITAS RIIL TERHADAP MANAJEMEN LABA BERBASIS AKRUAL PADA PERUSAHAAN MANUFAKTUR YANG TERDAFTAR DI BURSA EFEK INDONESIA (BEI). SKRIPSI,.

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THE INFLUENCE OF REAL ACTIVITIES MANIPULATION ON ACCRUAL-BASED EARNINGS MANAGEMENT

(An Empirical Study at Manufacturing Companies Listed in Indonesian Stock Exchange)

A THESIS

Submitted in Partial Fulfillment of Requirements For Obtaining The Degree of Economy Bachelor

RIZKA NURJANNAH Reg. No. 709220053

FACULTY OF ECONOMIC UNIVERSITAS NEGERI MEDAN

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ABSTRACT

Rizka Nurjannah. Reg. No. 709220053. The Influence of Real Activities Manipulation on Accrual-Based Earnings Management. Thesis, Program of Accounting Study, Faculty of Economic, Universitas Negeri Medan, 2013.

The question in this research is whether real activities manipulation has influence on accrual-based earnings management. The objective of this research is to find out the empirical evidence of the influence of real activities manipulation on accrual-based earnings management at manufacturing companies listed in Indonesian Stock Exchange (IDX) in year 2011.

The population in this study are all manufacturing companies listed in Indonesian Stock Exchanges in year 2011. From 136 listed companies, 122 companies selected as the samples. Data used in this research is secondary data, by collecting the financial statements of the Indonesian Stock Exchanges website on the internet site http://www.idx.co.id and data from the Indonesian Capital Market Directory. Technical data analysis used was simple regression analysis.

Results obtained with significance level α = 5%, indicating that the level of real activities manipulation has no effect on accrual-based earnings management with the p-significance value 0.757 > 0.05.

The conclusion of the research hypothesis states that the alternative hypothesis rejected. This means that real activities manipulation does not influence accrual-based earnings management at manufacturing companies listed in Indonesian Stock Exchanges.

Keywords: Earnings Management, Real Activities Manipulation, Accrual-Based Earnings Management.

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ABSTRAK

Rizka Nurjannah. NIM 709220053. Pengaruh Manipulasi Aktivitas Riil Terhadap Manajemen Laba Berbasis Akrual pada Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia (BEI). Skripsi, Program Studi Akuntansi, Fakultas Ekonomi, Universitas Negeri Medan, 2013.

Permasalahan yang dibahas dalam penelitian ini yaitu apakah manipulasi aktivitas riil berpengaruh terhadap manajemen laba berbasis akrual. Penelitian ini ditujukan untuk mengetahui bukti empiris dari pengaruh manipulasi aktivitas riil terhadap manajamen laba berbasis akrual pada perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia pada tahun 2011.

Populasi dalam penelitian ini adalah seluruh perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia tahun 2011. Dari 136 perusahaan yang terdaftar, dipilih 122 perusahaan sampel. Data yang digunakan dalam penelitian ini adalah data sekunder, dengan cara mengumpulkan laporan keuangan dari situs Bursa Efek Indonesia pada situs internet http://www.idx.co.id dan data dari Indonesian Capital Market Directory. Teknik analisis data yang dilakukan dengan menggunakan analisis regresi sederhana.

Hasil yang diperoleh dengan taraf signifikansi α = 5%, menunjukkan bahwa manipulasi aktivitas riil tidak memiliki pengaruh terhadap manajemen laba berbasis akrual dengan tingkat probabilitas 0,757 > 0,05.

Kesimpulan dari hasil penelitian menyatakan bahwa hipotesis alternatif ditolak. Hal ini berarti bahwa manipulasi aktivitas riil tidak mempengaruhi manajemen laba berbasis akrual pada perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia.

Kata Kunci: Manajemen Laba, Manipulasi Aktivitas Riil, Manajemen Laba Berbasis Akrual.

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SUPERVISOR APPROVAL SHEET ... i

APPROVAL AND LEGALIZATION SHEET ... ii

ABSTRACT ... iii

ABSTRAK ... iv

ACKNOWLEDGEMENT ... v

CONTENTS ... viii

TABLES ... xi

FIGURES ... xii

LIST OF APPENDIX ... xiii

CHAPTER I: INTRODUCTION ... 1

1.1Background of The Study ... 1

1.2Problem Identifications ... 5

1.3Research Concentration ... 5

1.4Research Question... 6

1.5The Objective of Research ... 6

1.6Research Contributions ... 6

CHAPTER II: REVIEW OF LITERATURES ... 7

2.1 The Theory ... 7

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2.1.2 Accrual-Based Earnings Management ... 13

2.1.3 Real Activities Manipulation ... 14

2.2 The Previous Study ... 19

2.3 The Conceptual Framework ... 24

2.4 The Hypothesis ... 25

CHAPTER III: RESEARCH METHOD ... 26

3.1 Location and Time of Research ... 26

3.2 Population and Sample ... 26

3.3 Type and Source Data ... 27

3.4 Research Variables and Operational Definition ... 27

3.5 Data Collecting Technique ... 33

3.6 Data Analyzing Technique ... 33

3.7 Hypothesis Test... 35

CHAPTER IV: RESEARCH RESULT AND ANALYSIS... 36

4.1 Research Result ... 36

4.1.1 General View of Sample ... 36

4.1.2 Descriptive Analysis ... 48

4.1.3 Normality Test ... 50

4.1.4 Regression Test ... 50

4.1.5 Hypothesis Test ... 51

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CHAPTER V: CONCLUSION AND SUGGESTION ... 54

5.1 Conclusion ... 54

5.2 Suggestion ... 54

REFERENCES ... 55 APPENDIX

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TABLES

Table 2.1 The Previous Study ... 21

Table 4.1 Determination of Sample ... 36

Table 4.2 List of Selected Manufacturing Companies... 37

Table 4.3 Accrual-Based Earnings Management ... 43

Table 4.4 Real Activities Manipulation ... 47

Table 4.5 Dependent and Independent Variable in Descriptive Statistics ... 49

Table 4.6 Regression Result ... 51

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LIST OF APPENDIX

Appendix A

Result of Data Tabulation

Appendix B SPSS Result

Appendix C Administration

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CHAPTER I INTRODUCTION

1.1 Background of the Study

Earnings is one of tools to measure the company’s performance which investors and creditors give first attention because they use earnings to evaluate managements performance. Good earnings is useful in decision making, which have characteristics: relevance, reliability, and comparable.

One of the ways that management can do in arranging financial statements that have effects on earnings is earnings management. Earnings management is hoped to be able to increase firms’ value in a certain period.

As we known that earnings is one of the important things in a company and it

is used to measure the manager’s performance in a certain period, many managers try

to give a “good” earnings to the investors or shareholders to get their incentives. This

motivation pushes the managers to do earnings management. Bagnoli and Watts (in Pudjiastuti and Mardhiyah, 2006) told that an earnings management practice is done in many companies.

Earnings management can occur because there is a conflict of interest between principal (owners/shareholders) and agent (management). They cannot meet their maximum utilities because management has more information about firms than shareholders and it causes asymmetry information that management may do accounting practices with earnings oriented to reach particular performance. Agency

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conflict causes opportunity for managements to report unreal earnings that will cause the firms value decrease in the future.

Gunny (2005) classified earnings management into three groups, they are: fraud accounting, accrual-based earnings management, and real activities manipulation. Roychowdhury (2006) and Graham et al. (2005) found that managers prefer real activities manipulation than accrual-based earnings management since Sarbanes-Oxley Act (SOX). According to Gunny et al. (2005), a shift from accrual earnings management to real earnings management due to several factors. First, the manipulation of accrual earnings management more often used as a central observation or inspection by auditors and regulators rather than decisions about pricing and production. Second, only focuses attention on accrual earnings management is risky because the companies may have limited flexibility to adjust accruals, such as limitations in reporting accruals discretionary (Graham et al. 2005). Cohen et al. (2008), Cohen and Zarowin (2010), and also Badertscher (2011) prove that firms make choices between real activities manipulation and accrual-based earnings management. Zang (2012) extends research on the trade-off between real activities manipulation and accrual-based earnings management. Zang (2012) proves that there is direct substitution between them after the fiscal year-end due to their sequential nature.

This thesis is replication of Zang (2012). Following Zang (2012), my study will focus in the two strategies of earnings management: accrual-based earnings management and real activities manipulation. The difference in this research is in

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research method. In Zang (2012), the research used data panel and the research was done in many range of time and in many range of data. Meanwhile, in this research, the researcher only observes in a year to see the overall effects of earnings management in that year. This research will focus at manufacturing companies listed in Indonesian Stock Exchange in year 2011. Data in this research will process by SPSS 16.

Real activities manipulation is a purposeful action to alter reported earnings in a particular direction, which is achieved by changing the timing or structuring of an operation, investment, or financing transactions (Zang, 2012). The idea that firms engage in real activities manipulation is supported by the survey evidence in Graham et al. (2005). They report that 80 percent of surveyed CFOs stated that, in order to deliver earnings, they would decrease research and development (R&D), advertising, and maintenance expenditures, while 55 percent said they would postpone a new project, both of which are real activities manipulation.

Unlike real activities manipulation, which alters the execution of a real transactions taking place during the fiscal year, accrual-based earnings management is achieved by changing the accounting methods or estimates used when presenting a given transaction in the financial statements (Zang, 2012). For example, changing the depreciation method for fixed assets and the estimate for provision for doubtful accounts can bias reported earnings in a particular direction without changing the underlying transactions.

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The focus of this study is whether managers do real activities manipulation during the fiscal year and accrual-based earnings management at the fiscal year-end as substitute. This study is important because as mentioned by Fields et al. (2001), examining only one earnings management technique at a time cannot explain the overall effect of earnings management activities. In particular, if managers use real activities manipulation and accrual-based earnings management as substitutes for each other, then examining either type of earnings management activities in isolation cannot lead to definitive conclusions. Means it is important to know whether managers use the two techniques of earnings management and make a trade-off among them.

Real activities manipulation must occur during the fiscal year and is realized by the fiscal year-end, after which managers still have the chance to adjust the level of accrual-based earnings management. This timing difference implies that manager would adjust the latter based on the outcome of real activities manipulation. Hence, there is direct substitution between them; if real activities manipulation turns out to be unexpectedly high (low), then managers will decrease (increase) the amount of accrual-based earnings management they carry out.

As we known, manufacturing company is the biggest emitent that listed in Indonesian Stock Exchange. It means that it gives a big chance for the investors to give their investments. Then, manufacturing companies will be the focus of investors. In order to get many investors, there is a big opportunity for managers to do earnings management. Besides, manufacturing company is more complex than other

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companies. It accommodates many aspects of accounting. Means it is very easy for managers to do earnings management.

Based on this theory, the researcher is interested to research “The Influence of Real Activities Manipulation on Accrual-Based Earnings Management (An Empirical Study at Manufacturing Companies Listed in Indonesian Stock Exchanges)”.

1.2 Problem Identifications

As related to the background of the study above, there are some identifications of the study as follows:

1. What are the motivations of managers do earnings management? 2. What is the impact of earnings management to the investors? 3. Is there any influence of earnings management on firms’ value?

4. Do managers make trade-off the two methods of earnings-management (real activities manipulation and accrual-based earnings management)?

1.3 Research Concentration

Considering the above identifications, the scope of this study is to find out the empirical evidence of the influence of Real Activities Manipulation on Accrual-Based Earnings Management.

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1.4 Research Question

As related to the above background, the question of the study is as follows: Is there any influence of Real Activities Manipulation on Accrual-Based Earnings Management (An Empirical Study at Manufacturing Companies Listed in Indonesian Stock Exchanges)?

1.5 The Objective of Research

The objective of the research is to find out the empirical evidence of the influence of Real Activities Manipulation on Accrual-Based Earnings Management at manufacturing companies listed in Indonesian Stock Exchanges (IDX) in year 2011.

1.6 Research Contributions

The contributions of the study are as follows: a. For Researcher:

This research provides a new knowledge to researcher related to earnings management.

b. For Academics:

This research provides a new paradigm for students in studying earnings management, especially the two techniques of earnings management: Real Activities Manipulation and Accrual-Based Earnings Management.

c. For Next Researchers:

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CHAPTER V

CONCLUSION AND SUGGESTION

5.1 Conclusion

From research analysis and discussion which has been elaborated before and based on data obtained from research as which has been discussed in this thesis, the conclusion is based on the regression test, hypothesis test rejects Ha (0.757>0.05). Means Real Activities Manipulation has no influence on Accrual-Based Earnings Management.

5.2 Suggestion

Based on conclusions explained before and research findings, hence submitted suggestions as follows.

1. Researcher suggests next researcher to expand the sample where the sample is not limited at manufacturing companies but also expanding the sample all of companies that listed in Indonesia Stock Exchange.

2. Researcher recommend next researcher to use more variables to find out the influence on Accrual-Based Earnings Management and a range of data time series so it can explain the overall effects in earnings management.

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