This research is a replication of the Oktorina’s research (2008), by adding a
measurement of earnings management accruals and real earnings management
through three activities. This research aims at identifying firm’s tendency to execute
earnings management throught accruals and real earnings management and its
impact to market performance.
This study uses data from 86 manufacturing companies listed in Indonesia
Stock Exchange during 2007 to 2009. Accrual earnings management is measured by
discretionary accruals based on modified Jones model’s (1991), whereas real
earnings management used is based on the Roychowdhury model’s (2006), there is
real earnings management through operating cash flow, production costs, and
discretionary costs. Market performance is measured by cummulative abnormal
return (CAR) with a market adjusted model’s. Then, testing of hypotheses to analized
impact of earnings management on market performance using multiple regression
analysis.
The results show that the manufacturing companies listed in Indonesia Stock
Exchange tend to execute accruals earnings management and real earnings
management throught the production cost. Moreover, accruals earnings management
and real earnings management through production costs effect market performance.
The research is expected to be information for business people about the existence of
accrual earnings management and real earnings management and its impact to
market performance, so it can be a consideration in making investment decisions
