Institutional Ownership, Profitability, and Leverage Influences on Earnings Management in Basic and Chemical Industry Companies

Abstract

This research investigates institutional ownership, profitability, and leverage influences on earnings management practices within basic and chemical industry companies listed on the Indonesia Stock Exchange during 2020-2023. Employing quantitative methodology with purposive sampling, data were collected from 17 companies, totaling 68 observations. Multiple linear regression analysis reveals institutional ownership exerts insignificant effects on total accruals, while profitability measured through ROA demonstrates significant negative impacts, indicating elevated profitability reduces earnings manipulation tendencies. Conversely, leverage reflected in DAR exhibits significant positive relationships with earnings management, suggesting highly leveraged firms display greater manipulation susceptibility. Simultaneous testing confirms these variables collectively affect earnings management significantly. The adjusted R-squared value of 0.774 indicates 77.4% variance explanation by examined variables, with the remaining 22.6% attributed to unexamined factors. Findings emphasize governance mechanisms, profitability monitoring, and debt management as critical strategies for constraining earnings manipulation within manufacturing contexts.