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 between 2020-2023. Employing quantitative methodology with purposive sampling, data were collected from 17 companies, totaling 68 observations. Multiple linear regression analysis shows that institutional ownership has little effect on total accruals, while profitability measured by ROA has a significant negative effect, meaning that higher profitability leads to less earnings manipulation. On the other hand, leverage shown by DAR has a strong positive link to earnings management, meaning that companies with high debt are more likely to manipulate their 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. The results highlight that governance mechanisms, keeping an eye on profitability, and managing debt are important strategies to limit earnings manipulation in manufacturing.