Edy Suprianto

Faculty of Economics and Business, Universitas Sebelas Maret

Indonesia

Faculty of Economics, Universitas Islam Sultan Agung

Indonesia

Controlling generation of family firms and earnings management in Indonesia: The role of accounting experts of audit committees

Rahmawati Rahmawati

Faculty of Economics and Business, UniversitasSebelasMaret

Indonesia

Doddy Setiawan

Faculty of Economics and Business, Universitas Sebelas Maret

Indonesia

Y. Anni Aryani

Faculty of Economics and Business, Universitas Sebelas Maret

Indonesia

Abstract. This study aims to identify whether the controlling generation (founder vs. descendant) of family companies in Indonesia affects earnings management and analyze the role of accounting experts of audit committees in minimizing the implementation of earnings management. A total of 258 samples are collected from manufacturing group companies listed in the 2012-2017 Indonesian stock exchange. A modified Jones model is used as a proxy for earnings management. Results reveal that controlling by the first generation negatively affects earnings management. Trend analysis results also show that family companies owned and managed by the first generation via earnings management remain stable for 6 consecutive years compared with that of family group companies owned and managed by the second generation. Accounting experts of audit committees negatively influence earnings management in family firms.

Received: January, 2019

1st Revision: April, 2019

Accepted: September, 2019

DOI: 10.14254/2071-8330.2019/12-3/21

JEL Classification: G30, M49

Keywords: accrual earnings management, family firms, controller generation companies, accounting experts of audit committees