Main Article Content
Abstract
This research aimed to show the difference in profitability ratios in affecting a company's stock return if earnings manipulation is detected or not detected. The profitability ratios used in this research are Earnings per Share, Net Profit Margin, and Return on Assets, with Firm Size as the control variable. There are 340 manufacturing company data listed on Indonesia Stock Exchange from 2016 to 2019 whose passed purposive sampling was used as this study data. This research applied the Beneish M-Score tool to detect earnings manipulation, which shows 276 companies detected and 64 companies not detected manipulation. The testing uses multiple regression to see the partial, simultaneous, and influence of independent variables on the stock return. The analysis shows that the profitability ratios of detected and non-detected affect stock return. Partially, the non-detected shows that EPS and ROA have a significant positive effect on stock return, while NPM is insignificant. While the partial test of detected manipulation shows that EPS and NPM have a significant positive effect, and ROA showed a significant negative effect. Both non-detected and detected earnings manipulation revealed an insignificant effect for the firm Size.
Keywords
Article Details
Author retains the copyright and grants the journal the right of first publication of the work simultaneously licensed under the Creative Commons Attribution-ShareAlike 4.0 License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal
Author is able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book) with the acknowledgement of its initial publication in this journal.
Author is permitted and encouraged to post his/her work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of the published work (See The Effect of Open Access).
Creative Commons Attribution-ShareAlike (CC BY-SA)
Jurnal Akuntansi is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
References
- Al-Shattarat, B., Hussainey, K., & Al-Shattarat, W. (2018). The impact of abnormal real earnings management to meet earnings benchmarks on future operating performance. International Review of Financial Analysis. https://doi.org/10.1016/j.irfa.2018.10.001
- Association of Certified Fraud Examiners (ACFE). (2020). Report to The Nations on Occupational Fraud and Abuse: 2020 Global Fraud Study. In ACFE. https://www.acfe.com/report-to-the-nations/2020/
- Beneish, M. D. (1999). The Detection of Earnings Manipulation. Financial Analysts Journal, 55(5), 24–36. https://doi.org/10.2469/faj.v55.n5.2296
- Beneish, M. D. (2001). Earnings management: A perspective. Managerial Finance, 27(12), 3–17. https://doi.org/10.1108/03074350110767411
- Beneish, M. D., Lee, C. M. C., & Nichols, D. C. (2013). Earnings manipulation and expected returns. Financial Analysts Journal, 69(2), 57–82. https://doi.org/10.2469/faj.v69.n2.1
- Beneish, M. D., Lee, C. M. C., Nichols, D. C., Financial, S., Journal, A., April, N. M., Beneish, M. D., Lee, C. M. C., & Nichols, D. C. (2013). Earnings Manipulation and Expected Returns In our study , we examined the investment. Financial Analysts Journal, 69(2), 57–82. https://doi.org/https://doi.org/10.2469/faj.v69.n2.1
- Cahyaningrum, Y. W., & Antikasari, T. W. (2017). Pengaruh Earning Per Share, Price To Book Value, Return on Asset, Dan Return on Equity Terhadap Harga Saham Sektor Keuangan. Jurnal Economia, 13(2), 191. https://doi.org/10.21831/economia.v13i2.13961
- Christensen, T. E., Huffman, A. A., & Lewis-Western, M. F. (2017). Earnings Management Proxies: Prudent Business Decisions or Earnings Manipulation? SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2793838
- Dakhlallh, M. M., Rashid, N., Wan Abdullah, W. A., Qawqzeh, H. K., & Mustafa Dakhlallh, A. (2020). Accrual-based Earnings Management, Real Earnings Management and Firm Performance: Evidence from Public Shareholders Listed Firms on Jordanian's Mtock Market. Journal of Advanced Research in Dynamical and Control Systems, 12(1), 16–27. https://doi.org/10.5373/JARDCS/V12I1/20201004
- Din, W. U. (2017). Stock Return Predictability with Financial Ratios: Evidence from PSX 100 Index Companies. SSRN Electronic Journal, 1–15. https://doi.org/10.2139/ssrn.3077890
- Endri, E. (2020). Factors Determine Stock Return of Livestock Feed Companies: Common Effect Model Analysis. SSRN Electronic Journal, 5, 106–113. https://doi.org/10.2139/ssrn.3649066
- Etikan, I. (2016). Comparison of Convenience Sampling and Purposive Sampling. American Journal of Theoretical and Applied Statistics, 5(1), 1. https://doi.org/10.11648/j.ajtas.20160501.11
- Ghazali, A. W., Shafie, N. A., & Sanusi, Z. M. (2015). Earnings Management: An Analysis of Opportunistic Behaviour, Monitoring Mechanism and Financial Distress. Procedia Economics and Finance, 28(April), 190–201. https://doi.org/10.1016/s2212-5671(15)01100-4
- Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365–383. https://doi.org/10.2308/acch.1999.13.4.365
- Jasman, J., & Kasran, M. (2017). Profitability, Earnings Per Share on Stock Return with Size as Moderation. Trikonomika, 16(2), 88. https://doi.org/10.23969/trikonomika.v16i2.559
- Jauharia Hatta, A., & Sugeng Dwiyanto, B. (2012). the Company Fundamental Factors and Systematic Risk in Increasing Stock Price. Journal of Economics, Business, and Accountancy | Ventura, 15(2), 245. https://doi.org/10.14414/jebav.v15i2.78
- Kasmiati, K., & Santosa, P. W. (2019). The effect of earning information, cash flow components, and financing decision on stock returns: empirical evidence on Indonesia stock exchange. Journal of Economics, Business & Accountancy Ventura, 22(2), 157–166. https://doi.org/10.14414/jebav.v22i2.1638
- Kedia, S., Koh, K., & Rajgopal, S. (2015). Evidence on Contagion in Earnings Management. SSRN Electronic Journal, 90. https://doi.org/10.2139/ssrn.2562751
- Kusmayadi, D., Rahman, R., & Abdullah, Y. (2018). Analysis of The Effect of Net Profit Margin, Price to Book Value, and Debt to Equity Ratio on Stock Return. International Journal of Recent Scientific Research, 9(7), 28091–28095. https://doi.org/10.24327/ijrsr.2018.0907.239
- Lento, C., & Yeung, W. H. (2017). Earnings Benchmarks, Earnings Management and Future Stock Performance of Chinese Listed Companies reporting under ASBE-IFRS. Asian Review of Accounting, 25(4), 502–525. https://doi.org/10.1108/ARA-10-2016-0112
- Maccarthy, J. (2017). Using Altman Z-Score and Beneish M- Score to detect financial fraud and corporate failure: a case study from Enron corporation. International Journal of Finance and Accounting. International Journal of Finance and Accounting, 6(6), 159–166. https://doi.org/10.5923/j.ijfa.20170606.01
- Mirgen, C., Kuyu, E., & Bayrakdaroglu, A. (2017). Relationship Between Profitability Ratios and Stock Prices: an Empirical Analysis on Bist-100. Pressacademia, 6(1), 1–10. https://doi.org/10.17261/pressacademia.2017.737
- Mostafa, W. (2017). The impact of earnings management on the value relevance of earnings: Empirical evidence from Egypt. Managerial Auditing Journal, 32(1), 50–74. https://doi.org/10.1108/MAJ-01-2016-1304
- Öztürk, H. (2017). The Relationship Between Earnings-to-Price, Current Ratio, Profit Margin and Return: An Empirical Analysis on Istanbul Stock Exchange. Accounting and Finance Research, 7(1), 109. https://doi.org/10.5430/afr.v7n1p109
- Har, W.P., & Ghafar, M.A.A. (2015). The Impact of Accounting Earnings on Stock Returns: The Case of Malaysia's Plantation Industry. International Journal of Business and Management, 10(4), 155–165. https://doi.org/10.5539/ijbm.v10n4p155
- Reniati, R. S. W. M. A. (2020). Financial Performance and Corporate Social Responsibility on Return of Shares. Jurnal Akuntansi, 23(3), 409. https://doi.org/10.24912/ja.v23i3.611
- Saeidi, P. (2012). The Relationship between Income Smoothing and Income Tax and Profitability Ratios in Iran Stock Market. Asian Journal of Finance & Accounting, 4(1), 46–51. https://doi.org/10.5296/ajfa.v4i1.790
- Santosa, P. W. (2019). Financial Performance, Exchange Rate and Stock Return: Evidence from Manufacturing Sector. Jurnal Manajemen Teknologi, 18(3), 205–217. https://doi.org/10.12695/jmt.2019.18.3.5
- Satryo, A. G., Rokhmania, N. A., & Diptyana, P. (2017). The influence of profitability ratio, market ratio, and solvency ratio on the share prices of companies listed on LQ 45 Index. The Indonesian Accounting Review, 6(1), 55. https://doi.org/10.14414/tiar.v6i1.853
- Shuto, A. (2007). Executive compensation and earnings management: Empirical evidence from Japan. Journal of International Accounting, Auditing and Taxation. https://doi.org/10.1016/j.intaccaudtax.2007.01.004
- Tabassum, N., Kaleem, A., & Nazir, M. S. (2015). Real Earnings Management and Future Performance. Global Business Review, 16(1), 21–34. https://doi.org/10.1177/0972150914553505
- Tarjo, & Herawati, N. (2015). Application of Beneish M-Score Models and Data Mining to Detect Financial Fraud. Procedia - Social and Behavioral Sciences, 211(September), 924–930. https://doi.org/10.1016/j.sbspro.2015.11.122
- U.S. Securities and Exchange Commission (SEC). (2020). Whistleblower Program 2020 Annual Report to Congress. In SEC. https://www.sec.gov/files/2020 Annual Report_0.pdf
- Watts, R. L., & Zimmerman, J. L. (1978). Towards a Positive Theory of the Determination of Accounting Standards Towards a Positive Theory of the Determination of Accounting. The Accounting Review, 53(I), 112–134. http://www.jstor.org/stable/245729%0Ahttp://about.jstor.org/terms
- Watts, R. L., & Zimmerman, J. L. (1986). Positive Accounting Theory. Prentice Hall: Cambridge. In Prentice Hall. https://ssrn.com/abstract=928677
- Watts, R. L., & Zimmerman, J. L. (1990). Positive Accounting Theory: A Ten Year Perspective. The Accounting Review, 65(1), 131–156. http://www.jstor.org/stable/247880
References
Al-Shattarat, B., Hussainey, K., & Al-Shattarat, W. (2018). The impact of abnormal real earnings management to meet earnings benchmarks on future operating performance. International Review of Financial Analysis. https://doi.org/10.1016/j.irfa.2018.10.001
Association of Certified Fraud Examiners (ACFE). (2020). Report to The Nations on Occupational Fraud and Abuse: 2020 Global Fraud Study. In ACFE. https://www.acfe.com/report-to-the-nations/2020/
Beneish, M. D. (1999). The Detection of Earnings Manipulation. Financial Analysts Journal, 55(5), 24–36. https://doi.org/10.2469/faj.v55.n5.2296
Beneish, M. D. (2001). Earnings management: A perspective. Managerial Finance, 27(12), 3–17. https://doi.org/10.1108/03074350110767411
Beneish, M. D., Lee, C. M. C., & Nichols, D. C. (2013). Earnings manipulation and expected returns. Financial Analysts Journal, 69(2), 57–82. https://doi.org/10.2469/faj.v69.n2.1
Beneish, M. D., Lee, C. M. C., Nichols, D. C., Financial, S., Journal, A., April, N. M., Beneish, M. D., Lee, C. M. C., & Nichols, D. C. (2013). Earnings Manipulation and Expected Returns In our study , we examined the investment. Financial Analysts Journal, 69(2), 57–82. https://doi.org/https://doi.org/10.2469/faj.v69.n2.1
Cahyaningrum, Y. W., & Antikasari, T. W. (2017). Pengaruh Earning Per Share, Price To Book Value, Return on Asset, Dan Return on Equity Terhadap Harga Saham Sektor Keuangan. Jurnal Economia, 13(2), 191. https://doi.org/10.21831/economia.v13i2.13961
Christensen, T. E., Huffman, A. A., & Lewis-Western, M. F. (2017). Earnings Management Proxies: Prudent Business Decisions or Earnings Manipulation? SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2793838
Dakhlallh, M. M., Rashid, N., Wan Abdullah, W. A., Qawqzeh, H. K., & Mustafa Dakhlallh, A. (2020). Accrual-based Earnings Management, Real Earnings Management and Firm Performance: Evidence from Public Shareholders Listed Firms on Jordanian's Mtock Market. Journal of Advanced Research in Dynamical and Control Systems, 12(1), 16–27. https://doi.org/10.5373/JARDCS/V12I1/20201004
Din, W. U. (2017). Stock Return Predictability with Financial Ratios: Evidence from PSX 100 Index Companies. SSRN Electronic Journal, 1–15. https://doi.org/10.2139/ssrn.3077890
Endri, E. (2020). Factors Determine Stock Return of Livestock Feed Companies: Common Effect Model Analysis. SSRN Electronic Journal, 5, 106–113. https://doi.org/10.2139/ssrn.3649066
Etikan, I. (2016). Comparison of Convenience Sampling and Purposive Sampling. American Journal of Theoretical and Applied Statistics, 5(1), 1. https://doi.org/10.11648/j.ajtas.20160501.11
Ghazali, A. W., Shafie, N. A., & Sanusi, Z. M. (2015). Earnings Management: An Analysis of Opportunistic Behaviour, Monitoring Mechanism and Financial Distress. Procedia Economics and Finance, 28(April), 190–201. https://doi.org/10.1016/s2212-5671(15)01100-4
Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365–383. https://doi.org/10.2308/acch.1999.13.4.365
Jasman, J., & Kasran, M. (2017). Profitability, Earnings Per Share on Stock Return with Size as Moderation. Trikonomika, 16(2), 88. https://doi.org/10.23969/trikonomika.v16i2.559
Jauharia Hatta, A., & Sugeng Dwiyanto, B. (2012). the Company Fundamental Factors and Systematic Risk in Increasing Stock Price. Journal of Economics, Business, and Accountancy | Ventura, 15(2), 245. https://doi.org/10.14414/jebav.v15i2.78
Kasmiati, K., & Santosa, P. W. (2019). The effect of earning information, cash flow components, and financing decision on stock returns: empirical evidence on Indonesia stock exchange. Journal of Economics, Business & Accountancy Ventura, 22(2), 157–166. https://doi.org/10.14414/jebav.v22i2.1638
Kedia, S., Koh, K., & Rajgopal, S. (2015). Evidence on Contagion in Earnings Management. SSRN Electronic Journal, 90. https://doi.org/10.2139/ssrn.2562751
Kusmayadi, D., Rahman, R., & Abdullah, Y. (2018). Analysis of The Effect of Net Profit Margin, Price to Book Value, and Debt to Equity Ratio on Stock Return. International Journal of Recent Scientific Research, 9(7), 28091–28095. https://doi.org/10.24327/ijrsr.2018.0907.239
Lento, C., & Yeung, W. H. (2017). Earnings Benchmarks, Earnings Management and Future Stock Performance of Chinese Listed Companies reporting under ASBE-IFRS. Asian Review of Accounting, 25(4), 502–525. https://doi.org/10.1108/ARA-10-2016-0112
Maccarthy, J. (2017). Using Altman Z-Score and Beneish M- Score to detect financial fraud and corporate failure: a case study from Enron corporation. International Journal of Finance and Accounting. International Journal of Finance and Accounting, 6(6), 159–166. https://doi.org/10.5923/j.ijfa.20170606.01
Mirgen, C., Kuyu, E., & Bayrakdaroglu, A. (2017). Relationship Between Profitability Ratios and Stock Prices: an Empirical Analysis on Bist-100. Pressacademia, 6(1), 1–10. https://doi.org/10.17261/pressacademia.2017.737
Mostafa, W. (2017). The impact of earnings management on the value relevance of earnings: Empirical evidence from Egypt. Managerial Auditing Journal, 32(1), 50–74. https://doi.org/10.1108/MAJ-01-2016-1304
Öztürk, H. (2017). The Relationship Between Earnings-to-Price, Current Ratio, Profit Margin and Return: An Empirical Analysis on Istanbul Stock Exchange. Accounting and Finance Research, 7(1), 109. https://doi.org/10.5430/afr.v7n1p109
Har, W.P., & Ghafar, M.A.A. (2015). The Impact of Accounting Earnings on Stock Returns: The Case of Malaysia's Plantation Industry. International Journal of Business and Management, 10(4), 155–165. https://doi.org/10.5539/ijbm.v10n4p155
Reniati, R. S. W. M. A. (2020). Financial Performance and Corporate Social Responsibility on Return of Shares. Jurnal Akuntansi, 23(3), 409. https://doi.org/10.24912/ja.v23i3.611
Saeidi, P. (2012). The Relationship between Income Smoothing and Income Tax and Profitability Ratios in Iran Stock Market. Asian Journal of Finance & Accounting, 4(1), 46–51. https://doi.org/10.5296/ajfa.v4i1.790
Santosa, P. W. (2019). Financial Performance, Exchange Rate and Stock Return: Evidence from Manufacturing Sector. Jurnal Manajemen Teknologi, 18(3), 205–217. https://doi.org/10.12695/jmt.2019.18.3.5
Satryo, A. G., Rokhmania, N. A., & Diptyana, P. (2017). The influence of profitability ratio, market ratio, and solvency ratio on the share prices of companies listed on LQ 45 Index. The Indonesian Accounting Review, 6(1), 55. https://doi.org/10.14414/tiar.v6i1.853
Shuto, A. (2007). Executive compensation and earnings management: Empirical evidence from Japan. Journal of International Accounting, Auditing and Taxation. https://doi.org/10.1016/j.intaccaudtax.2007.01.004
Tabassum, N., Kaleem, A., & Nazir, M. S. (2015). Real Earnings Management and Future Performance. Global Business Review, 16(1), 21–34. https://doi.org/10.1177/0972150914553505
Tarjo, & Herawati, N. (2015). Application of Beneish M-Score Models and Data Mining to Detect Financial Fraud. Procedia - Social and Behavioral Sciences, 211(September), 924–930. https://doi.org/10.1016/j.sbspro.2015.11.122
U.S. Securities and Exchange Commission (SEC). (2020). Whistleblower Program 2020 Annual Report to Congress. In SEC. https://www.sec.gov/files/2020 Annual Report_0.pdf
Watts, R. L., & Zimmerman, J. L. (1978). Towards a Positive Theory of the Determination of Accounting Standards Towards a Positive Theory of the Determination of Accounting. The Accounting Review, 53(I), 112–134. http://www.jstor.org/stable/245729%0Ahttp://about.jstor.org/terms
Watts, R. L., & Zimmerman, J. L. (1986). Positive Accounting Theory. Prentice Hall: Cambridge. In Prentice Hall. https://ssrn.com/abstract=928677
Watts, R. L., & Zimmerman, J. L. (1990). Positive Accounting Theory: A Ten Year Perspective. The Accounting Review, 65(1), 131–156. http://www.jstor.org/stable/247880