Key Drivers of Earnings Management in Indonesian Stock Market-Listed Insurance Companies

Tri Permana

doi:10.61656/sbamr.v8i1.56

Tri Permana Insurance Company Jakarta

DOI: https://doi.org/10.61656/sbamr.v8i1.56

Abstrak

Purpose: The purpose of this study is to investigate whether leverage, company performance, and the percentage of shares offered to the public during an IPO significantly influence earnings management practices in insurance companies listed on the Indonesia Stock Exchange. By focusing on these financial and structural factors, the research aims to provide empirical evidence on how internal and external pressures shape managerial decisions related to earnings reporting.

Method: The study employs a quantitative approach using secondary data drawn from insurance companies that went public on the Indonesia Stock Exchange. The variables analyzed include leverage ratios, company performance measured by Return on Assets (ROA), and the proportion of shares offered to the public during the IPO. Multiple regression analysis was applied to examine the relationship between these independent variables and earnings management, ensuring statistical rigor in testing the proposed hypotheses.

Findings: The findings reveal that leverage, company performance, and the percentage of shares offered at IPO all have an effect on earnings management. However, among these variables, leverage emerges as the most dominant factor influencing managerial behavior. While ROA and IPO share percentage also show an impact, their effects are less pronounced compared to leverage, highlighting the critical role of debt obligations in shaping earnings management strategies.

Implication: These results suggest that companies with higher leverage are more likely to engage in earnings management, possibly to meet debt covenants or maintain investor confidence. For regulators and stakeholders, this underscores the need to monitor leverage levels as a key indicator of potential earnings manipulation. It also implies that IPO structures and performance metrics should be carefully evaluated to ensure transparency in financial reporting.

Originality: This study contributes originality by focusing specifically on insurance companies undergoing IPOs in Indonesia, a sector and context that has received limited scholarly attention. By integrating leverage, performance, and IPO share percentage into a single framework, the research provides a comprehensive view of earnings management drivers and highlights leverage as the most influential factor, offering new insights for future studies

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