THE MODERATING ROLE OF INSTITUTIONAL OWNERSHIP ON THE DETERMINANTS OF EARNINGS QUALITY: EVIDENCE FROM EMERGING MARKET FIRMS IN INDONESIA
DOI:
https://doi.org/10.18623/rvd.v22.n3.3494Keywords:
Earnings Quality, Leverage, Firm Size, Profitability, Institutional Ownership, IndonesiaAbstract
This study examines the determinants of earnings quality in Indonesian listed firms, with a focus on the moderating role of institutional ownership. Using panel data from 133 firms from 2022 to 2024, the research employs the Random Effects Model (REM) estimated using Generalized Least Squares (GLS). The findings reveal that only firm size has a significant and positive effect on earnings quality, indicating that larger firms tend to report more reliable and transparent financial information. In contrast, leverage, profitability, and institutional ownership, both as direct and moderating variables, do not significantly influence earnings quality. These results suggest that firm scale, rather than financial structure or ownership characteristics, is the primary driver of reporting quality in Indonesia's emerging market. Institutional investors, although dominant, appear to play a passive monitoring role, limiting their governance effectiveness. The study contributes to agency theory by demonstrating that governance mechanisms in emerging economies are driven by size rather than ownership. Practical implications are provided for regulators and investors seeking to enhance the credibility of financial reporting.
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