PENGARUH TINGKAT KESULITAN KEUANGAN TERHADAP MANAJEMEN LABA: TEORI KEAGENAN VERSUS TEORI SIGNALING

Abstract

This research investigates the influence of company financial distress on earnings management by using agency and signaling theories. This research compares the explanations between agency and signaling theories on this relationship. Agency theory
explains that company financial distress positively influences earnings management, but signaling theory predicts that company financial distress negatively influences earnings
management. Company financial distress is measured by using Ohlson model. Kang- Sivaramakrishnan model is used to measure discretionary accruals, a measure of earnings
management. Empirical data are analyzed by using ordinary least square regression and testing of difference between two proportions from one group. Results of data analysis reject
agency theory explanation, and support signaling theory explanation. This research finds that company financial distress negatively influences discretionary accruals.

Keywords: Financial distress, earnings management, agency theory, signaling theory