Real Earnings Management in the Indonesian Sharia Capital Market

AbstractThis study investigates whether the firms in The Indonesian Sharia Capital Market conduct real earnings management (RM). By using Earning Distribution Analysis, we find that there is abnormal distribution of earning growth which is found high frequency of firms with around zero earnings. It shows that those firms have high intention of conducting earnings management because they want to avoid small losses by converting into small profit, so that firms are called suspect firm. Further, this study investigates whether any differences of RM between suspect firms and non suspect firms. The result shows that the suspect firm conduct RM aggressively than non suspect firm