Penilaian Kesehatan Bank Oleh Bank Indonesia dan Manajemen Laba Dalam Perbankan. Bank Evaluation by Bank Indonesia and Earnings Management in Banking Industry

Many cases and researches show that financial statement usage (that encompass inherent weaknesses, like flexibility in preparing financial statement) in many business contract have stimulated manager to manipulate earnings. Accounting that we know is imperfect. We can not ignore that fact. What we can do is to know the conditions that can motivate manager to manage earnings so we can not be fooled by them. Paying attention to earnings management problems is a contribution in creating trustful information that is useful for efficiency in fund allocation.The objective of this study is to evaluate earnings management in banking industry in Indonesia. Is financial statement utilization in bank evaluation (by Bank Indonesia as Central Bank) motivating manager to manage earnings? 421 years observation is used as final sample. This sample is classified into three group based on the delta of bank's healthy score. The empirical result show that Z score of bank's discretionary accrual whose healthy score decrease (relative to last year score) is positive and significant. Beside that, t-test and ANOVA indicate that discretionary accrual of bank whose healthy score decrease is higher than discretionary accrual of bank whose healthy score do not decrease. This implies that bank whose healthy score decrease make income increasing accrual to hide its under average quality.It is hope that this study will be useful to all parties that have interest with bank's financial statement, like bank central who has responsibility to monitor banking activities and to regulate banking industry, and users of bank's financial statement, who have interest in fund investments in banking industry. Keywords: financial statement -- earnings management ban