Mekanisme Coorporate Governance, Rekayasa Keuangan dan Kinerja Perusahaan

Literature on corporate govemance has been voluminous, There has been extensive literature on corporate govemance and performance, but little has been known about corporate governance and earning management. This paper is intended to find the gap in the corporate governance literature. The objective of this study are to examine the relationship between corporate governance-earning management and corporate performance measuring by return on assets in Indonesia. This study takes sample from 22 companies in the property and real estates sector at the Indonesia Stock Exchange for period of 2003-2006 which used firm size as control variable that classified into large firm and small firm. The result of this study indicate that only institutional ownership could be corporate governance mechanism that could reduce earning management in the large firm. In general, large firm increased its income but this earning management had not significant influence to corporate performance. In the small firm, this study indicate that presence of independent director and size of director had positive significant in{Iuence to corporate governance. The result reflect that size of director could reduce the conflict of interest between manager and shareholders and finally the board of director can give more effective control to the earning management in that firm. But in small firm, the strenght of firm controlling and majority interest makes the placement of board of director is only to complete the formal instrudion and regulation. Earning management had negative significant influence to corporate performance of small firm which is based on this study that generally conclude the firm decreased its income. Keywords: corporate governance mechanism, earning management, corporate performance, return on assets, firm siz