Corporate governance, earnings management, and investment opportunity set of banking industry in Indonesia

Earning management has become a common phenomenon that occurs within a company and is difficult to avoid. Earnings management can be done because managers must obey the certain rules. This happens in the banking industry because the banking industry has more stringent regulations than other industries. This study aimed to examine the effect of corporate governance on earnings management with investment opportunity set as intervening variable. Dependent variable of this research was earnings management. The independent variable of this study was corporate governance mechanism which was proxy with the proportion of independent commissioners. The intervening variable of this study was investment opportunity set. The samples of this study were banking companies listed on the Indonesia Stock Exchange (BEI) in 2012-2015. The analytical method used was path analysis. The results of this study indicated that corporate governance could reduce the occurrence of earnings management practices. Meanwhile, corporate governance did not affect the investment opportunity set and investment opportunity set did not influence the earnings management so that investment opportunity set could not mediate the influence of corporate governance on earnings management