Firm Size, Financial Distress, Audit Quality, and Earnings Management of Banking Companies

The era of globalization has stimulated the spirit of competition of companies in an ever-intensifying business race of various sectors. In an attempt to sustain the life of the company, earnings figures are kept positive to attract investors and to elevate the company’s social status. This study aims to examine whether firm size, financial distress, and audit quality are influenced by earnings management. This research is a quantitative study from secondary data. A sample of 12 banking companies listed on the Indonesia Stock Exchange in 2014–2018 was used in this research. This research also employed descriptive analysis and panel data regression analysis. Results showed that firm size had a significant negative effect on earnings management; financial distress had a significant positive effect on earnings management; whereas audit quality had no significant effect on earnings management. A multitude of issues arising in banking companies involve earnings management behaviour. It is suggested that investors and the public perform a deeper analysis of the companies in which to invest. Companies are also advised against earning management practices harmful to financial statement users