HOW MARKET COMPETITION CAN INFLUENCE BUSINESS STRATEGIES-INDUCED REAL EARNINGS MANAGEMENT: AN EMPIRICAL EVIDENCE FROM INDONESIA

Nurul Fitriana Zulaikha; Fuad Fuad

doi:10.14710/jaa.19.2.157-171

DOI: https://doi.org/10.14710/jaa.19.2.157-171

HOW MARKET COMPETITION CAN INFLUENCE BUSINESS STRATEGIES-INDUCED REAL EARNINGS MANAGEMENT: AN EMPIRICAL EVIDENCE FROM INDONESIA

Nurul Fitriana Zulaikha - Department of Accounting, Faculty of Economics and Business, Universitas Diponegoro, Indonesia

*Fuad Fuad

- Department of Accounting, Faculty of Economics and Business, Universitas Diponegoro, Indonesia

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Abstract

The study explores the relationship between business units strategy and market competition towards earnings management. Using a balanced sample from Indonesian manufacturing companies from 2011 – 2014 we find convincing evidence that earnings management practice is heavily determined by the choice of firms’ strategic decisions. More specifically, we document that while cost leadership strategy positively affects the earnings management, the inverse effect for the relationship between differentiation strategy and earnings management is also apparent. Also, our finding notes that the intensified market competition is also likely strengthen the relationship between cost leadership strategy and earnings management practice, but such moderating role is not apparent for differentiation strategy and earnings management.

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Keywords: business strategy; cost leadership strategy; differentiation strategy; market competition; earnings management

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Section: Articles

Language : EN

In Volume 19, Nomor 2, Tahun 2022

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