The Effect of Financial Distress and Corporate Governance on the Discretionary Allowance for Impairment Losses

https://doi.org/10.35912/sakman.v2i2.1563
Published: Dec 14, 2022

Abstract:

Purpose: This study provides a more accurate picture of how financial distress and corporate governance influence managerial discretion, where the target of this research is the banking industry which is the industry with the largest financial assets. Companies that have large financial assets also have large allowances for impairment losses, and this is the main factor driving accrual-based company profits. This research activity is expected to provide scientific and practical benefits as well as a new view on financial distress, corporate governance and managerial discretion. For the banking industry, it provides an understanding of whether the recognition of allowance for impairment losses can be affected by financial distress and/or corporate governance.

Method: This research uses a multiple linear regression with quantitative data. The sample selection in this study was carried out using a purposive sampling method, which is a sampling method that applies certain criteria according to the research objectives. The population in this study are companies in the banking industry that are listed on the Indonesian Stock Exchange. In this study, five years of observation were carried out from 2017 to 2021.

Result: Based on the results of this study, it can be concluded that financial distress, institutional ownership, proportion of independent commissioners, and proportion of audit committee have no effect on managerial discretion. It refutes the hypotheses regarding the influence of financial distress and corporate governance on managerial discretion over the recognition of allowance for impairment losses. However, the managerial ownership has a positive influence on managerial discretion, which raises a possibility that managers who own shares of a company have a desire to get more benefits from the cost of equity and/or capital gains.

Keywords:
1. Financial Distress
2. Institutional Ownership
3. Managerial Ownership
4. Independent Commissioners
5. Audit Committee
6. Managerial Discretion
7. Allowance For Impairment Losses
8. banking
Authors:
Wendy Tandiawan
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How to Cite
Tandiawan, W. (2022). The Effect of Financial Distress and Corporate Governance on the Discretionary Allowance for Impairment Losses . Studi Akuntansi, Keuangan, Dan Manajemen, 2(2), 99–111. https://doi.org/10.35912/sakman.v2i2.1563
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Issue & Section
Vol. 2 No. 2 (2023): Januari
Articles
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References

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    Sucipto, H., & Zulfa, U. (2021). Pengaruh good corporate governance, financial distress dan ukuran perusahaan terhadap manajemen laba. JAD: Jurnal Riset Akuntansi & Keuangan Dewantara, 4(1), 12-22.

    Suparlan, S., & Timur, S.-L. (2019). Analisis Pengaruh Kepemilikan Institusional Dan Kepemilikan Manajerial Terhadap Nilai Perusahaan Dengan Proporsi Dewan Komisaris Independen Sebagai Variabel Moderating (Studi Empiris Pada Perusahaan Sektor Industri Barang Konsumsi Yang Terdaftar Di Bursa Efek Indonesia Periode 2011-2015).

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    Tsaqif, B. M., & Agustiningsih, W. (2021). Pengaruh Financial Distress dan Ukuran Perusahaan Terhadap Manajemen Laba dengan Kepemilikan Manajerial sebagai Variabel Moderasi. Jurnal Akuntansi dan Governance, 2(1), 53-65.

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  1. Agarwal, A. (2021). Study of machine learning algorithms for potential stock trading strategy frameworks. International Journal of Financial, Accounting, and Management, 3(3), 275-287. doi:10.35912/ijfam.v3i3.604
  2. Almalita, Y. (2017). Pengaruh corporate governance dan faktor lainnya terhadap manajemen laba. Jurnal Bisnis dan Akuntansi, 19(2), 183-194.
  3. Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The journal of finance, 23(4), 589-609.
  4. Candy, C., Robin, R., Sativa, E., Septiana, S., Can, H., & Alice, A. (2022). Fintech in the time of COVID-19: Conceptual Overview. Jurnal Akuntansi, Keuangan, Dan Manajemen, 3(3), 253-262. doi:10.35912/jakman.v3i3.1115
  5. Finishtya, F. C. (2019). The role of cash flow of operational, profitability, and financial leverage in predicting financial distress on manufacturing company in Indonesia. Jurnal Aplikasi Manajemen, 17(1), 110-117.
  6. Firman, K., & Widodo, H. (2022). The Influence of Good Corporate Governance, Earning Power and Leverage on Earnings Management in Manufacturing Companies in the Industrial and Consumer Goods Sector. Indonesian Journal of Law and Economics Review, 17, 10.21070/ijler. v21017i21070. 21800-21010.21070/ijler. v21017i21070. 21800.
  7. Haj Youssef, M., & Teng, D. (2021). Managerial discretion and corporate governance: The bonded relationship. Corporate Ownership and Control, 18(3), 75-85.
  8. Hestyaningsih, H., Martini, M., & Anggraeni, M. (2020). Auditor switching: Analisis berdasar pergantian manajemen, financial distress, rentabilitas, dan ukuran kantor akuntan publik. Jurnal Akuntansi, Keuangan, Dan Manajemen, 1(3), 181-194.
  9. Jones, J. J. (1991). Earnings management during import relief investigations. Journal of accounting research, 29(2), 193-228.
  10. Karina, R., & Alfarizi, M. A. (2021). The Role Of Good Corporate Governance On Earnings Management In Indonesia Peran Tata Kelola Perusahaan Terhadap Manajemen Laba Di Indonesia.
  11. Kusuma, I. G. B. I., & Mertha, I. M. (2021). Manajemen Laba dan Nilai Perusahaan (Studi Empiris pada Perusahaan Manufaktur di Bursa Efek Indoensia). E-Jurnal Akuntansi, 31(1), 182-196.
  12. Mahrani, M., & Soewarno, N. (2018). The effect of good corporate governance mechanism and corporate social responsibility on financial performance with earnings management as mediating variable. Asian Journal of Accounting Research.
  13. Manan, M. A., & Hasnawati, S. (2022). Pengaruh Good Corporate Governance terhadap Financial Distress yang di Kontrol oleh Ukuran Perusahaan pada Perusahaan Industri Sektor Manufaktur di Indonesia. Jurnal Akuntansi, Keuangan, Dan Manajemen, 3(4), 279-292.
  14. Mayndarto, E. C., & Murwaningsari, E. (2021). The Effect of Good Corporate Governance on Earning Management With the Bonus Plan As a Moderating Variables. International Journal of Social and Management Studies, 2(3), 35-46.
  15. Mulya, A. S. (2022). Analisis Faktor yang Memengaruhi Keputusan Agresivitas Transfer Pricing. Studi Akuntansi, Keuangan, dan Manajemen, 2(1), 71-82. doi:10.35912/sakman.v2i1.1652
  16. Mustika, M., Ardheta, P. A., & Paembonan, Y. R. (2020). Pengaruh Financial Distress dan Komite Audit Terhadap Manajemen Laba Pada Sektor Pertambangan. Jurnal STEI Ekonomi, 29(01), 71-78.
  17. Noviyani, N., & Yulianti, E. (2022). Faktor Penentu Financial Distress pada Perusahaan Sektor Pertanian yang Terdaftar di BEI Periode 2015-2019. Studi Ilmu Manajemen dan Organisasi, 3(2), 315-326.
  18. Pratomo, D., & Hapsari, D. W. (2018). The Role Of The Board Of Commissioners In Earnings Management. Sustainable Collaboration in Business, Technology, Information and Innovation (SCBTII), 1(1).
  19. Purnama, D. (2017). Pengaruh profitabilitas, leverage, ukuran perusahaan, kepemilikan institusional dan kepemilikan manajerial terhadap manajemen laba. Jurnal Riset Keuangan Dan Akuntansi, 3(1).
  20. Sidauruk, T. D., & Putri, N. T. P. (2022). Pengaruh Komisaris Independen, Karakter Eksekutif, Profitabiltas dan Ukuran Perusahaan terhadap Tax Avoidance. Studi Akuntansi, Keuangan, dan Manajemen, 2(1), 45-57. doi:10.35912/sakman.v2i1.1498
  21. Sisdianto, E., Ramdani, R. F., & Fitri, A. (2019). Pengaruh discretionary accrual terhadap earnings management: Studi pada perusahaan otomotif yang terdaftar di bursa efek indonesia periode 2012–2016. Jurnal Akuntansi, Keuangan, Dan Manajemen, 1(1), 27-38.
  22. Sparta, S., & Trinova, N. (2020). The factors affecting the bank’s credit impairment losses by adopting IAS on PSAK 55 in Indonesia. Journal of Economics, Business, & Accountancy Ventura, 22(3), 360-371.
  23. Sucipto, H., & Zulfa, U. (2021). Pengaruh good corporate governance, financial distress dan ukuran perusahaan terhadap manajemen laba. JAD: Jurnal Riset Akuntansi & Keuangan Dewantara, 4(1), 12-22.
  24. Suparlan, S., & Timur, S.-L. (2019). Analisis Pengaruh Kepemilikan Institusional Dan Kepemilikan Manajerial Terhadap Nilai Perusahaan Dengan Proporsi Dewan Komisaris Independen Sebagai Variabel Moderating (Studi Empiris Pada Perusahaan Sektor Industri Barang Konsumsi Yang Terdaftar Di Bursa Efek Indonesia Periode 2011-2015).
  25. Tannaya, C. I. N., & Lasdi, L. (2021). Pengaruh Financial Distress Terhadap Manajemen Laba Dengan Moderasi Corporate Governance. Jurnal Ilmiah Mahasiswa Akuntansi, 10(1), 31-40.
  26. Tsaqif, B. M., & Agustiningsih, W. (2021). Pengaruh Financial Distress dan Ukuran Perusahaan Terhadap Manajemen Laba dengan Kepemilikan Manajerial sebagai Variabel Moderasi. Jurnal Akuntansi dan Governance, 2(1), 53-65.
  27. Wijaya, H., & Tifanny, D. (2020). The Effect of Corporate Governance on Earnings Management. ESENSI: Jurnal Manajemen Bisnis, 23(1), 72-85.