Free cash flow, investment inefficiency, and earnings management: evidence from manufacturing firms listed on the Indonesia Stock Exchange-Reference-Cited by-同舟云学术

Free cash flow, investment inefficiency, and earnings management: evidence from manufacturing firms listed on the Indonesia Stock Exchange

Published:2018-03-21 Issue:1 Volume:15 Page:299-310
ISSN:1810-4967
Container-title:Investment Management and Financial Innovations
language:
Short-container-title:Investment Management and Financial Innovations

Author:

Fakhroni Zaki¹^ORCID,Ghozali Imam²,Harto Puji³,Nur Afri Yuyetta Etna³

Affiliation:

1. Ph.D. Student in Accounting, Diponegoro University, and a Lecturer at Mulawarman University

2. Dr., Professor, Department of Accounting, Faculty of Economics and Business, Diponegoro University

3. Ph.D., Department of Accounting, Faculty of Economics and Business, Diponegoro University

Abstract

The study aims to test investment inefficiency of fixed assets in mediating the relationship between free cash flow and earnings management and to test the controlling shareholders in moderating the relationship between free cash flow and fixed assets investment inefficiency. The research problem proposed in this study is whether the use of free cash flow for the investment inefficiency of fixed assets is able to ultimately improve the managerial performance. This research investigates new empirical evidence related to management earnings practices caused by free cash flow fixed assets investment inefficiency. The study was conducted on all the manufacturing firms listed on the Indonesia stock exchange from 2010 to 2015. The data used are secondary data in the form of the firms’ financial statements. Using purposive sampling, 314 units were analyzed from 69 manufacturing firms. The estimation of the path model was completed using Structural Equation Modeling (SEM) by WarpPLS program version 5.0. The results showed that free cash flow is positively related to earnings management. Fixed assets investment inefficiency is able to mediate the relationship between free cash flow and earnings management.

Publisher

LLC CPC Business Perspectives

Subject

Strategy and Management,Economics and Econometrics,Finance,Business and International Management

Link

https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/10137/imfi_2018_01_Fakhroni.pdf

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