International Journal of Advance Study and Research Work (2581-5997)/ Volume 3/Issue 3/March 2020

Factors that Influence Firm Value with Earnings

Management as Mediating Variable
Riska Novianti1 & Adi Kuswanto2
Gunadarma University, Indonesia
Email id: noviantiriskaa@gmail.com1, kuswanto@staff.gunadarma.ac.id2

DOI: 10.5281/zenodo.3732473

Abstract

This study aims to prove the effect of Non-Performing Loan (NPL), Net Interest Margin (NIM), Capital Adequacy Ratio (CAR),
Tax Planning (TAX), and IFRS on the firm value with earnings management as a variable intervening partially or
simultaneously. The sample used in this study is 37 conventional banking companies listed on the Indonesia Stock Exchange
(IDX). This research uses Structural Equation Model (SEM) analysis with AMOS and SPSS version 23 analysis tools. The
results of this study indicate that there is an effect of NPL and CAR on earnings management, and earnings management on
firm value. Meanwhile, Non-Performing Loan (NPL), Net Interest Margins (NIM), Capital Adequacy Ratio (CAR), Tax
Planning (TAX), IFRS, have a simultaneous effect on firm value with earnings management as an intervening variable.

Keywords: Non-Performing Loan, Net Interest Margin, Capital Adequacy Ratio, Tax Planning, Ifrs, Earnings Management,
Firms Value.

Introduction
In the last five years, the global economy was unstable due to financial market fluctuations, the tension of trade wars, Brexit, as well
as the geopolitical polemic that occurred in several countries. The world economy sluggishness that began since the crisis in 2008
has not gradually improved. The IMF World Economic Outlook (WEO) 2018 said that the Gross Domestic Product (GDP) growth in
developed and developing countries tended to decline especially in 2015 and 2018. In 2015 world commodity prices fell to the
lowest level since 2009. The fall in commodity prices directly affected export activity. Then it didn't stop there, in 2018 the United
States started a trade war by setting a 25% import duty on Chinese imports.
Amid the global economic crisis, banks are trying to improve the performance to create corporate value. Company value is the
company's performance which is reflected by the shares price formed by demand and supply in the capital market which reflects the
public's assessment of the company's performance (Harmono, 2009).
Internal banking companies try to build a good perception from investors about the company value owned by the company. So,
company value is a certain condition that reflects the public trust level in the company, the higher company value, the more
prosperous the owner. Conversely, the lower company value, the public's perception of the company's performance is bad and
investors will not be interested in the company.
By implement risk management, it can also be an effort to minimize earnings management practices aimed to increase market value
or company value. Risk management is a set of policies, procedures that are complete and has an organization to manage, monitor,
and control the organization's exposure on risk (Warburg in Hanafi, 2006). In banking companies, there are several risks
management that can be applied, namely NPL, NIM, and CAR.
Non-Performing Loan (NPL) is proxies from credit risk management that show the ability of a bank as a liaison institution
(intermediary) between those who need funds and those who are excess funds. According to Siamat (2004), NPL is defined as loans
that have difficulty paying off due to intentional factors and/or due to external factors beyond the debtor's control. In Bank Indonesia
Regulation Number 6/10 / PBI / 2004 concerning Rating System for Commercial Banks, it is determined that the non-performing
loan (NPL) ratio is 5%. Hakim and Sugianto (2018) through their research showed that NPL has a significant negative relationship
to firm value.
Net Interest Margin (NIM) is a proxy for market risk management and an indicator of banking performance. NIM is a measurement
related to the difference between the interest income generated by banks and interest income from debtors to the total assets owned

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 International Journal of Advance Study and Research Work (2581-5997)/ Volume 3/Issue 3/March 2020

by the bank. Bank stability and profitability are even better if the NIM is higher. According to Saksonova (2014), the net interest
margin is the most appropriate criterion for evaluating the bank operations' effectiveness and stability compared to Return On Assets
(ROA) or Return On Equity (ROE) in evaluating the success of banks managing interest-bearing assets.
Capital Adequacy Ratio (CAR) is a proxy for the management of the capital adequacy level. CAR reflects the bank's ability to cover
the risk of loss from its activities and bankability to fund its operational activities. In the Financial Services Authority Regulation
Number 11 / POJK.03 / 2016 concerning the Minimum Capital Requirement for Commercial Banks, which is at least 8% Risk-
Weighted Assets (ATMR) for banks with a risk rating of rank 1st. In the 1st quarter of 2015, the banking CAR figure experienced a
decrease of up to 20.28% which means it gives a signal that bank profitability is declining. According to Srihayati and Tandika
(2015), CAR value does not affect company value. This is different from the findings of Sari and Denies (2018) which states that the
CAR value does not have a significant positive effect on firm value.
Also implementing risk management to minimize earnings management practices that can affect the value of the company, banking
companies also need to apply the International Financial Reporting Standard (IFRS). As it is known that accounting information is a
form of information that is relevant if it has reliable because it has a high degree of accuracy in describing the company's economic
activities. One of the most common statements about IFRS is that accounting standards are market-oriented and encourage the
principle of fair value (Tarca, 2012). Many countries have adopted IFRS as the main standard in preparing financial statements.
Earnings management practices to determine market value can also be influenced by tax planning. According to Zain (2006), Tax
planning is a structural action related to the potential consequences of taxes, the emphasis is on controlling every transaction that has
tax consequences with the aim of streamlining the amount of tax to be transferred to the government. Tax avoidance, which is part of
corporate tax planning, is a common thing to do to explain the actual tax amount that has been reduced, but on the other hand, it is
still seen as a controversial practice because it violates taxation laws.

Literature Review
Firm Value
Company value can be measured using Tobin's Q proxy, this model was first developed by Tobin in 1969. Tobin's Q is the company
market value by comparing the market value of a company listed on the financial market with the company's asset replacement
value. The replacement value of company assets is assumed to have the same value as the assets book value and is divided into two,
namely inventory and fixed assets. Hayashi (1982) stated that several criteria need to be considered when using Tobin's Q model in
calculating replacement costs. The following were the criteria; a) Production function and adjustment costs; b) Tight competition in
products and markets; and c) Capital markets are in the form of strong efficiency so that no single company can influence the
market. Companies with high Tobin's Q value usually have a strong brand image, have attractive investment opportunities and have
a competitive advantage. Companies that have low Tobin's Q values are generally in very competitive industries or industries that
are starting to shrink.

Earnings Management
Earnings management is the behavior of changing, hiding, or delaying financial information. Sulistyo (2008) said that earnings
management is the opportunist behavior of managers to play around with numbers in financial statements, following the objectives
to be achieved. In this case, earnings management can be understood as a fraudulent behavior of company managers. Fraud in
earnings management is due to numbers manipulation in the financial statements that are done consciously so that stakeholders who
want to know the company's condition are deceived because they obtain false information. Earnings management often occurs
because there is a gap in company information received by outsiders (Jogiyanto, 2009). The following is a description of the forms
of earnings management; 1. Taking a Bath; 2. Income Minimization; 3. Income Maximization; 4. Income Smoothing.

Non-Performing Loan
Non-Performing Loan (NPL) is an indicator that shows the problem loan position at a bank to the total loans granted. The NPL used
is net NPL, which is the adjusted NPL. Kuncoro (2011) said that the assessment of asset quality was an assessment of the bank
assets condition and credit risk management adequacy. The credit, in this case, is problem loans. NPL is classified as loans with
substandard, doubtful and bad quality (Almilia and Winny, 2005).

Net Interest Margin

Net Interest Margin (NIM) according to Mawardi (2005) is the interest rate measured by the difference between the funding interest
rate and the loan interest rate given or in absolute form is the difference between the total funding interest cost with the total interest
cost loans, which in banking terms is called Net Interest Margin (NIM). The high value of NIM refers to interest income on earning
assets which, if increased, means that the bank's financial performance is increasing.

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Capital Adequacy Ratio

Capital Adequacy Ratio (CAR) is a ratio that shows a bank in maintaining adequate capital and the ability of bank management to
identify, measure, supervise, and control risks that can arise which can affect the bank capital amount (Kuncoro, 2011). According to
Bank Indonesia Number 9/13 / PBI / 2007, CAR is the minimum capital provision for banks based on broad risk assets, both assets
listed in the balance sheet and administrative assets as reflected in obligations that are still contingent and/or commitments provided
by banks for third parties or market risk.

IFRS Adoption
International Financial Reporting Standards (IFRS) are standards, interpretations, and frameworks for the preparation and
presentation of financial statements prepared by the International Accounting Standards Board (ISAC) which was then restructured
in 2001 to become International Accounting Standard Boards (IASB). IFRS was effective in 2011 and had been adopted by several
countries such as Canada, Australia, and European countries which were supported by the United States of America which
previously did not carry out IFRS convergence. According to Horton et al (2010), the purpose of IFRS formation is to produce
financial statements that reflect the company's financial position honestly and fairly in a certain time by using international financial
reporting standards, so that the information contained in financial statements can be compared internationally. This is under the
mandate of the G-20 countries meeting in London on April 2 nd, 2009 to have a single set of high-quality global accounting standards
to provide quality financial information on international capital markets.

Tax Planning
According to Pohan (2013), tax planning is a process of organizing both personal and business taxpayers in such a way by utilizing
various possibilities loopholes that can be taken by companies in the corridor of tax regulations (loophole), so that companies can
pay taxes in a minimum amount. Tax planning is quite effective as an effort to reduce the tax burden, in addition to that tax planning
activities are also permissible and do not violate tax laws and regulations in force in Indonesia (Yuono and Dini, 2016).

Previous Studies
Prayudha and Masodah (2017) conducted a study to find out the magnitude of the influence of IFRS, ISA, and risk management on
earnings management in banking companies listed on the Indonesia Stock Exchange during the 2015-2016 period. The research
method used is multiple regression analysis models. The variables used are Discretionary Accruals (DA) as the dependent variable
with IFRS, audit quality, NPL, LDR, CAR, NIM, and BOPO as independent variables. The results of the study indicate that the NPL
variable and the CAR variable partially affect earnings management.
Kamil and Herawati (2016) conducted a study aimed at empirically proving how the influence of the CAMEL ratio partially and
simultaneously affected earnings management in Islamic banking companies in Indonesia in 2012-2014 with 11 samples. This study
uses the method of multiple linear regression models. The variables used are Discretionary Accruals (DA) as the dependent variable
and CAR, NPL, NPM, ROA, ROE, NIM, BOPO, FDR as independent variables. The results showed that BOPO and FDR influence
earnings management. Meanwhile, CAR, NPL, NPM, ROA, ROE, NIM do not affect earnings management.
Achyani and Susi (2019) conducted a study aimed at analyzing the effect of tax planning on earnings management on manufacturing
companies listed on the Indonesia Stock Exchange during the 2015-2017 period. This study uses the method of multiple linear
regression models. The variables used are Discretionary Accruals (DA) as the dependent variable and tax planning, deferred tax
expense, deferred tax assets, managerial ownership, and free cash flow as independent variables. The results show that tax planning
does not affect earnings management.
Xu (2014) conducted a study to determine the impact of IFRS on earnings management with a sample of non-publicly traded
companies in the UK that were active during the 2003-2010 period. The research method used is multiple linear regression models.
The variables used are Discretionary Accruals (DA) as the dependent variable with IFRS, BIG4, SIZE as independent variables and
LOSS, GROWTH, CASHFLOW, and ROE as control variables. The results of this study indicate that the IFRS variable does not
affect earnings management.

Research Methodology
The study is conducted by indirect observation using secondary data from the company. The selected research objects are DAR,
NPL, NIM, CAR, TAX, and IFRS application on company value with earnings management as an intervening variable in 37
conventional banking companies listed on the Indonesia Stock Exchange in 2014-2018. The analysis tools used are AMOS and
SPSS version 23.

The Effect of NPL on Earnings Management

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Credit risk refers to the risk of bank losses because the debtor does not repay the loan principal. The company management must
manage credit risk well to avoid credit that is not paid by the debtor. Credit risk management can be done by minimizing the
company's Non-Performing Loan (NPL) level. A company can be categorized as healthy if its NPL value is less than 5% (Bank
Indonesia Circular Letter, 2004). According to Surwanti et al (2016), Sari (2012) and Kamil and Herawati (2016) NPL do not affect
earnings management. Meanwhile, according to Prayudha and Masodah (2017), NPL affects earnings management because on credit
risk theory, large NPL will increase the risk of losses suffered by banks and management tends to increase profits to attract
investors.
H1: NPL Affect Earnings Management
The Effect of NIM on Earnings Management
Market risk indicates the risk of changes in the price of the balance sheet and administrative account positions, including derivative
transactions, and changes in overall market conditions including the risk of changes in option prices (Indonesian Bankers
Association, 2015). Market risk management can be done by maximizing Net Interest Margin (NIM). According to Bank Indonesia
Circular Letter (2004), a company can be categorized as healthy if its NIM value is more than 2%. Some studies show that there are
different research results from one another. Research conducted by Kamil and Herawati (2016) and Surwanti et al (2016) shows that
NIM does not affect earnings management. While research conducted by Sari (2012) and Prayudha and Masodah (2017) shows that
NIM affects earnings management.
H2: NIM Affect Earnings Management

The Effect of CAR on Earnings Management

Bank Indonesia has the responsibility to determine the minimum capital required by banks and to issue regulations regarding
minimum capital (regulatory capital). A company is said to be healthy if its CAR value is more than 9.5% (Circular of Bank
Indonesia, 2004). Some studies show that there are different research results from one another. Research conducted by Surwanti et al
(2016), Sari (2012) and Kamil and Herawati (2016) show that CAR does not affect earnings management. Meanwhile according to
Prayudha and Masodah (2017) show that CAR affects earnings management.
H3: CAR Affect Earnings Management

The Effect of Tax Planning on Earnings Management

Tax planning is carried out by companies to reduce the amount of tax that must be paid. Achyani and Susi (2019) show that tax
planning does not affect earnings management because in a company there are several divisions or departments with each
management. This will create a tendency that management will be interested in their respective interests to obtain bonuses or
rewards if they show good performance so that earnings management occurs because management's self-interest is not due to tax
planning. However, it is different from Wardani and Santi (2018) who show the results of research that tax planning affects earnings
management.
H4: Tax Planning Affect Earnings Management

The Effect of IFRS Adoption on Earnings Management

The adoption of IFRS in Indonesia will have an impact on the fewer choices of accounting methods that can be applied by
management, to minimize earnings management practices. According to Ewert and Wagenhofer (2005) states that increasingly
stringent accounting standards can reduce earnings management and improve the quality of financial reporting. Some studies show
that there are different research results from one another. Xu (2014) and Mikova (2014) conducted a study that showed that the
application of IFRS did not affect earnings management, while the research conducted by Said (2019) showed that the application of
IFRS affected earnings management.
H5: IFRS Adoption Affect Firm Value

The Effect of Earnings Management on Firm Value

Manipulation of financial statements is a form of earnings management practices carried out by the management to get profits and
one of the other impacts is the increase in the company value. Earnings management proxied by discretionary accruals (DA) value
significantly influences market value. According to Gill et al (2013) and Chandra and Devie (2017) earnings, management affects
firm value. Meanwhile, according to Darwis (2012), the practice of earnings management by management does not affect the value
of the company because the increase in profits made by fraud will harm the company and reduce the value of the company.
H6: Earnings Management Affect Firm Value

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 International Journal of Advance Study and Research Work (2581-5997)/ Volume 3/Issue 3/March 2020

Fig 1: Research Framework

Results and Discussion

Descriptive Analysis
Referring to the data generated in this study, it can be seen that for five periods, namely in 2014-2018. Banking companies were
indicated to practice earnings management by the highest increasing profit activity was in 2014 with a percentage of 78.38% and the
lowest occurred in 2016 amounting to 48.65%. The average value of banking companies during the 2014-2018 period tended to
decline their profit. In 2016, the value of the company experienced the most significant increase and decrease in the amount of 152%
and 42%.
Structural Equation Model Analysis (SEM)

Fig 2: Results of SEM Analysis

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 International Journal of Advance Study and Research Work (2581-5997)/ Volume 3/Issue 3/March 2020

Table: Goodness of Fit

Goodness of Fit Cut Off Value Model Test Results Criteria
Chi-square Small expected value 20.320 Good
Probability ≥ 0.05 0.001 Not Good
RMSEA ≤ 0.05 – 0.08 0.129 Not Good
GFI ≥ 0.90 0.971 Good
AGFI ≥ 0.80 0.838 Good
CMIN/DF ≤ 2 atau ≤ 5 4.064 Not Good
TLI ≥ 0.90 -0.154 Not Good
NFI ≥ 0.90 0.735 Not Good
Source: Data Processed, 2019

Evaluation of Goodness Fit Criteria

Sample Size
The sample used in this study amounted to 185 samples, which was following the minimum SEM analysis requirements.

Outliers
Based on the results of the outlier univariate test using Z-score analysis, there are still outlier data. Following the requirements, the
outlier data is deleted, so that the total sample changes to 143. Furthermore, after the outlier univariate test stage is completed, a
multivariate outlier test is performed using the Mahalanobis distance test. The results of the multivariate outlier test are the chi-
square value which changes to 15,672 with a probability level of 0.008. However, there are still outlier data shown by p1 and p2
values which are below 0.05. This means that data deletion still needs to be done until there is absolutely no outlier data. The final
result of the multivariate outlier test is the total sample changes to 128.

Multicollinearity and Singularity Test

According to Ghozali (2011), multicollinearity can be seen through the determinant of the covariance matrix. A very small
determinant value indicates an indication of multicollinearity or singularity problems, so the data cannot be used for research
(Tabachnick and Fidell, 2007). The results of the multicollinearity and singularity test in this study did not show values> 0.90, which
means that each variable did not experience multicollinearity.

Normality Test
This study used skewness value for the univariate normality test and kurtosis value for a multivariate normality test. If the value of
the Critical Ratio (C.R) for the two tests is in the range of ± 2.58 at the 0.01 significance level, then the normal distribution can be
fulfilled either univariate or multivariate. The results after the data were processed showed that there was no skewness value and
kurtosis value that exceeded ± 2.58 with a multivariate value of 4.172. So, the data in this study are normal.
Model Interpretation and Modification
The modification index is one of the tools to create a good model. This index is also an index that can be a guideline for
modification by looking at the largest value of the modification index and there is a strong theoretical foundation for correlated data.
This process is estimated to reduce the value of chi-square (X2) significantly. The following are the results of the index modification
test in this study:
Table: Goodness of Fit
M.I. Par Change
e7 <--> e4 4.159 -.002
e7 <--> e3 6.140 -.001
e7 <--> e2 9.851 .000

The relationship between the application of IFRS (e4) with TQ (e7) can occur because the application of IFRS can improve the
credibility of a company's financial statements, wherein the financial statements there are components such as total outstanding
shares, stock prices, liabilities, and assets that can describe the value of the company. According to Prayudha and Masodah (2017),
the application of IFRS will also have an impact on more detailed disclosures.

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 International Journal of Advance Study and Research Work (2581-5997)/ Volume 3/Issue 3/March 2020

The relationship between CAR (e3) and TQ (e7) can occur because according to Murni et al (2018), the value of CAR affects the
value of the company following investment theory where if the CAR value is high then the public and investors will believe in the
ability of bank capital so that funds third parties can be absorbed more which will ultimately increase the value of the company.
The relationship between NIM (e2) and TQ (e7) can occur because bank income from net interest indicates good bank business
management. NIM is a ratio that is used to determine the ability of bank management in terms of productive asset management so
that it can generate profits. The profit obtained is profit with interest income sourced from the debtor to the total assets owned by the
bank. The greater this ratio means that the interest income obtained by banks the greater this is supported in research conducted by
Haerani and Yosevin (2014).
After the modification, there is a change in the Goodness of Fit Model. Here are the final results of SEM analysis in this study:

Fig 3: Final Results of SEM Analysis

Table: Goodness of Fit – Final Model

Goodness of Fit Cut Off Value Model Test Results Criteria
Chi-square Small expected value 1.817 Good
Probability ≥ 0.05 0.403 Good
RMSEA ≤ 0.05 – 0.08 0.000 Good
GFI ≥ 0.90 0.996 Good
AGFI ≥ 0.80 0.943 Good
CMIN/DF ≤ 2 atau ≤ 5 0.909 Good
TLI ≥ 0.90 1.031 Good
NFI ≥ 0.90 0.978 Good
Source: Data Processed, 2019

Hypothesis Testing

Table: Hypothesis Testing Results

Estimate S.E. C.R. P Hyp Information
EM <--- NPL -1.687 .541 -3.116 .002 H1 Significant
EM <--- NIM .447 .580 .771 .440 H2 Not Significant
EM <--- CAR -.998 .242 -4.117 *** H3 Significant
EM <--- TAX -.082 .084 -.977 .328 H4 Not Significant
EM <--- IFRS .211 .183 1.153 .249 H5 Not Significant
TQ <--- EM .115 .099 1.162 .245 H6 Not Significant
Source: Data Processed, 2019

Discussion
H1: NPL Affect Earnings Management

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Based on the results in the table above, the probability and Critical Ratio (C.R) values for NPL are 0.002 and -3.116. This means that
NPL affects earnings management because the problem of losses caused by bad credit risk can be a strong reason for investors to
conduct earnings management to cover losses so that the company's value is not bad in the investor's view. According to Prayudha
and Masodah (2017), a negative NPL is an anomaly with the possibility of a bad economic condition so that, the banking NPL that
affects earnings management is negative. The results of this study are in line with Surwanti et al (2016), Sari (2012), and Kamil and
Herawati (2016).

H2: NIM Affect Earnings Management

Based on the results in the table above, the probability value and (C.R) for NIM are 0.440 and 0.771. This means that NIM does not
affect earnings management due to other factors that need to be considered such as interest rate movements that make banking
companies careful in providing credit, declining credit demand figures, and expansion of non-credit services of the banking
company itself which is also of interest the customer. The results of this study are in line with Sari (2012), Surwanti et al (2016), and
Kamil and Herawati (2016).

H3: CAR Affect Earnings Management

Based on the results in the table above, the probability value and (C.R) for CAR are *** and -4.117. This means that CAR is a ratio
that describes the capital adequacy, if a bank has sufficient capital following the conditions set by Bank Indonesia, the practice of
earnings management does not need to be done because there has been a contribution to increasing profits. The high value of CAR
will contribute to an increase in profits, this is due to an increase in the amount of own capital so that it can be used to manage
existing assets (Yogi and Ayu, 2016). The results of this study contradict Prayudha and Masodah (2017).

H4: TAX Affect Earnings Management

Based on the results in the table above, the probability value and (C.R) for TAX are 0.328 and -0.977. This means that Tax planning
does not affect earnings management due to differences in the methods used to measure earnings management in each company.
Meanwhile, according to Achyani and Susi (2019), tax planning does not affect earnings management because within a company,
divisions or departments practice earnings management tends to be due to self-interest management not because of tax planning. The
results of this study contradict Wardani and Santi (2018).

H5: IFRS adoption Affect Earnings Management

Based on the results in the table above, the probability value and (C.R) for the application of IFRS are 0.249 and 1,153. This means
that there is no influence between the adoption of IFRS and Earnings Management. Zuhair and Dade (2018), this happens because
the IASB as a standard-setter of IFRS has members who are mostly developed countries, so IFRS is not necessarily fully compatible
when applied in developing countries which have different characteristics from developed countries the application of IFRS by the
company was not as a form to prevent the existence of earnings management practices but as a form of applying internationally
applicable regulations. The results of this study are in line with Mikova (2014), Xu (2014), and Abbas (2018).

H6: Earnings Management Affect Firm Value

Based on the results in the table above, the probability value and (C.R) for Earnings Management are 0.245 and 1,162. This means
that there is no influence between Earnings Management and Company Value. According to Kamil and Dini (2014) earnings
management is an action to increase or decrease earnings by choosing accounting policies by management that are subjective, so
earnings management, especially in the long run, will reduce the value of the company. Earnings management actions taken will not
provide a favorable reaction such as increasing the value of the company when the objectives held by managers with different capital
owners are Lestari and Selvy (2018).

Conclusion and Recommendation

Based on the hypothesis testing that has been done, it could as follow:
1. NPL harms earnings management. Although NPL has a negative influence on earnings management and tends to
increase, the average value of NPL in the period 2014-2018 is below the predetermined standard of 5%. This indicates
that credit risks faced by banking companies tend to be large and have not been fully able to be overcome.
2. NIM does not affect earnings management. NIM is not the only factor that causes increased earnings management
practices. This happens because there are factors that need to be considered such as interest rate movements that make
banking companies careful in extending credit, declining credit demand figures, and expanding non-credit services of
banking companies themselves that are also in demand by customers.

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3. CAR harms earnings management. This is because the minimum CAR value in the 2014-2108 period in this study is in
the range of 8-11% which is still quite low despite exceeding the minimum limit so that banking companies still have
the potential to practice earnings management as an effort to fulfill their capital.
4. TAX does not affect earnings management. The average value of Tax in the 2014-2018 period in this study shows a
decrease in tax planning in the banking industry which indicates that banking companies pay taxes in real terms and
reduce tax planning activities. The low tax planning activities can affect earnings management practices to increase
profits by reducing taxes.
5. IFRS does not affect earnings management. This is due to differences in systems and patterns of IFRS implementation
between one country and other countries so that the successful implementation of IFRS in certain countries may not
necessarily have the same impact on other countries.
6. Earnings Management does not affect firm value. The increasing earnings management practices can raise the suspicion
of external parties especially investors, then coupled with disclosures in irrelevant financial statements that can cause a
decline in the value of the company.

Based on the research results and conclusions described above, it can be submitted suggestions for the future as follows.
1. Further research can use a sample in a larger amount, which uses a sample of all companies in all sectors listed on the
Indonesia Stock Exchange.
2. Further research can be done using a longer research period.
3. Further research is expected to use other variables that are more diverse to get the results of a greater effect on earnings
management and firm value.

References

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