Economics and Financial Innovation

The Role of Financial Structure and Ownership in Determining Accounting Conservatism: A Study on Leverage, Managerial Ownership, and Financial Distress Factors

Abdullah Bahfen — 2025-09-17

This study aims to explore the impact of leverage, managerial ownership, and financial distress on the decision to adopt accounting conservatism in manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the period from 2013 to 2017. Leverage is assessed through the Debt-to-Equity Ratio (DER), managerial ownership is evaluated using the managerial ownership ratio (MOR), financial distress is measured by the Altman Z-score, and accounting conservatism is indicated by CONACCit. This research utilizes a quantitative approach and a purposive sampling technique, resulting in a sample of 20 companies, relying on secondary data sourced from financial reports available on the official IDX website. Data analysis is conducted using multiple linear regression. The findings reveal that leverage, managerial ownership, and financial distress significantly affect accounting conservatism. The managerial implications of these results highlight the necessity for management to maintain a prudent capital structure, promote managerial ownership to enhance accountability, and adopt accounting conservatism as a strategy for addressing financial risks and preserving stakeholder trust. From an Islamic perspective, the implementation of accounting conservatism aligns with the principle of prudence, which is essential for maintaining trust, ensuring transparency, and safeguarding the interests of all stakeholders involved.

The Watchdogs of Financial Reporting: Audit Committee Quality, Auditor Size, and Earnings Management

Nazila Alfiyasahra — 2025-09-17

This study investigates the impact of audit committee quality and the size of public accounting firms on earnings management. The audit committee's characteristics are assessed through proxies, including the size of the audit committee, the frequency of its meetings, the independence of its members, and their relevant expertise. The research utilizes secondary data from companies classified within the basic and chemical manufacturing industries that are listed on the Indonesia Stock Exchange (IDX). A purposive sampling method yielded a sample of 16 firms spanning the period from 2015 to 2017. The analytical approach employed was multiple regression. The findings suggest that an independent audit committee has a positive influence on earnings management. Conversely, factors such as the size of the audit committee, the number of meetings held, the expertise of committee members, and the size of the public accounting firm do not significantly affect earnings management. The managerial implications of this study recommend that companies should prioritize the independence of their audit committees, recognizing it as an effective oversight mechanism for mitigating earnings management practices.

The Effect of Inventory Valuation and Net Profit Margin on Market Value: An Empirical Study of Companies

Afina Mirrah Aghnia — 2025-09-17

Market value reflects stock prices on the Indonesia Stock Exchange and is influenced by the interaction between supply and demand. This study aims to analyze the effect of Inventory Valuation Accounting Methods and Net Profit Margin on Market Value in manufacturing companies in the consumer goods industry listed on the IDX for the period 2012–2016. The research sample was selected using purposive sampling of 20 companies. The results showed that, partially, Inventory Valuation Accounting Methods had no significant effect on Market Value. The managerial implications of these findings emphasize the importance of effective company management in improving efficiency and profitability. This is because increasing the Net Profit Margin can directly enhance the company's market value. In contrast, the choice of inventory valuation method has no significant impact on investor perceptions of stock prices.

RGEC as a Mirror of Bank Performance: A Comparative Analysis of Banking Health Levels

Aini Nur Arfira — 2025-09-17

The rapid growth of banking in Indonesia has made it essential to monitor bank performance. Bank Indonesia, as the central bank, supervises financial institutions to evaluate their financial health and activities. Despite global financial pressures, Indonesia’s banking sector has shown improvement, reflected in eased liquidity constraints and growth in non-performing as well as current loans. This study conducts a comparative assessment of bank health using the Risk Profile, Good Corporate Governance, Earnings, and Capital (RGEC) method, focusing on Bank Rakyat Indonesia (BRI) and Bank Danamon during 2013–2016, examined through an Islamic perspective. A comparative quantitative approach is employed to analyze differences in their financial health. The findings reveal variations between BRI and Danamon in Risk Profile, Good Corporate Governance, and Earnings. However, no significant difference was observed in Capital. From an Islamic perspective, the RGEC framework aligns with Sharia principles, as it emphasizes fair and transparent evaluation while avoiding prohibited elements such as fraud, exploitation, or activities that may harm others. Thus, this research not only highlights differences in the financial health of the two banks but also demonstrates the relevance of the RGEC method as an Islamic-compliant tool for assessing banking performance.

Dividend Policy Determination: An Empirical Study of Free Cash Flow, Collateral Assets, and Leverage

Andini Julita — 2025-09-17

This study examines the effect of free cash flow, collateral assets, and leverage on the dividend policy of consumer goods manufacturing companies listed on the Indonesia Stock Exchange (IDX) during 2012–2017. Free cash flow is measured using the free cash flow ratio, collateral assets with the collateral assets ratio, leverage by the debt-to-equity ratio, and dividend policy through the dividend payout ratio. The sample was selected using purposive sampling, consisting of 11 companies, with data sourced from financial statements and annual reports. Multiple linear regression with SPSS version 25 was applied for analysis. The results show that free cash flow, collateral assets, and leverage jointly and significantly affect dividend policy. Individually, free cash flow and leverage have a significant positive influence, while collateral assets show no significant effect. These findings highlight the role of financial flexibility in supporting dividend distribution. Adequate free cash flow ensures liquidity for consistent dividend payments, and sound leverage management strengthens the company’s financial structure. In contrast, the insignificant impact of tangible assets suggests that asset ownership is less relevant in dividend decisions compared to liquidity and capital structure. Management should therefore prioritize cash availability and debt control to build investor confidence and enhance firm value