The Effect of Independent Commissioners, Firm Size, and Managerial Ownership on the Integrity of Financial Reports

Abstract

: This study examines whether independent commissioners, firm size, and managerial ownership affect financial reporting integrity. Independent commissioners and managerial ownership represent corporate governance mechanisms, while firm size is measured by the natural logarithm of total assets. The study uses secondary data obtained from the annual reports and audited financial statements of companies included in the LQ45 Index and listed on the Indonesia Stock Exchange during 2021–2024. Through purposive sampling, 30 companies were selected, resulting in 120 firm-year observations. Panel data regression analysis was conducted using the Random Effect Model in EViews 13. The findings show that managerial ownership has a positive and significant effect on financial reporting integrity, whereas independent commissioners and firm size do not have significant effects. These findings suggest that financial reporting integrity is influenced more by governance mechanisms that align the interests of managers and shareholders than by the formal presence of independent commissioners or the scale of the firm's assets. The results provide partial support for agency theory by confirming the governance role of managerial ownership in enhancing financial reporting integrity.