THE EFFECT OF PROFITABILITY, SALES GROWTH, AND LEVERAGE ON EARNINGS MANAGEMENT

Abstract

This study aims to determine the effect of profitability, sales growth, and leverage on earnings management. The population in this research is primary consumer sector companies (consumer non-cyclicals) which are listing consistently on the Indonesia Stock Exchange for the 2021-2024 period. The sample was selected using the purposive sampling method, resulting a sample of 62 companies with 238 final observation data after eliminating 10 outlier observations. Data analysis method was analysed using panel data regression with Eviews 13 software and the Fixed Effect Model (FEM) was selected as the panel regression model. The result of this research provides empirical data that sales growth has a significant effect on earnings management, while profitability and leverage have no effect on earnings management. Therefore, the firm size as control variable has a significant effect on earnings management. These results indicate that sales growth plays a more important role in explaining earnings management than profitability and leverage.