THE ANALYSIS OF IFRS IMPLEMENTATION, LEVERAGE, AUDIT QUALITY, INSTITUTIONAL OWNERSHIP, AND MANAGERIAL OWNERSHIP IMPACT TOWARDS EARNINGS QUALITY OF INDONESIAN LISTED COMPANIES IN LQ-45 INDEX 2012

Abstract

This research mainly aims to analyze the impact of IFRS implementation, leverage, audit quality, institutional ownership, and managerial ownership towards the earning quality subsequent to the issuance of Indonesian Institute of Accountants (IAI) formal statement regarding full convergence of IFRS by 1 January 2012. Through this research, the financial data of 2012 is compared to 2008 data when Indonesia Accounting Standard Board just decided to firstly start the IFRS adoption phase. This research is carried out against the companies listed in stock exchanges of Indonesia, particularly LQ-45 Index 2012 companies. It involves 76 companies that have data availability in both pre-IFRS and post-IFRS full convergence as the sample. The earnings quality is measured by using Modified Dechow-Dichev Model that focuses on earnings mapping closeness to cash flows. This research finds that there is significant influence of IFRS implementation, leverage ratio, and institutional ownership towards the earnings quality. On the other hand, there is no significant influence of audit size and managerial ownership towards the earnings quality. In the context of increasingly high demand for accounting standards convergence to IFRS, this study reveals the negative side of IFRS implementation in raising the accruals which results in lower earnings quality of companies. From the statistic results, there is an implication for accounting information users are not able to benefit from the IFRS implementation in terms of higher earnings quality.