THE RELATIONSHIP OF EARNINGS QUALITY WITH CSR DISCLOSURE AND SHARIAH COMPLIANCE (CASE STUDY OF LQ45 COMPANY DURING 2018-2018)

• Main Author: Jannah, Rayhatul
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/41124
• Institution: Institut Teknologi Bandung

Ethics and financial reporting have become a common issue around academics and business practitioners. Since there is a chance either the managers take the opportunistic behavior or do moral obligation, then this research examines the effect of two potential ethical principles on earnings quality which are corporate social responsibility (CSR) and membership in the Shariah index. To see is there a significant relationship between both ethics source principal and earnings quality. The definition of membership in the Shariah index refers to the obedience of the company based on the ethical code in Islam. This research used the sample company that always listed in the LQ45 index during 2015-2018 with the amount of 26 companies or 104 observations. The data is processed by using panel data analysis through the multiple linear regression model. With the earnings quality as the dependent variable obtained from the computation of discretionary accruals by using a cross-sectional approach. While the CSR disclosure index and membership in the Shariah index as the independent variables. This research also used several other variables in the regression to control the company's' characteristics that could affect the extent of the independent variables and earnings quality. The result shows that the company that has a high degree of CSR and membership in the Shariah index has an inconsistent significant relationship with earnings quality since this research uses both of results either earnings quality with a sign or earnings quality absolute. CSR index only has a significant relationship with the degree of earnings management absolute that represents the higher the degree of earnings management, hence the lower the earnings quality. Meanwhile, the Shariah index only has a significant relationship with the incomeincreasing or income-decreasing management which represents that the higher the degree of income-increasing or income-decreasing, the lower the earnings quality of the company. But both of them determine negatively associated with earnings quality which means the companies of this sample are less likely to manage the earnings. From these results, it can be concluded that companies are likely to have high earnings quality in their reporting.