The Effect of Information Asymmetry, Leverage, and Profitability on Earnings Management Practices

One component of financial statements that describes the performance of issuers is the profit component. In general, the amount of profit can be a decision maker for investors. Any changes related to earnings information will affect the actions of investors. The accrual basis in financial statements provides an opportunity for managers to modify financial statements to produce the desired amount of profit. The choice of accounting method that is deliberately chosen by management for certain purposes is known as earnings management. The population of this study are all banking companies listed on the Indonesia Stock Exchange (IDX) in the 2016- 2020 period, which amount to 43 banking companies. The sampling method was carried out by purposive sampling, so that 10 samples were obtained during 2016 to 2020 and a total of 50 observations were obtained. The results showed that the variables of information asymmetry and leverage had a positive and significant effect on earnings management practices. Meanwhile, the profitability variable has a negative effect on earnings management practices.