The document discusses a study examining the effect of earnings management on corporate social responsibility (CSR) disclosure and the moderating role of corporate governance in Indonesian banks. The study finds that earnings management does not positively influence CSR disclosure, and an independent board does not weaken this relationship. However, more frequent audit committee meetings do weaken the positive relationship between earnings management and CSR reporting. The study has limitations due to focusing on banks that generally have low CSR disclosure.

1. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Earnings Management, Corporate
Social Responsibility And Corporate
Governance In Indonesian Banking
Industry
Supardi
Yudi Santara Setyapurnama
Akademi Akuntansi YKPN Yogyakarta

2. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Objective
• The objectives to be achieved in this study are
to examine the effect of earnings management
practices on corporate social responsibility and
examine the moderating role of corporate
governance on the relationship between
earnings management and corporate social
responsibility.
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3. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Motivation
• Previous studies have examined the
relationship between the quality of financial
statements specifically related to earnings
management practices and CSR which reports
mixed results (Chih et al., 2008; Prior et al.,
2008; Oktafia, 2013; and Grougiou, et al.,
2014).
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4. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Motivation
• To reduce financial statements that can mislead
decision makers, several researchers
(Herawaty, 2008; Riwayati et al., 2015; Achyani
et al., 2015; Rice, 2016; Abbadi et al., 2016;
and Supardi and Asmara, 2018) states the need
for integration between the role of corporate
governance with the disclosure of social
responsibility.
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5. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Research Questions
• RQ 1: Does earnings management influence
corporate social responsibility?
• RQ 2: Can corporate governance moderate the
effect of earnings management practices with
corporate social responsibility?
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6. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Theoretical Framework
• In this study, researchers used legitimacy theory and
agency theory.
• Legitimacy theory is used to explain the relationship
between earnings management and corporate social
responsibility disclosure in annual reports.
• Agency theory is used to explain the role of corporate
governance in reducing earnings management
practices carried out by opportunistic managers that
can harm stakeholders.
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7. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
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Hypothesis
H1 : Earnings Management has a positive effect on the
disclosure of Corporate Social Responsibility.
H2a : The positive effect of earnings management on
disclosure of corporate social responsibility, is
weakened by the supervision of an independent
commissioner.
H2b : The positive effect of earnings management on
corporate social responsibility disclosure, is weakened
by the oversight of the audit committee.

8. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
RESEARCH METHOD
• Sample selection
– The commercial bank is listed on the IDX for three
consecutive years namely 2015-2017.
– the commercial bank has complete data needed in
this study.
– Banking sector companies publish annual reports in
2015-2017 and the audited Public Accountant Firm
• Source
Indonesian Capital Market Directory,
www.idx.co.id
company’s website.
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9. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
RESEARCH METHOD
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Variables Measurements
Earning
Management (EMit)
The difference between realized security gain or
loss (RSGL) income items and loan loss
provocation (LLP) expenditure items firms i year t
Corporate Social
Responsibility
(CSRit)
Identifying CSR practices in the firms i year t based
on the Global Reporting Initiative Index which
consists of 79 items.
Corporate
Governance (CGit)
The proportion of independent commissioners firms
i year t and the frequency of audit committee
meetings firms i year t

10. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
RESEARCH METHOD
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11. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
DATA ANALYSIS
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Descriptives Statistics
Variable Minimum Maximum Mean Std. Deviation
CSR 0,171 0,767 0,391 0,160
EM 0,019 10,876 1,141 1,136
INDP 0,400 1,000 0,582 0,104
AUD 2,000 22,000 11,098 6,590
EM*INDP 0,096 5,924 0,669 0,549
EM*AUD 1,039 16,639 3,495 2,214
LEV 0,853 4,267 2,415 0,588
INTA 0,000 0,016 0,001 0,0001

12. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
DATA ANALYSIS
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Bivariate Analysis
CSR EM INDP AUD INTA LEV EM*INDP
EM -.117
INDP -.059 .034
AUD .376** -.114 -.107
INTA -.093 .012 .136 -.038
LEV .151 -.195* -.078 .173* -.195*
EM*INDP -.118 .581** .163 -.119 .032 -.164
EM*AUD -.015 .462** .029 .075 .016 -.080 .448**
**, *. The correlation is significant at 0.01 and 0.05 levels respectively (2-tailed).

13. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
DATA ANALYSIS
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Model 1 Model 2
Variable Coefficient t-Stat Coefficient t-Stat
Intercept 0.402 *** 3.387 0.266 ** 2.078
EM - 3.542 - 0.683 -0.095 -1.309
INDP -0.146 -0.786 -0.044 -0.251
AUD -0.058 -0.847 -0.037 ** -1.929
INTA 0.037 1.483 4.244 0.876
LEV 0.083 0.695 0.016 0.663
EM*INDP 0.018 0.157
EM*AUD -0.027 ** -1.761
Adj. R2 0.004 0.133
F-stat 1.103 3.859 ***
***, **, * show that coefficient is significant at 0.01, 0.05, and 0.1 respectively

14. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
The Price Model Test Result
H1
Earnings Management has a positive effect on
the disclosure of Corporate Social
Responsibility.
Rejected
H2a
The positive effect of earnings management
on disclosure of corporate social
responsibility, is weakened by the supervision
of an independent commissioner.
Rejected
H2b
The positive effect of earnings management
on corporate social responsibility disclosure, is
weakened by the oversight of the audit
committee.
Accepted
Results

15. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Discussion
• The findings in this testing hyphotesis 1 is not consistent with
the results obtained by Prior et al. (2008), Oktafia (2013) and
Grogiou et al. (2014) which they found that earnings
management practices can increase the extent of corporate
social responsibility disclosure.
• The result of this testing hyphotesis 1 is the same as the
research conducted by Sun et al. (2010). Researchers suspect
that opportunistic managers who do earnings management
will not necessarily be driven to disclose corporate social
responsibility more broadly.

16. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Discussion
• The result of this testing hyphotesis 2a is consistent
with research conducted by Chintya (2012), Oktafia
(2013) and Sari (2014) but different from studies
conducted by Sun et al. (2010).
• This finding indicate that changes in the composition
of independent directors cannot influence managers
in carrying out earnings management practices by
expanding the scope of corporate social
responsibility disclosure.

17. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Discussion
• The result of this testing hyphotesis 2b is the same as
those of Rodgers et al. (2007), Sun et al. (2010), and
Oktafia (2013) which stated that the number of audit
committee meetings had a significant influence in
the relationship between earnings management and
corporate social responsibility disclosure.
• The researcher suspects that the role of the audit
committee in banking companies can be carried out
effectively and efficiently.

18. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Conclusion
• Hypothesis 1 and hypothesis 2a are rejected,
while hypothesis 2b is accepted and
supported by empirical data on research.
• For the audit committee (Hypothesis 2b), it
was supported by a significant negative and
proven basis in weakening the relationship
between earnings management and
disclosure of corporate social responsibility.

19. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019
Limitations
• This research has limitations, especially on the
use of banking companies as research
samples. Because banking companies operate
not directly related to the environment, they
tend to have low levels of corporate social
responsibility disclosure and are more related
to community activities. So that the Global
Reporting Initiatives indicators that are used
are not widely met.

20. The International Conference in Religious and Cultural Paradox in Social, Economics, and Business Sciences (INCRECS) 2019