EFFECT OF THE AUDIT COMMITTEE AND OWNERSHIP OF INSTITUTIONAL EARNINGS PERSISTENCE IN MANUFACTURING COMPANY

TESIS

Abstract

By : I Made Sujana

Email : tax.madesujana@yahoo.com

Faculties : Fakultas Ekonomi dan Bisnis

Department : S2 Akuntansi

ABSTRACT EFFECT OF THE AUDIT COMMITTEE AND OWNERSHIP OF INSTITUTIONAL EARNINGS PERSISTENCE IN MANUFACTURING COMPANY This study examined the effect of the audit committee and institutional ownership on earnings persistence. Previous studies show inconsistent results on the persistence of earnings. Theories related to this research is the theory of agency (agency theory) which describes the working relationship between two or more parties based on a contract in which one party called the agent and the party called principals. Principal authorizes the agent to manage the assets of its assets in the form of a company and the results or progress in the period accounted for in the form of financial statements. This study uses regression analysis techniques (multiple regression) by comparing the coefficient of determination between the two independent variables. The data used in this research is secondary data published on the Stock Exchange using 77 samples of manufacturing firms the period 2011-2012. The analysis showed that audit committees have negative effect on the persistence of earnings, while institutional ownership has a positive effect on earnings persistence. The audit committee has a negative effect on earnings persistence may be caused by the greater number of the audit committee are owned by the persistence of earnings will tend to decline, it is probably because when the number of audit committee in a company more and more, the supervision and control conducted by the audit committee must increasingly considering a lot of views from different viewpoints with the members of different educational backgrounds, and can lead to inefficiency of work of the audit committee so that the level of earnings persistence will also be getting lower and lower the quality of reported earnings. Another possibility that not all members of the audit committee have the expertise in accounting and finance so as to reduce the element of relevance in the financial statements so that the predictability of the financial statements tends to decrease. The level of expertise in accounting and finance throughout the audit committee members also have an impact on the process of supervision of financial statements that will ultimately affect the quality of the financial statements. Institutional ownership has a positive effect on earnings persistence implies that the greater number of shares owned by institutional shareholders, the persistence of earnings will tend to increase, because the power of the shareholders of the constitution is getting higher and they can monitor it better so the less likely management did earnings restatement or the higher the quality of reported earnings. Keywords: audit committee, institutional ownership, earnings persistence

Keyword : audit committee, institutional ownership, earnings persistence

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