Abstract
Indonesia is the biggest economy in the southeast Asia. This paper
investigates the earnings management behavior of Indonesian public firms. The
earnings management activities have been divided into three parts. Namely,
accrual earnings management, real earnings management and fraud detection. Our
findings indicate that earnings management activities are common for Indonesian
firms. Firm size and asset growth have
significant relationship associated, with various directions, with both accrual
earnings management and real management activities for Indonesian firms. We also find that firm size, asset
growth, ROE, and debt ratio consistently have significant relationship to real
earnings management. In predicting the possibility of Indonesian firm to
commit financial fraud, we find that manipulating gross margin, sales growth,
depreciations and expenses related to sales and general administration is
common seen from fraudulent firms in Indonesia.
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