Effect of Profit Management on Right Issue Offers

Oct 13, 2025 by windailys.com 38 views

Analysis of the Effect of Profit Management and Real Activities on Right Issue Offers and Company Long-Term Performance on the Indonesia Stock Exchange (2005-2009)

The Indonesia Stock Exchange (IDX) has been a significant platform for companies to raise capital through various means, including right issue offers. However, the decision to offer a right issue is a complex process that involves various factors, including profit management and real activities. This study aims to analyze the effect of accrual earnings management and real activities on company decisions to offer the rights issue and the company's long-term performance.

Understanding the Concept of Accrual Earnings Management and Real Activities

Accrual earnings management refers to the practice of manipulating financial statements to achieve a desired outcome, such as increasing earnings or reducing expenses. This can be done through various means, including discretionary accruals, which are accruals that are not related to the company's normal business operations. Real activities, on the other hand, refer to the actual operations of the company, including production costs, cash flow, and discretionary costs.

Research Methodology

This study uses a hypothesis testing method with a quantitative approach. The research population consists of all companies that conduct rights issues on the IDX during the 2005-2009 period, which is 92 companies. The research sample was taken by purposive sampling technique, producing 45 companies that met the criteria. The data used is secondary data in the form of company financial statements downloaded from the IDX website. Data analysis using a multiple linear regression model, with hypothesis testing is carried out using the T test and the F test.

Results and Discussion

The results of this study show that:

Effect of Profit Management on Right Issue Offers: Discretionary and long-term discretionary accruals have no significant effect on company decisions to offer Right Issue. This suggests that companies do not use accrual earnings management as a primary factor in deciding to offer a right issue.
The Effect of Real Activities on Right Issue Supply: Abnormal Production Costs and Abnormal Discretionary Costs Simultaneously have a significant effect on company decisions to offer Right Issue. This shows that companies that manipulate production costs and discretionary costs tend to prefer to offer right issues.
Effects of Profit Management and Real Activities on Long-Term Performance: Short-term Discretionary Accrual, Long-term Discretionary Accrual, Company Cash Flow, Abnormal Production Costs, and Abnormal Discretioning Costs Partially affect the company's long-term performance. Simultaneous test results also show that these variables jointly affect the long-term performance of the company that conducts a Right Issue offer.

Implications

The results of this study provide some important implications:

For investors: Investors need to pay attention to the practice of earnings management and real activities carried out by the company before deciding to invest in companies that make rights issue offers. Companies that do financial manipulation tend to have poor long-term performance.
For regulators: Regulators need to tighten supervision of earnings management practices and real activities carried out by the company. This is to prevent the practice of financial manipulation and protect the interests of investors.
For companies: Companies must pay attention to the long-term impact of earnings management practices and real activities on company performance and company image. Companies that manipulate financial manipulation at risk of getting sanctions from regulators and losing trust from investors.

Limitations

This research has several limitations:

The research period is limited in 2005-2009.
The data used only comes from the company's financial statements published on the IDX.
The regression model used in this study does not consider all variables that might affect company decisions to offer the company's right issue and long-term performance.

Suggestions for Future Research

Subsequent research can expand the research period and consider other variables that may affect company decisions to make a rights issue offer and company long-term performance.
Further research can also use qualitative data to study more in the motivation and strategy of the company in conducting a Right Issue offer.

Conclusion

This study shows that real activities, especially abnormal production costs and abnormal discretionary costs, have a significant effect on company decisions to offer right issues. In addition, both accrual earnings management and real activities partially affect the long-term performance of the company that conducts a Right Issue offer. The results of this study provide important information for investors, regulators, and companies in understanding the impact of earnings management and tangible activities on rights issue bid decisions and company long-term performance.

Recommendations for Practitioners

Investors should be cautious when investing in companies that have a history of earnings management and real activities manipulation.
Regulators should tighten supervision of companies that engage in earnings management and real activities manipulation.
Companies should prioritize transparency and honesty in their financial reporting and operations to maintain trust with investors and regulators.

Future Research Directions

Further research can explore the impact of earnings management and real activities on company performance in other industries and countries.
Researchers can also investigate the motivations and strategies behind companies' decisions to engage in earnings management and real activities manipulation.
The study can also be extended to include other variables that may affect company decisions to offer the company's right issue and long-term performance.
Q&A: Understanding the Effect of Accrual Earnings Management and Real Activities on Right Issue Offers and Company Long-Term Performance

In our previous article, we discussed the analysis of the effect of accrual earnings management and real activities on company decisions to offer the rights issue and the company's long-term performance. Here are some frequently asked questions (FAQs) and answers to help you better understand the topic:

Q: What is accrual earnings management?

A: Accrual earnings management refers to the practice of manipulating financial statements to achieve a desired outcome, such as increasing earnings or reducing expenses. This can be done through various means, including discretionary accruals, which are accruals that are not related to the company's normal business operations.

Q: What are real activities?

A: Real activities refer to the actual operations of the company, including production costs, cash flow, and discretionary costs.

Q: How do accrual earnings management and real activities affect company decisions to offer the rights issue?

A: The results of this study show that abnormal production costs and abnormal discretionary costs have a significant effect on company decisions to offer the rights issue. This suggests that companies that manipulate production costs and discretionary costs tend to prefer to offer right issues.

Q: How do accrual earnings management and real activities affect company long-term performance?

A: The results of this study show that short-term discretionary accrual, long-term discretionary accrual, company cash flow, abnormal production costs, and abnormal discretionary costs partially affect the company's long-term performance. Simultaneous test results also show that these variables jointly affect the long-term performance of the company that conducts a Right Issue offer.

Q: What are the implications of this study for investors?

A: Investors need to pay attention to the practice of earnings management and real activities carried out by the company before deciding to invest in companies that make rights issue offers. Companies that do financial manipulation tend to have poor long-term performance.

Q: What are the implications of this study for regulators?

A: Regulators need to tighten supervision of earnings management practices and real activities carried out by the company. This is to prevent the practice of financial manipulation and protect the interests of investors.

Q: What are the implications of this study for companies?

A: Companies must pay attention to the long-term impact of earnings management practices and real activities on company performance and company image. Companies that manipulate financial manipulation at risk of getting sanctions from regulators and losing trust from investors.

Q: What are the limitations of this study?

A: The research period is limited in 2005-2009. The data used only comes from the company's financial statements published on the IDX. The regression model used in this study does not consider all variables that might affect company decisions to offer the company's right issue and long-term performance.

Q: What are the suggestions for future research?

A: Subsequent research can expand the research period and consider other variables that may affect company decisions to make a rights issue offer and company long-term performance. Further research can also use qualitative data to study more in the motivation and strategy of the company in conducting a Right Issue offer.

Q: What are the recommendations for practitioners?

A: Investors should be cautious when investing in companies that have a history of earnings management and real activities manipulation. Regulators should tighten supervision of companies that engage in earnings management and real activities manipulation. Companies should prioritize transparency and honesty in their financial reporting and operations to maintain trust with investors and regulators.

Q: What are the future research directions?

A: Further research can explore the impact of earnings management and real activities on company performance in other industries and countries. Researchers can also investigate the motivations and strategies behind companies' decisions to engage in earnings management and real activities manipulation. The study can also be extended to include other variables that may affect company decisions to offer the company's right issue and long-term performance.

We hope this Q&A article helps you better understand the effect of accrual earnings management and real activities on right issue offers and company long-term performance. If you have any further questions or concerns, please feel free to ask.