Citation:

Adi Nurpermana, Titik Aryati. "The Effect of Fair Value Accounting and Product Market Competition on Earning Quality With Relationship Capital as a Moderation Variable" International Research Journal of Economics and Management Studies, Vol. 3, No. 2, pp. 175-182, 2024.

Abstract:

This paper aims to study whether fair value accounting and product market competition can improve the quality of earnings in primary material and transportation and logistics companies in Indonesia during the 2019-2021 period and emphasize the moderating impact of relationship capital. This paper shows four main findings: first, fair value accounting measures reduce earnings quality; second, product market competition increases earning rate; third and fourth, relationship capital strengthens fair value accounting and product market competition on earning quality. In addition to contributing to this study, the researchers concluded that in developing countries, no statistically relevant relationship was found between fair value accounting and earning quality, possibly due to IFRS adoption and lack of experience in FVA or, more generally, the influence of IFRS regulations. Very low on local accounting practices. So, practitioners have to master accounting standards in Indonesia.

References:

[1] Abor, J. (2007). Debt policy and performance of SMEs: evidence from Ghanaian and South African firms. J. Risk Fin. Incorporate. Bal. Sheet 8, 364– 379.
[2] Abor, J. (2007). Debt policy and performance of SMEs: evidence from Ghanaian and South African firms. J. Risk Fin. Incorporate. Bal. Sheet 8, 364– 379.
[3] Alzoubi, E., S., S. & Selamat, M., S. (2013). The adoption of IFRS-based accounting standard and earnings quality: Literature review and proposing conceptual framework. [Online]. Available: http://www.wbiconpro.com/104-Latest-Ebraheem.pdf [2013/04/09]
[4] Angraini, R., & Septiano, R. (2019). Pengaruh pertumbuhan laba dan likuiditas terhadap kualitas laba pada perusahaan manufaktur sektor karet dan batubara di kota padang. Academic Conference of Accounting J, 1(1), 129– 140.
[5] Awatif Alsheikh, Mohamat Sabri Hassan, Norman Mohd-Saleh, Mohd Hafizuddin-Syah bin Abdullah, & Warda Alsheikh. (2021). Firm’s Size, Mandatory Adoption of IFRS and Corporate Risk Disclosure among Listed Non-Financial Firms in Saudi Arabia. Asian Academy of Management Journal of Accounting and Finance, 17(2), 1–28. https://doi.org/10.21315/aamjaf2021.17.2.1
[6] Balakrishnan, K. and Cohen, D., 2014. Competition and financial accounting misreporting. University of Pennsylvania and University of Texas at Dallas working paper.
[7] Barth, M. E., Kasznik, R., & McNichols, M. F. 2001. Analyst Coverage and Intangible Assets.Journal of Accounting Research, Vol. 39, No. 2, 1-34.
[8] Bassey, E., Sunday.O., Okon.E.,(2013), “The Impact of Environmental Accounting and Reporting on Organizational Performance of Selected Oil and Gas Companies in Niger Delta Region of Nigeria”, Research Journal of Finance and Accounting, Vol. 4 No. 3, pp 57 – 73.
[9] Booth, L., Zhou, J., 2009. Market power and dividend policy: a risk-based perspective. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1296940.
[10] Brander, J. A., and Lewis, T. R. (1986). Oligopoly and financial structure: the limited liability effect. Am. Econ. Rev. 76, 956–970.
[11] Bratten, B. et al. 2013. The Audit of Fair Values and Other Estimates: The Effects of Underlying Environmental, Task, and Auditor-Specific Factors. Auditing: A Journal of Practice.
[12] Cheng, P., Man, P., Yi, C. H., 2013. The impact of product market competition on earnings quality. Accounting & Finance 53, 137-162.
[13] Chintrakarn, P., Jiraporn, P., and Singh, M. (2014). Powerful CEOs and capital structure decisions: evidence from the CEO pay slice (CPS). Appl. Econ. Lett. 21, 564–568.
[14] Dechow, P. and I. Dichev. 2002. The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors. The Accounting Review, 77 (Supplement), 35-59.
[15] Fosberg, R. H. (2004). Agency problems and debt financing: leadership structure effects. Corp. Govern. 41, 31–38.
[16] Francis, J., Lafond, R., Olsson, P., & Schipper, K., 2005. The Market Pricing of Accruals Quality. Journal of Accounting and Economics, 39, 295-327.
[17] Freedman, Martin, & Jaggi, Bikki, (2005),‖ Global warming, commitment to the Kyoto protocol, and accounting disclosures by the largest global public firms from polluting industries‖, The International Journal of Accounting, Vol 40, pp.216
[18] Gaspar, J.M., Massa, M., 2006. Idiosyncratic volatility and product market competition. Journal of Business Vol.79, pp.3125-3152.
[19] Guo, Y., Jung, B. and Yang, S.Y. (2015), “Product market competition and earnings quality: a non-linear relationship”, SSRN eLibrary, pp. 1-45.
[20] Hasan, M.M. and Habib, A. (2017), “Corporate life cycle, organizational financial resources and corporate social responsibility”, Journal of Contemporary Accounting and Economics, Vol. 13 No. 1, pp. 20-36.
[21] Jones, Jennifer J, 1991. Earnings Management During Import Relief Investigations. Journal Of Accounting Research, Vol 29, No.2 1991, p.193-228.
[22] Kale, J.R., Loon, Y.C., 2011. Product market power and stock market liquidity. Journal of Financial Markets Vol. 14, pp.376-410.
[23] Karim, N. K., Atikah, S., & Lenap, I. P. (2019). Kualitas Laba Dan Pengukurannya Pada Perusahaan Jasa Pendukung Industri Pariwisata. Jurnal Aplikasi Akuntansi, 4(1), 1–14. Https://Doi.Org/10.29303/Jaa.V4i1.56
[24] Levitt, A. (1998). The importance of high-quality accounting standards. Accounting Horizons, 12 (1), 79-82.
[25] Margaritis, D., and Psillaki, M. (2010). Capital structure, equity ownership and firm performance. J. Bank. Fin. 34, 621–632.
[26] Mauro P, Guido P, Elisa M, Fair value accounting and earnings quality (EQ) in banking sector: Evidence from Europe African Journal of Business Management (2017) 11(20) 597-607
[27] McDonough, R. P., & Shakespeare, C. M. (2015). Fair value measurement capabilities, disclosure, and the perceived reliability of fair value estimates: A discussion of Bhat and Ryan (2015). Accounting, Organizations and Society, 46(C), 96-99.
[28] Michalkova, L., Cepel, M., Valaskova, K., Vincurova, Z., 2022. Earnings Quality and Corporate Life Cycle Before the Crisis. A Study of Transport Companies Across Europe. Amfiteatru Economic, 24(61), pp. 782-796.
[29] Mikhail, M., B. Walther and R. Willis, 2003. Reactions to dividend changes conditional on earning quality. J. Account, Audit. Finance., 18(1): 121-151.
[30] Nelly R, Siregar S, Sugianto S. Analisis Manajemen Risiko Pada Bank Syariah: Tinjauan Literatur . reslaj [Internet]. 23Feb.2022 [cited 14Jan.2023];4(4):918-30. Available from: https://journal.laaroiba.ac.id/index.php/reslaj/article/view/1008
[31] Ngo, D. N. P., and Le, A. T. H., 2021. Relationship between the audit committee and earning management in listed companies in Vietnam. Journal of Asian Finance Economics and Business, 8(2), pp. 135-142. https://doi.org/10.13106/jafeb.2021.vol 8.no2.0135
[32] Olaoye Festus Oladipupo, Ibukun-Falayi Owoola Rekiat, EFFECT OF FAIR VALUE accounting on earnings quality of nigeria deposit money banks. kiu interdisciplinary journal of humanities and social sciences
[33] Pramanda, A., & Husnah, N. (2014). Pengaruh Intellectual Capital terhadap kualitas laba dengan corporate governance sebagai variabel moderasi (studi perusahaan manufaktur yang terdaftar di bursa efek indonesia tahun 2011 dan 2012). Universitas Indonesia, 1-14.
[34] Sharma, V., 2010. Stock Returns and Product Market Competition: beyond Industry Concentration Review of Quantitative Finance and Accounting Vol. 37, pp. 283-299.
[35] Sodan, S. (2015). The impact of fair value accounting on earnings quality in Eastern European countries. Procedia Economics and Finance, 32, 1769- 1786.Available at: https://doi.org/10.1016/s2212-5671(15)01481-1.
[36] Susanto, Y. K., Pirzada, K., and Adrianne, S., 2019. Is tax aggressiveness an indicator of earnings management? Polish Journal of Management Studies, 20(2), pp. 516-527. https://doi.org/10.17512/pjms.2019.20.2.43
[37] Ulum, Ihyaul, I. Ghozali, dan A. Purwanto.2014a.Intellectual Capital Performance of Indonesian Banking Sector: A Modified VAIC (M-VAIC) Perspective.Asian Journal of Finance & Accounting.Vol.6 No.2, ISSN: 1946-052X.
[38] Vahab Rostami, Leyla Rezaei, dan Zeinab Bazargani., 2021. The Effect of Product Market Competition and Life Cycle Stages on Corporates’ Business Strategy with Emphasis on New Companies. Journal of Business Intelligence Management Studies Vol. 9, No.36
[39] Verrecchia, R.E. (1983), “Discretionary disclosure”, Journal of Accounting and Economics, Vol. 5 No. 1, pp. 179-194.
[40] Widhiastuti S, Murwaningsari, Etty Mayangsari S., 2018. The effect of business intelligence and intellectual capital of company value moderated by management of profit riil. JVol. 2, No. 2, pp. 64-78
[41] William R Scott. 2009. Financial Accounting Theory. Fifth Edition. Pearson Prentice Hall: Toronto.
[42] Z Paktinat dan D Javid, Investigating the Effect of Product Market Competition on Earning Quality in the Listed Companies in the Tehran Stock Exchange, International Journal of Management, Accounting & Economics Vol.1, No.1: 60-70, 2015.

Keywords:

Fair Value Accounting, Product Market Competition, Earning Quality, Relationship Capital.