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Journal : Business Management

The Effect of Earnings Management, Financial Ratios, and Corporate Governance Mechanisms on Bond Ratings Rusli, Muhammad; Firdania, Andi; Masniah, Andi
Business Management Vol 5, No 1 (2026): Business Management Februari
Publisher : Lembaga Penelitian dan Pendidikan (LPP) Mandala

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.58258/bisnis.v5i1.10095

Abstract

Introduction: Bond ratings are key indicators of corporate credit risk and reduce information asymmetry in debt markets. In Indonesia, PT PEFINDO ratings differentiate issuers with stronger credit quality (investment grade) from riskier issuers (non-investment grade). This study examines whether earnings management, financial ratios, and corporate governance mechanisms affect bond ratings of IDX-listed issuers rated by PEFINDO.Material and Methods: This quantitative explanatory study uses secondary data from annual reports/financial statements and PEFINDO bond ratings. Using purposive sampling, 11 non-financial firms were observed for 2018–2022 (44 firm-year observations). Bond ratings were coded as a binary variable (investment grade = 1; non-investment grade = 0) and analyzed using binary logistic regression.Research Results: Most observations were investment grade (59.1%). The model fits well (Hosmer–Lemeshow Sig. = 0.907) with strong explanatory power (Nagelkerke R² = 0.795). Earnings management negatively affects the probability of achieving investment grade, while liquidity, managerial ownership, and audit quality (Big-4 proxy) positively affect it. Total asset turnover, price–earnings ratio, institutional ownership, and independent commissioners are not significant.Conclusion: Bond ratings are more closely related to reporting credibility, liquidity strength, and selected governance signals than to market-based and activity ratios in this sample. Issuers should enhance reporting quality, liquidity management, and audit/governance credibility to support higher bond ratings; future studies should expand samples, periods, and include additional credit-risk controls and alternative rating models.
Co-Authors Abdul Saman Abdurahman Abdurrahman Alifah Wardhani, Annisa Alimin Alwi Alit Prajatama, Alit Almusawir Alwi Adib Novianto Alwi Adib Novianto Andrew Andrew April Yanti, Sisca Aristya, Yovi Ashwad, Hajar Asshagab, Muhtar Azwaludin, Azwaludin Bangsawan, Andi Rijal Claudia Soenjoyo, Cindy Cornelius Bagas Wicaksono Darani Putri de Vos, Pierre Demmanaba, Licar Jaya Dewi Anggraini Dewi Haryanti Agustan , Andi Dhimas Tribuana Dwi Handoyo, Nanda Edy Winarso Elumalai, Gunathevan Erianto, Erik Erwin Erwin Fakhurraji, Alzikri Farid Imam Nurhadi Fasiha, Fasiha Fatimah Siregar Fichry Irfan Fadillah Firdania, Andi Firman Ardiansyah Fryonanda, Harfebi Gabriele Zega , Vania Gatc, Jullend Gusti Made Trisetya Putra Hadi Sutopo Halide, Nirwana Halwan, Muhammad Hamid, Abd. Haris Hamida, Ambas Hamzah Hanna Yuni Hernanti Harahap, Anna Leli Harapin Hafid H. Hardiyanto, Dandy Hariono, Ajun Hasibuan, Khoiria Rahmadani Heppy New Year Haloho Heriansyah Hermansius, Ranap Tumpal I Gusti Made Trisnayoga, I Gusti Made I Wayan Ardi Yasa, I Wayan Jabani, Muzzayanah Jabar, Aryuni Salpiana Jafar, Erwin Jaida, Arifin Joel Reinhard Bagenda Jud Jud, Jud Jullend Gatc Jumadi Jumadi Jumareng, Hasanuddin Kara, Aisyah Karimah, Syahadah Albaqiyatul Koko, Tahrun Kurniati La Ode Monto Bauto, La Ode Monto La Ode Nafiu Lucky Hartanto Salim Lucky Hartanto Salim lutfi Abdillah Luthfiyah S, Rifqah Mana, Muhammad Adhyaksa S. Marini Alifia Marsuna marsuna, marsuna Martinus Mesarudi Gea Masniah, Andi Mira Ziveria Mira Ziveria, Mira Mochammad Imron Awalludin Mohamad Ridwan Mongsidi, Wolter Muhajir, Muhammad Nur Alam Muhammad Arsyam Muhammad Zhafran Mustawa, Mustawa Mutmainna, Ina Ni Wayan Deriani, Ni Wayan Ningtias, Shinta Ayu Novianto, Alwi Adib Nuharti, Nuharti Nuraini Purwandar Nuraini Purwandari Nuraini Purwandari Nurban, Nurban Nurfaidah Nurfaidah Nurhanna Harahap Nurhidayat, Sodik Pada, Damir Parlindungan, Davis Roganda Pasaribu, Endi Zunaedy Peribadi Puspita Ayu, Novalinda Putra, Gusti Made Trisetya Putri , Darani Raden Sri Ayu Ramadhana Ramadhani Halim , Vadly Ratnanda, Olivia Ridha Sefina Samosir Ridha Sefina Samosir Ridha Sefina Samosir S, Ardiana S, Zainuddin Sagita Theo, Shella Said Uddin, Abu Salim, Lucky Hartanto sariul Sariul, Sariul Sarmadan Sarpin Sarpin, Sarpin Sarumpaet, Erik Rolando Satya Candrasari Sawali, La Setya, Muhammad Donny Shella Sagita Theo Siti Zubaidah Suhartiwi Suhartiwi, Suhartiwi Sukrianto, Andi Sumartin, Farhan Osamah Syah Rany, Erwin Syahrani, Dwi Takdir Takdir, Takdir Tangguh Okta Wibowo Tanzil Tri Putra, Muh. Untung Triananda Fauzan Adicandra Umran, Laode Muh. Utomo, Reza Agun Vadly Ramadhani Halim Vania Gabriele Zega Wardani, Widi Wijaya, Teddy Winarso, Edy WULANDARI Yasmin, Fatimah Yonias Minggo, Stebit Yulius Denny Prabowo, Yulius Denny Zaenal Arwih, Muhammad Zakirah, Zakirah Zhafran , Muhammad