The Effect of Managerial Ownership, Profitability and Leverage on Earnings Management with Audit Quality as a Moderating Variable (A Study of Primary Consumer Goods Manufacturing Companies Listed on the Indonesia Stock Exchange during the 2020–2023 Period)

Wulandari Nurtiara (University of Jambi)
Yudi Yudi (University of Jambi)
Misni Erwati (University of Jambi)

Formosa Journal of Multidisciplinary Research (FJMR)
Vol. 4 No. 7 (2025): July 2025

Earnings management remains a concern in corporate governance, especially in emerging economies with prevalent agency conflicts. This study examines how managerial ownership, profitability, and leverage affect earnings management and tests whether audit quality moderates these links. Using 128 firm-year observations from 32 primary consumer goods firms listed on the IDX for 2020–2023, the analysis applies Partial Least Squares Structural Equation Modeling (PLS-SEM) via WarpPLS 8.0, with discretionary accruals from the Modified Jones Model as the proxy. The results show managerial ownership and leverage significantly increase earnings management (p < 0.01), while profitability has no effect. Audit quality reduces the impact of profitability on earnings management but does not moderate the other links. The findings provide evidence on governance practices in Indonesia and highlight the need for stronger audit oversight.