COVID-19 Pandemic and Earnings Management: The Moderating Role of Internal and External Corporate Governance Mechanisms in Indonesia

Widowati Dian Permatasari (Department of Accounting, Faculty of Economics and Business, Universitas Muhammadiyah Surakarta, Surakarta, Indonesia)
Dany Adi Saputra (Department of Accounting, Vocational School, Universitas Sebelas Maret, Surakarta, Indonesia)

Al-Kharaj: Jurnal Ekonomi, Keuangan & Bisnis Syariah
Vol. 8 No. 10 (2026): Al-Kharaj: Jurnal Ekonomi, Keuangan & Bisnis Syariah

This research has two objectives. First, it analyzes the impact of the COVID-19 pandemic on the corporate's earnings management practices because only a few studies have analyzed this issue. Second, this study investigates the moderating effect of internal and external corporate governance mechanisms on the relationships between the COVID-19 pandemic and earnings management. The proxy of earnings management employed discretionary accruals from the modified Jones model, which is adjusted to the company's financial performance. The governance variables used in this study were the number of commissioners, the ratio of independent commissioners, and auditor quality (Big 4 or non-Big 4). The research sample was all manufacturing companies in Indonesia recorded in 2019 and 2020. This research has found that earnings management practices declined during the COVID-19 pandemic. Moreover, corporate governance mechanisms, namely the number of commissioners and the quality of the company's external auditors, moderate the relationship between the COVID-19 pandemic and earnings management practices.