The Effect of Effective Tax Rate, Investor Sentiment, and ESG on Earnings Management: An Empirical Study of Healthcare Companies Listed on the Indonesian Stock Exchange in 2021-2024

Putri Nabila Musfi (Departemen Magister of Accounting, Faculty of Economics and Business, University of Padjadjaran)
Sofik Handoyo (Departemen Magister of Accounting, Faculty of Economics and Business, University of Padjadjaran)
Gia Kardina Prima Amrania (Departemen Magister of Accounting, Faculty of Economics and Business, University of Padjadjaran)

Indonesian Journal of Economics, Social, and Humanities
Vol. 8 No. 3 (2026)

Earnings management refers to opportunistic actions by management in preparing financial statements through the use of accounting discretion to potentially mislead stakeholders regarding reported earnings. This practice has become a critical issue, particularly in the post-pandemic healthcare sector, which faces pressures related to performance, reputation, and public trust. This study aims to analyze the effects of Effective Tax Rate (ETR), investor sentiment, and Environmental, Social, and Governance (ESG) on earnings management practices in healthcare sector companies listed on the Indonesia Stock Exchange (IDX) for the period 2021–2024. The study population consists of 34 healthcare sector companies listed on the IDX; using purposive sampling, 26 companies were selected as the research sample, yielding a total of 104 observations. The study used a quantitative approach with secondary data obtained from annual reports, sustainability reports, and capital market databases. The dependent variable of earnings management was measured using the Modified Jones Model of discretionary accruals, while the independent variables included the effective tax rate, investor sentiment based on market turnover, and the ESG Disclosure Index based on GRI. Data analysis utilized panel data regression with tests of classical assumptions and selection of the best model via the Chow, Hausman, and Lagrange multiplier tests. The results indicate that the effective tax rate does not significantly affect earnings management; investor sentiment has a significant positive effect on earnings management, while ESG does not significantly affect earnings management. These findings suggest that capital market pressures and investor expectations drive management to adjust earnings to make the company’s performance appear stable, while ESG practices in the healthcare sector in Indonesia are still in the early stages of adoption and thus have not yet become an effective monitoring mechanism to limit opportunistic management behavior.