EARNINGS QUALITY AND ASYMMETRIC COST BEHAVIOR: A STUDY OF INDONESIA CAPITAL MARKET
Abstract
This study investigates whether earnings quality affects to asymmetric cost behavior, i.e., sticky cost of listed firms of Jakarta Stock Exchange (JKSE). This study analyzes 1032 year-firms observations during 2012-2019 periods. This study investigates earnings quality on listed firms of JKSE during the period of IFRS adoption in 2012 and implementation of sustainability reporting voluntarily. This study finds that earnings quality influence to cost stickiness is supported. However, earnings quality negatively influences cost stickiness. The result of this study indicates that there is likely the effect of IFRS adoption in 2012 and implementation of sustainability reporting voluntarily since 2010 from listed firms on the JKSE on its earnings quality. This result is consistent with study of Banker, Basu, Byzalov, &Chen (2016). So higher earnings quality, lower cost stickiness. This study contributes theoretically to the literature on financial accounting, management accounting and cost management related to the topic of asymmetric cost behavior on earnings characteristics. This research also contributes practically to the ability of earnings quality in listed firms of the JKSE to reflect information on their financial performance related to the earnings quality by investors and financial analysts.
References
Anderson, Mark C., Banker, Rajiv D., & Janakiraman, Surya N. (2003). Are Selling, General, and Administrative Costs "Sticky"? Journal of Accounting Research, 41(1), 47-63.
Balakrishnan, Ramji, Labro, Eva, & Soderstrom, Naomi S. (2014). Cost Structure and Sticky Costs. Journal of Management Accounting Research, 26(2), 91-116.
Banker, Rajiv D., Basu, Sudipta, Byzalov, Dmitri, & Chen, Janice Y. S. (2016). The Confounding Effect of Cost Stickiness on Conservatism Estimates. Journal of Accounting and Economics, 61(1), 203-220.
Banker, Rajiv D., & Byzalov, Dmitri. (2014). Asymmetric Cost Behavior. Journal of Management Accounting Research, 26(2), 43-79.
Banker, Rajiv D., Byzalov, Dmitri, & Chen, Lei. (2013). Employment Protection Legislation, Adjustment Costs and Cross-Country Differences in Cost Behavior. Journal of Accounting and Economics, 55(1), 111-127.
Banker, Rajiv D., Byzalov, Dmitri, Ciftci, Mustafa, & Mashruwala, Raj. (2014). The Moderating Effect of Prior Sales Changes on Asymmetric Cost Behavior. Journal of Management Accounting Research, 26(2), 221-242.
Banker, Rajiv D., Byzalov, Dmitri, Fang, Shunlan, & Liang, Yi. (2018). Cost Management Research. Journal of Management Accounting Research, 30(3), 187-209.
Banker, Rajiv D., & Chen, Lei. (2006). Predicting Earnings Using a Model Based on Cost Variability and Cost Stickiness. The Accounting Review, 81(2), 285-307.
Basu, Sudipta. (1997). The Conservatism Principle and The Asymmetric Timeliness of Earnings. Journal of Accounting and Economics, 24(1), 3-37.
Chen, Clara Xiaoling, Lu, Hai, & Sougiannis, Theodore. (2012). The Agency Problem, Corporate Governance, and the Asymmetrical Behavior of Selling, General, and Administrative Costs. Contemporary Accounting Research, 29(1), 252-282.
Ciftci, Mustafa, Mashruwala, Raj, & Weiss, Dan. (2016). Implications of Cost Behavior for Analysts' Earnings Forecasts. Journal of Management Accounting Research, 28(1), 57-80.
Ciftci, Mustafa, & Salama, Feras M. (2018). Stickiness in Costs and Voluntary Disclosures: Evidence from Management Earnings Forecasts. Journal of Management Accounting Research, 30(3), 211-234.
Clogg, Clifford C., Petkova, Eva, & Haritou, Adamantios. (1995). Statistical Methods for Comparing Regression Coefficients Between Models. American Journal of Sociology, 100(5), 1261-1293.
Dechow, Patricia, Ge, Weili, & Schrand, Catherine. (2010). Understanding Earnings Quality: A Review of The Proxies, Their Determinants and Their Consequences. Journal of Accounting and Economics, 50(2), 344-401.
Dechow, Patricia, & Schrand, Catherine M. (2004). Earnings Quality: The Research Foundation of CFA Institute.
den Besten, Priscilla Samantha, Georgakopoulos, Georgios, Vasileiou, Konstantinos Z., & Ereiotis, Nikolaos. (2015). The Impact of IFRS Adoption on Earnings Quality: A Study Conducted on Foreign Issuers in the United States. International Business Research, 8(11), 139-155.
Dierynck, Bart, Landsman, Wayne R., & Renders, Annelies. (2012). Do Managerial Incentives Drive Cost Behavior? Evidence about the Role of the Zero Earnings Benchmark for Labor Cost Behavior in Private Belgian Firms. The Accounting Review, 87(4), 1219-1246.
Francis, Jennifer, Olsson, Per, & Schipper, Katherine. (2008). Earnings Quality. Boston: Now Publisher Inc.
Garrison, Ray H., Noreen, Eric W., & Brewer, Peter C. (2018). Managerial Accounting (16th ed.). New York: McGraw-Hill Education.
Gujarati, Damodar N., & Porter, Dawn. (2009). Basic Econometrics (5th ed.). New York: McGraw-Hill Irwin.
Houqe, Muhammad Nurul, Monem, Reza M., Tareq, Mohammad, & van Zijl, Tony. (2016). Secrecy and The Impact of Mandatory IFRS Adoption on Earnings Quality in Europe. Pacific-Basin Finance Journal, 40, 476-490.
Houqe, Muhammad Nurul, van Zijl, Tony, Dunstan, Keitha, & Karim, A. K. M. Waresul. (2012). The Effect of IFRS Adoption and Investor Protection on Earnings Quality Around The World. The International Journal of Accounting, 47(3), 333-355.
Kama, Itay, & Weiss, Dan. (2013). Do Earnings Targets and Managerial Incentives Affect Sticky Costs? Journal of Accounting Research, 51(1), 201-224.
Menicucci, Elisa. (2020). Earnings Quality: Definition, Measurs, and Financial Reporting: Palgrave Macmillan.
Ratung, Ferdi. (2021). Mantap! Ekonomi RI Nomor 2 Setelah China di Negara G20 [Press release]. Retrieved from https://economy.okezone.com/read/2021/05/27/320/2416350/mantap-ekonomi-ri-nomor-2-setelah-china-di-negara-g20.
Rezaee, Zabihollah, Dou, Huan, & Zhang, Huili. (2020). Corporate Social Responsibility and Earnings Quality: Evidence from China. Global Finance Journal, 45, 1-21.
Weiss, Dan. (2010). Cost Behavior and Analysts' Earnings Forecasts. The Accounting Review, 85(4), 1441-1471.
Views:
521
Downloads:
339
Copyright (c) 2022 Riki Martusa, Meythi Meythi, Laurensia Vina Dharmawan
This work is licensed under a Creative Commons Attribution 4.0 International License.
All articles are published in open-access and licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0). Hence, authors retain copyright to the content of the articles.
CC BY 4.0 License allows content to be copied, adapted, displayed, distributed, re-published or otherwise re-used for any purpose including for adaptation and commercial use provided the content is attributed.
