Chapter 12 Opportunistic Behavior and Financial Distress: The Case of Earnings Management

This study investigates the role of opportunistic behavior in earnings management. Using listed firms in the Indonesia Stock Exchange as the object of study, our examination shows that profitability's opportunistic behavior affects earnings management significantly. The higher the profitability, the higher the earnings management will be. Financial distress also affects the tendency of earnings management. The more severe financial distress, the higher the earnings management is. Another important finding is that bigger firms tend to perform more earnings management activities. This study contributes to earnings management and agency problems research in the context of go public firms in emerging markets since opportunistic earnings management will prevent investments, which will hamper the country's economic growth. This study also contributes to entrepreneurial studies. The manager is considered an entrepreneur CEO, so all the management strategies affect company value, including how the manager communicates the earnings information to accounting information users.