The interaction effect of Institutional Ownership and Firm Size on the relationship between Managerial Ownership and Earnings Management

Prior studies examine the influence of institutional ownership and managerial ownership on earnings management with conflicting results. This research investigates the inconsistent results with a developed framework through the interaction effect of institutional ownership and firm size on the relationship between managerial ownership and earnings management. The study carries out a test using a sample of 115 manufacturing companies listed on Indonesian Stock Exchange from 2008 to 2012. The least square regression analysis serves as statistical analysis tool of the study. The study shows that managerial ownership affects earnings management practices. Institutional ownership and firm size moderate the relationship between managerial ownership and earnings management. The presence of institutional ownership possesses the likelihood of a reduction in the practice of earnings management.