Good Corporate Governance, Capital Structure, and Earnings Management: Moderating Sustainability Reporting in Energy Issuers

Nabila Salma Anindyatama; Isroah

doi:10.24843/EJA.2026.v36.i05.p08

Authors

Nabila Salma Anindyatama Faculty of Economics and Business, Universitas Negeri Yogyakarta, Indonesia
Isroah Faculty of Economics and Business, Universitas Negeri Yogyakarta, Indonesia

DOI:

https://doi.org/10.24843/EJA.2026.v36.i05.p08

Keywords:

Earning Management, Good Corporate Governance, Capital Structure, Sustainability Reporting, GRI Disclosure Index

Abstract

This study aims to analyze the effect of Good Corporate Governance (GCG) mechanisms, as indicated by the board of directors, audit committee, independent board of commissioners, managerial ownership, and capital structure, on earnings management in energy sector companies listed on the Indonesia Stock Exchange for the period 2021-2024. This study also examines the moderating role of sustainability reporting, measured using the GRI disclosure index, in this relationship.

This study uses a quantitative approach with purposive sampling of 22 energy sector companies, resulting in 88 observations. Earnings management is measured using the Modified Jones Model, while sustainability reporting is measured based on the completeness of disclosure of the GRI Universal Standards 2021 and energy sector-specific standards. Data analysis used multiple linear regression and Moderated Regression Analysis (MRA).

The results show that only managerial ownership has a significant negative effect on earnings management, while the board of directors, audit committee, independent board of commissioners, and capital structure have no significant effect. The audit committee even shows a significant positive effect on earnings management. As a moderating variable, sustainability reporting was found to strengthen the supervisory function of the audit committee and weaken the positive influence of capital structure on earnings management, but it weakened the effectiveness of the board of directors and independent commissioners. These findings indicate the phenomenon of ceremonial adoption in the implementation of GCG and sustainability reporting in the Indonesian energy sector, where the formal governance structure does not yet reflect a substantive supervisory function

References

Aisah, I. U., & Herdiansyah, H. (2020). Strategi Pemberdayaan Masyarakat dalam Pelaksanaan Program Desa Mandiri Energi. Share : Social Work Journal, 9(2), 130. https://doi.org/10.24198/share.v9i2.21015

Akter, A., Wan Yusoff, W. F., & Abdul-Hamid, M. A. (2024). The moderating role of board diversity on the relationship between ownership structure and real earnings management. Asian Journal of Accounting Research, 9(2), 98–115. https://doi.org/10.1108/AJAR-10-2022-0307

Ali, W., Frynas, J. G., & Mahmood, Z. (2017). Determinants of Corporate Social Responsibility (CSR) Disclosure in Developed and Developing Countries: A Literature Review. In Corporate Social Responsibility and Environmental Management (Vol. 24, Issue 4, pp. 273–294). John Wiley and Sons Ltd. https://doi.org/10.1002/csr.1410

Al-Matari, E. M. (2025). Ownership structure and earnings management: the role of environmental sustainability as moderator variable. A Further analysis. Saudi evidence. Cogent Business and Management, 12(1). https://doi.org/10.1080/23311975.2025.2504131

Anagnostopoulou, S. C., & Tsekrekos, A. E. (2016). The effect of financial leverage on real and accrual-based earnings management. Accounting and Business Research, 47(2), 191–236. https://doi.org/10.1080/00014788.2016.1204217

Aydoğmuş, M., Gülay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. In Borsa Istanbul Review (Vol. 22, pp. S119–S127). Borsa Istanbul Anonim Sirketi. https://doi.org/10.1016/j.bir.2022.11.006

Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182. https://doi.org/10.1037/0022-3514.51.6.1173

Bawuah, I. (2024). Audit committee effectiveness, audit quality and earnings management: evidence from Ghana. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2315318

BEI. (2024). Discover detailed insights with Digital Statistics Go to IDX Digital Statistic. www.idx.co.id/id/data-pasar/laporan-statistik/digital-statistic/

Chen, Z., & Xie, G. (2022). ESG disclosure and financial performance: Moderating role of ESG investors. International Review of Financial Analysis, 83. https://doi.org/10.1016/j.irfa.2022.102291

Cho, S., & Chung, C. (2022). Board Characteristics and Earnings Management: Evidence from the Vietnamese Market. Journal Of Risk and Financial Management.

Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting Earnings Management. In Source: The Accounting Review (Vol. 70, Issue 2).

Dewi, E. P., & Nurhayati, I. (2022). Pengaruh Leverage Dan Profitabilitas Terhadap Manajemen Laba Dengan Kepemilikan Manajerial Sebagai Variabel Moderasi. https://doi.org/10.36277/geoekonomi

Dezoort, F. T., Hermanson, D. R., Archambeault, D. S., & Reed, S. A. (2002). Audit Committee Effectiveness: A Synthesis of the Empirical Audit Committee Literature. https://ecommons.udayton.edu/acc_fac_pub/64

Dimaggio, P. J., & Powell, W. W. (1983). The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields. In Source: American Sociological Review (Vol. 48, Issue 2).

El Diri, M., Lambrinoudakis, C., & Alhadab, M. (2020). Corporate governance and earnings management in concentrated markets. Journal of Business Research, 108, 291–306. https://doi.org/10.1016/j.jbusres.2019.11.013

Freeman, R. E. (1984). Stakeholder Management: Framework and Philosophy. In Strategic Management (pp. 52–82). Cambridge University Press. https://doi.org/10.1017/cbo9781139192675.006

Githaiga, P. N., Muturi Kabete, P., & Caroline Bonareri, T. (2022). Board characteristics and earnings management. Does firm size matter? Cogent Business and Management, 9(1). https://doi.org/10.1080/23311975.2022.2088573

GRI. (2021). GRI 1: Landasan 2021.

Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics.

Handoyo, S., & Kusumaningrum, I. T. (2022). Does corporate governance and other factors influence earnings management? a study on indonesia S banking sector. Humanities and Social Sciences Letters, 10 (1), 11–26. https://doi.org/10.18488/73.v10i1.2227

Jabir, M., Rusni, & Tafsir, M. (2022). Pengaruh Profitabilitas, Likuiditas Dan Solvabilitas Terhadap Nilai Perusahaan pada Sektor Energi Yang Terdaftar Di Bursa Efek Indonesia. Jurnal Magister Research, 1, 44–59.

Jensen, M. C., & Meckling, W. H. (1976). Theory Of The Firm: Managerial Behavior, Agency Costs And Ownership Structure. In Journal of Financial Economics (Vol. 3). Q North-Holland Publishing Company

Kirana, J. D., Wibawaningsih, E. J., & Wijayanti, A. (2020). The Role of Corporate Governance in Constraining Earning Management. https://doi.org/10.38035/jafm.v1i3

Liana, L. (2009). Penggunaan MRA dengan SPSS untuk menguji pengaruh variabel moderating terhadap hubungan antara variabel independen dan variabel dependen. Dinamik, 14(2).

Liu, J., Yu, X., Hu, J., & Ma, J. (2025). The Impact of ESG Performance on Earnings Management From a Long-Term Perspective: Evidence From China. Corporate Social Responsibility and Environmental Management, 32(6), 7510–7527. https://doi.org/10.1002/csr.70094

Mardjono, E. S., & Chen, Y.-S. (2020). Earning Management And The Effect Characteristics Of Audit Committee, Independent Commissioners: Evidence From Indonesia. In International Journal of Business and Society (Vol. 21, Issue 2).

Masmoudi, S., & Ben Salem, M. (2024). Reconnecting sustainability reporting with earnings management: empirical evidence from Kuwait. Accounting Research Journal, 37(3), 270–287. https://doi.org/10.1108/ARJ-05-2023-0140

Meyer, J. W., & Rowan, B. (1977). Institutionalized Organizations: Formal Structure as Myth and Ceremony. In Source: American Journal of Sociology (Vol. 83, Issue 2).

Muñoz Mendoza, J. A., Sepúlveda Yelpo, S. M., Velosos Ramos, C. L., & Delgado Fuentealba, C. L. (2020). Effects of capital structure and institutional financial characteristics on earnings management practices: Evidence from Latin American firms. International Journal of Emerging Markets, 16(3), 580– 603. https://doi.org/10.1108/IJOEM-03-2019-0239

Naz, A., & Sheikh, N. A. (2023). Capital structure and earnings management: evidence from Pakistan. International Journal of Accounting and Information Management, 31(1), 128–147. https://doi.org/10.1108/IJAIM-08-2022-0163

Ndegwa, J. N. (2024). Sustainability reporting, board diversity, earnings management and financial statements readability: evidence from an emerging economy. Corporate Governance (Bingley), 24(4), 780-798. https://doi.org/10.1108/CG-01-2023-0021

Nguyen, Q., Kim, M. H., & Ali, S. (2024). Corporate governance and earnings management: Evidence from Vietnamese listed firms. International Review of Economics and Finance, 89, 775–801. https://doi.org/10.1016/j.iref.2023.07.084

OJK. (2014). Peraturan Otoritas Jasa Keuangan Nomor 33/POJK.04/2014 Tahun 2014 tentang Direksi dan Dewan Komisaris Emiten atau Perusahaan Publik. https://peraturan.bpk.go.id/Details/129842/peraturan-ojk-no-33pojk042014-tahun-2014

Orazalin, N. (2020). Board gender diversity, corporate governance, and earnings management: Evidence from an emerging market. Gender in Management, 35(1), 37–60. https://doi.org/10.1108/GM-03-2018-0027

Saona, P., Muro, L., & Alvarado, M. (2020). How do the ownership structure and board of directors’ features impact earnings management? The Spanish case. Journal of International Financial Management and Accounting, 31(1), 98–133. https://doi.org/10.1111/jifm.12114

Spence, M. (1973). Job Market Signaling. The Quarterly Journal of Economics, 87, 355–374. http://www.jstor.org/stable/1882010

Sugiyono, D. (2013). Metode penelitian pendidikan pendekatan kuantitatif, kualitatif dan R&D.

Susanto, J., Marciano, D., Herlambang, A., Fakultas, M. /, & Dan Ekonomika, B. (2019). Pengaruh Tata Kelola Perusahaan Terhadap Struktur Modal Pada 172 Badan Usaha Sektor Agrikultur Yang Terdaftar Dalam Bursa Efek Di Asean Periode 2012-2016.

Suyono, E. (2017). Berbagai Model Pengukuran Earnings Management: Mana Yang Paling Akurat. In Dechow & Dichev model. De Angelo model.

Usman, A. S., & Yahaya, O. A. (2025). Board Independence And Earnings Management. Journal of Business Ethics and Education ISSN, 16, 113–155. https://doi.org/10.01674/jbee.2025.v16.i1x.113

Wasan, P., & Mulchandani, K. (2020). Corporate governance factors as predictors of earnings management. Journal of General Management, 45(2), 71–92. https://doi.org/10.1177/0306307019872304

Wooldridge, J. M. (2016). Introductory Econometrics A Modern Apptoach. www.cengage.com/highered