Earnings Management, Firm Size, and Voluntary Disclosure: Do They Really Influence the Cost of Equity Capital?

Tri Ayu  Wulandari; Sovi Ismawati Rahayu

doi:10.64463/v9d7qj23

Authors

Tri Ayu Wulandari Faculty of Economics and Business, YARSI University, Jakarta Author
Sovi Ismawati Rahayu Faculty of Economics and Business, YARSI University, Jakarta Author

DOI:

https://doi.org/10.64463/v9d7qj23

Keywords:

Earnings Management, Firm Size, Voluntary Disclosure, Cost of Equity Capital

Abstract

This study aims to examine the effect of earnings management, company size, and voluntary disclosure on the cost of equity capital. Earnings management in this study is measured using the modified Jones model, company size is measured by the natural log of total assets, and voluntary disclosure is measured by the Wallace index. This study uses a sample of consumer sector manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2013-2017 period. The sampling technique in this study was purposive sampling and obtained a sample of 17 companies. This study uses secondary data, namely financial reports obtained from the official website of the Indonesian Stock Exchange (IDX) and annual reports obtained from the company's official website. The results show that the variables of company size and voluntary disclosure have a significant effect on the cost of equity capital. Earnings management does not have a significant effect on the cost of equity capital. The managerial implication that can be taken is that company management should place more emphasis on increasing transparency through relevant and quality voluntary disclosure to reduce investor risk perceptions so that the cost of equity capital can be reduced.

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