Corporate governance, tax planning, leverage and public ownership on earnings management: The moderating role of profitability

This study examines the effect of tax planning, leverage, independent commissioners, and public ownership on earnings management, with profitability acting as a moderating variable. Earnings management practices often arise from conflicts of interest between management and shareholders, reducing financial statement quality and affecting external decision-making. The study uses a causal-comparative quantitative approach, analyzing secondary financial statement data from consumer goods companies listed on the Indonesia Stock Exchange during 2021–2024. A purposive sampling technique was applied, and Moderated Regression Analysis (MRA) was conducted to test the proposed relationships. The findings indicate that leverage has a positive and significant effect on earnings management, suggesting that companies with higher debt levels are more likely to engage in earnings manipulation. In contrast, tax planning, independent commissioners, and public ownership do not have significant direct effects on earnings management. Profitability significantly moderates the relationship between leverage and earnings management, amplifying the influence of leverage on managerial discretion, while it does not moderate the relationships of earnings management with tax planning, independent commissioners, or public ownership. These results suggest that earnings management in the consumer goods sector is primarily influenced by capital structure and financial performance rather than governance or ownership structure alone. The findings highlight the importance of strengthening monitoring mechanisms and corporate governance practices to enhance financial reporting quality. This study contributes to the literature on earnings management by demonstrating the conditional role of profitability as a moderating factor in the relationship between leverage and managerial discretion.