Does Difference Analysis of Real Earnings Management Matter During Covid-19 Pandemic? (Evidence From Indonesian Listed Companies)

This study aims to measure real earnings management in companies in the manufacturing industry, more specifically in the pharmaceutical and automotive sub-sectors, and examine the differences in real earnings management between companies in those sub-sectors. Three proxies are used to measure real earnings management, namely abnormal cash flow operations (CFO), abnormal production costs (PROD) and abnormal discretionary expenses (DISCR). The population of this study comprises the pharmaceutical and automotive sub-sector manufacturing companies listed on the Indonesia Stock Exchange during the period of the COVID-19 pandemic, namely 2019-2020. Purposive sampling was used to obtain the samples for the study. Where the data were normally distributed, they were analysed using the independent sample t-test to examine the difference in the value of real earnings management in the pharmaceutical and automotive sub-sectors. Where the results were not normal, the data were tested using the Mann-Whitney U-test. The statistical test revealed a significant difference in the total real earnings management practices between the pharmaceutical and automotive companies. The average value of total real earnings management was found to be higher in the pharmaceutical companies compared to the automotive companies. The test results for the abnormal CFO and abnormal PROD proxies of real earnings management practice showed no differences between the pharmaceutical and automotive companies, while differences were revealed in the results for the abnormal DISCR proxy between the companies in the two sectors.