Debt-to-Equity Ratio, Return on Assets, and Firm Size on Earnings Management Through Managerial Ownership

Abstract

Purpose: This study examines the relationships of Debt-to-Equity Ratio (DER), Return on Assets (ROA), and Firm Size with Earnings Management and assesses the moderating role of Managerial Ownership in Indonesian energy companies. Research Method: A quantitative design was applied to audited annual report data from 54 energy-sector companies listed on the Indonesia Stock Exchange during 2023–2024, yielding 108 firm-year observations selected through purposive sampling. Earnings Management was represented by signed discretionary accruals estimated using the complete Modified Jones procedure. Direct and interaction regression models were employed. Results and Discussion: Only DER was positively associated with Earnings Management, whereas ROA and Firm Size were not significant. Managerial Ownership did not moderate any of the examined relationships. Neither model was statistically significant overall, and their adjusted explanatory power was very low. Thus, debt provided limited coefficient-level evidence but did not establish a comprehensive explanation of Earnings Management. Implications: Managers should maintain prudent debt structures and strengthen reporting controls. Investors and creditors should assess accrual quality and broader governance mechanisms rather than relying solely on managerial ownership. Originality: This study evaluates Managerial Ownership as a conditional governance mechanism within Indonesia’s capital-intensive energy sector.