Financial Reporting Quality: The Effectiveness of the Corporate Governance Quality Evidence from Indonesia

Abstract

This study aims to examine and analyze the influence of the quality of corporate governance on the quality of financial reporting in Indonesia; Using panel data on all companies listed on the Indonesia Stock Exchange during the period 2010 - 2018, except financial companies. Financial companies are not sampled because they have different financial reporting systems and regulations in Indonesia. The final sample used in this study was 2014 companies. Corporate governance quality (CG quality) is measured using a corporate governance index that we have developed in accordance with GCG regulations and other regulations that apply in Indonesia. The quality of financial reports is proxied by discretionary accruals using the modified jones model, while the robust model uses accruals from the Kothari models. The analysis technique used is multiple linear regression with the SPSS software version 17. The results of our study found that the quality of corporate financial reports as measured by discretionary accruals was positively influenced by the quality of corporate governance in both the Jones model and the Kothari model at a significance level of 1%, which means that the higher the quality of corporate governance, the higher the quality of corporate governance, the more quality the company's financial statements will be and vice versa.