Earnings Management Analysis Before and After PSAK 109 Implementation in Banks Listed on IDX

Abstract

This study examines whether the introduction of PSAK 109 resulted in changes in earnings management practices among banks listed on the Indonesia Stock Exchange. The research adopts an empirical design using an event study approach focused on the implementation of PSAK 109. Variations in earnings management before and after the standard’s adoption are analysed through the Wilcoxon Signed Rank Test. The results indicate that the implementation of PSAK 109 did not lead to statistically significant changes in earnings management practices. This shows that management does not use earnings management to prevent a decrease in profits due to the implementation of PSAK 109. Management tends to increase prudence by tightening the application of the 5C principles in extending credit and utilising credit restructuring policies to prevent excessive increases in expected credit loss. According to agency theory, management maintains the quality of accounting information as a form of accountability to stakeholders. In practice, management can tighten its credit policy to prevent a decline in profits and maintain good performance. The novelty of this research is the use of a two-period time span, before and after PSAK 109 implementation, to provide a more comprehensive view of banks' prudential policies as institutions that collect public funds.