The Effect of Financial Performance on Earnings Management Practices in Pharmaceutical Industry Health Companies Listed on the Indonesia Stock Exchange (IDX) for the Period 2014-2023

Abstract

This study aims to analyze the effect of profitability, leverage, company size, and sales growth on earnings management practices in pharmaceutical companies listed on the Indonesia Stock Exchange (IDX) for the period 2014-2023. The data used is secondary data in the form of annual financial reports from 8 pharmaceutical issuers that meet purposive sampling criteria. The analysis was carried out with a non-linear panel data regression model using a quadratic polynomial function to capture complex relationship patterns. The results show that profitability and sales growth have a non-linear positive effect on earnings management, while leverage shows a significant negative effect. However, firm size has no significant effect on earnings management practices. The findings indicate that external pressures, such as creditor scrutiny and market expectations, play an important role in encouraging or limiting earnings management in pharmaceutical companies.