Earnings management is management intervention in financial statement
reporting process, aimed to increase managernent's wealth personally and/or increase
value of the firm. Earnings management is a factor that could reduce Financial statement
credibility, increase bias, and prevent stakeholders .from believing profit values.
Consistent good corporate government implementation is indicated could increasing
financial statement quality and reduce earnings management activities.
This research purpose is to find out whether corporate governance mechanisms,
consists of institutional ownership, managerial ownership, proportion of independent
board of commissioner, board of director, and audit committee, influence earnings
management. The object of this research is manufacturing companies listed in Indonesian
Stock Exchange in 2005-2007. There are ninety six companies selected with purposive
sampling techniques and data was analyzed using multiple linier regression.
The results show that proportion of independent board of commissioners and
audit committee variables influence earnings management partially and significantly.
Institutional ownership, managerial ownership, and independent board of
commissioner's variables didn't influence earnings management. Simultaneously, good
corporate governance mechanisms influence earnings management significantly.