Cost of Equity Capital and Real Earnings Management on Listed Companies in LQ-45 and Jakarta Islamic Index
Putra, Haret Bima Dwi
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This current issue of the changes in earnings management practice has moved on accrual earnings management to earnings management based on real activity. Earnings management practices had done by manager makes the earnings opacity. It means that the profits information from companies can not describe the true economic profit. The earnings opacity would increase the cost of equity capital because investors will increase the required rate of return. Generally, this study aimed to analyze the effect of real earnings management, company size and stock liquidity on the cost of equity capital. The research sample is 259 companies listed in LQ-45 and 208 companies listed in Jakarta Islamic Index (JII) during the 2004-2015 periods. The sample selected by purposive sampling. The analysis showed that the real earnings management, stock liquidity do not significantly effect on the cost of equity capital, while the company size significantly effect on the cost of equity capital.