Effects of ownership concentration, board of commissioners’ characteristics, and CEO characteristics on earnings management in Indonesian public listed companies

Earnings management arises when managers manipulate financial reports for personal gain or to present performance more favorably. This issue is particularly significant in Indonesia, where the two-tier board system may intensify agency conflicts between managers and shareholders. Grounded in agency theory, this study underscores the importance of strong governance mechanisms to curb managerial opportunism and safeguard financial integrity. The study investigates the effects of ownership concentration, Board of Commissioners (BOC) characteristics, and CEO characteristics on earnings management in Indonesian publicly listed companies. Using 955 firm-year observations from 2015 to 2019, the analysis applies the modified Jones and Roychowdhury models to measure both accrual earnings management (AEM) and real earnings management (REM), with static panel estimation and robust techniques ensuring reliability. Findings show that higher ownership concentration is positively associated with abnormal production costs, indicating that concentrated ownership may facilitate earnings management through operational activities. In contrast, larger BOC size significantly constrains REM by reducing abnormal discretionary expenses, while gender diversity—particularly female commissioners—decreases abnormal cash flows from operations. BOC financial experience and CEO age also mitigate REM, especially concerning abnormal cash flows and discretionary expenses. However, several proxies, including certain aspects of BOC diversity and CEO traits, show limited or no significant effects, highlighting that governance mechanisms vary in their effectiveness in constraining managerial opportunism. By integrating agency theory, positive accounting theory, and agency cost perspectives, this study advances understanding of how ownership concentration, BOC attributes, and CEO characteristics collectively influence earnings management. The findings contribute theoretically by clarifying the differential effectiveness of governance mechanisms and practically by offering guidance for regulators and firms in strengthening governance frameworks to enhance accountability, improve oversight, and ensure credible financial reporting.