Does earning management affect financial distress? Evidence from state-owned enterprises in Indonesia

Abstract

Financial distress in state-owned enterprises(SOEs) becomes a problem needing attention. This study aims to analyze the effect of earnings management, marketing productivity, and government subsidies on financial distress of SOEs with firm size as a control variable. The sample consisted of 19 state-owned companies receiving government subsidies and state capital participation in 2015–2017. The data analysis method used was a quantitative approach. The results showed that marketing productivity affected financial distress in state-owned companies receiving government subsidies in 2015–2017. High marketing productivity showed that SOEs were achieving high sales to meet public demand. Furthermore, earning management and subsidy had no effect on financial distress in state-owned companies. SOEs management performed earnings management within a certain limit so that it did not affect financial distress.

Keywords

• earning management
• financial distress
• marketing productivity subsidies