Earnings Quality and Stock Crash Risk: A Study in Indonesia

Alverina, Jessica Clara and Rudiawarni, Felizia Arni and Harindahyani, Senny (2025) Earnings Quality and Stock Crash Risk: A Study in Indonesia. Folia Oeconomica Stetinensia, 25 (2). pp. 1-23. ISSN 1898-0198

PDF Earnings Quality and Stock Crash Risk A Study in Indonesia.pdf Download (489kB)

Abstract

Research background: Earnings is essential information for investors. Therefore, the quality of earnings influences optimal investment decisions. Poor earnings quality leads to wrong investment decisions and increases the risk of stock crashes, which are detrimental to shareholder prosperity. The Indonesia Stock Exchange (IDX), as a stock exchange in a developing country, faces issues with the quality of its reported earnings. This research seeks to provide empirical evidence regarding earnings quality and stock crash risk. Purpose: This study aims to empirically examine the impact of earnings quality, which is proxied by earnings management and transparency, on stock price crash risk in Indonesia. Research methodology: This study investigates all firms listed on the Indonesia Stock Exchange from 2019 to 2021 using a multivariate regression analysis. Results: The results provide evidence that firms with higher earnings management are positively associated with higher stock crash risk. However, this study reveals interesting findings about the impact of earning transparency on stock crash risk in this time frame. Earnings transparency has a significantly positive impact on stock crash risk instead of a negative one. This study focuses on the 2019–2021 period, which coincides with the COVID-19 pandemic, so caution should be exercised when generalizing the findings to non-pandemic conditions. Novelty: The results imply additional, potentially interesting extensions. In emerging countries, many external factors beyond the firm’s control affect stock crash risks, and these conditions strongly prove the existence of an inefficient stock market in Indonesia.

Item Type:	Article
Uncontrolled Keywords:	stock price crash risk, earnings management, earnings transparency, earnings quality
Subjects:	H Social Sciences > HF Commerce > HF5601 Accounting
Divisions:	Faculty of Business and Economic > Department of Accounting
Depositing User:	SENNY HARINDAHYANI
Date Deposited:	14 Jan 2026 06:28
Last Modified:	14 Jan 2026 06:30
URI:	http://repository.ubaya.ac.id/id/eprint/50085

Actions (login required)

View Item