Independent Commissioners, Audit Committee, Ownership Structure, and Financial Statement Quality of Indonesian Consumer Cyclicals Firms

Abstract

This study examines associations between Good Corporate Governance (GCG) mechanisms and financial statement quality in Indonesian consumer cyclicals companies during 2022–2025, controlling for Return on Assets (ROA). Signed Discretionary Accruals (DA) indicate the direction of abnormal accrual adjustments rather than overall reporting quality. Purposive sampling yielded 19 companies and 76 firm-year observations. DA were estimated using the modified Jones model and analyzed through fixed-effects panel regression with Heteroskedasticity-Consistent Standard Errors, Type 1 (HC1) robust standard errors. Independent commissioners (β = 0.047787, p = 0.7227), audit committee meetings (β = −0.010318, p = 0.4797), and institutional ownership (β = −0.003788, p = 0.9574) showed insignificant associations. Managerial ownership was positively associated with DA (β = 0.430569, p = 0.0271), contrary to expectations. ROA was also positively associated (β = 0.562850, p = 0.0032). Although the overall model was significant (p = 0.002878, R² = 0.527732), the joint governance test was insignificant (p = 0.219619). Thus, H1–H5 were unsupported. Governance mechanisms did not consistently constrain income-increasing accrual adjustments. Positive signed DA does not independently establish manipulation or declining reporting quality. Findings are restricted by the sector-specific sample, four-year observation period, and accrual-model assumptions. This study provides sector-specific evidence challenging uniform agency-theory expectations and demonstrates why governance indicators alone cannot establish monitoring effectiveness.

Keywords

Consumer Cyclicals Discretionary Accruals Financial Statement Quality Good Corporate Governance Managerial Ownership