The Effect of Profitability and Liquidity on Earning Response Coefficient Moderated by Accruals Earning Management: Empirical Study of Companies in the Indonesia Stock Exchange

Abstract

This study aims to explain the phenomenon in Indonesia stock exchange where the shares are most actively traded. The motivation of this research is to analyze the response of investors in making decisions after the management publishes the company's financial statements. This study selected 20 companies using a purposive sampling method based on panel data, namely annual time series data and cross-sectional companies selected as samples. To test the research hypothesis, a linear regression model is used and     non-linear, while the research variable consisted of two independent variables, one moderator variable and two control variables. The findings in this study, namely the profitability variable has a negative and significant effect on the earning response coefficient, mainly because after five days since the financial statements were published, investors or speculators release their shares, especially for stocks that experience saturation of price growth so that prices tend to decline on the fifth day and so on. Liquidity has a positive and significant effect on the earning response coefficient, because the company increases its ability to meet financial obligations and is increasingly trusted by banks and third parties, so that investors in the capital market respond positively.