Malang – A recent study by Riezsa Putri Yunistya Sari, Setia Budi Kurniawan, Adi Suprayitno, and Rofikul Amin from Universitas Merdeka Malang reveals that sales growth significantly encourages earnings management practices among food and beverage companies listed on the Indonesia Stock Exchange between 2020 and 2024. The findings highlight that rising sales performance does not always reflect fully transparent financial reporting.
Published in the International Journal of Scientific Multidisciplinary Research (IJSMR) in 2026, the research examined whether deferred tax expenses, sales growth, and company size influence earnings management behavior in publicly listed firms. Among the three variables analyzed, only sales growth showed a statistically significant impact.
Financial statements remain the primary source of information for investors, creditors, regulators, and the public when evaluating corporate performance. However, accounting flexibility allows management to adjust reporting strategies in ways that can stabilize or enhance profit figures. This condition often emerges from differences in interests between shareholders and managers, a situation widely explained through agency theory.
Earnings management has long been a concern in Indonesia’s manufacturing sector, particularly in food and beverage companies that play a strategic role in national industrial output. A well-known example is the financial reporting manipulation case involving PT Tiga Pilar Sejahtera Food Tbk, which demonstrated how earnings adjustments can distort investor confidence and market perception.
During the 2020–2024 observation period, companies also faced external pressures from global economic uncertainty and post-pandemic recovery dynamics. These conditions increased incentives for management teams to maintain stable performance images in order to preserve investor trust and access to capital.
The Universitas Merdeka Malang research analyzed annual financial statements from 18 food and beverage companies listed on the Indonesia Stock Exchange over five years. Using multiple linear regression analysis, the study evaluated how deferred tax expenses, sales growth, and company size relate to changes in reported earnings as an indicator of earnings management activity.
The results show that higher sales growth increases the likelihood of earnings management practices. Companies experiencing strong revenue expansion often face expectations to maintain consistent performance trends. As a result, management may adjust reported profits to ensure financial results appear stable and attractive to external stakeholders.
In contrast, deferred tax expenses were not found to influence earnings management decisions. Differences between accounting income and taxable income did not significantly affect how companies reported profits during the observation period. Similarly, company size showed no measurable effect on earnings management behavior. Larger firms tend to operate under stricter regulatory oversight and public scrutiny, which may discourage aggressive reporting adjustments.
Overall, the three independent variables explained about 20.3 percent of the variation in earnings management practices observed in the sample companies. The remaining variation is likely influenced by other factors outside the study’s model, such as corporate governance structure, leverage policies, ownership concentration, or managerial incentives.
The findings provide important insights for investors who rely on sales growth indicators when assessing corporate performance. Rapid increases in revenue should be interpreted carefully and evaluated alongside additional financial indicators to ensure a more accurate understanding of company health. Transparent reporting remains essential for maintaining long-term credibility in capital markets.
For regulators, the study highlights the need for closer monitoring of firms experiencing strong sales expansion, as performance pressure may increase the risk of earnings adjustments. Strengthening disclosure requirements and governance frameworks can help ensure higher reporting integrity across strategic industrial sectors.
According to Setia Budi Kurniawan from Universitas Merdeka Malang, sales growth is often perceived as a strong signal of business success, but it can also create expectations that encourage management to maintain performance consistency through accounting adjustments. Understanding this relationship is essential for improving the quality of financial decision-making among stakeholders.
The research also opens opportunities for further academic investigation by incorporating additional variables such as corporate governance mechanisms, leverage ratios, ownership structures, and longer observation periods. Expanding these dimensions may provide a more comprehensive picture of earnings management behavior in Indonesia’s capital market environment.
As Indonesia’s food and beverage industry continues to play a central role in manufacturing growth and investment attraction, maintaining transparent financial reporting standards becomes increasingly important for sustaining investor confidence and strengthening market stability.
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