The Effect of Profit Management on Company Performance

Abstract

The purpose of this study is to determine earnings management that affects financial performance. Financial reporting provides corporate financial information that is useful for a number of users of the report in economic decision making. The main focus of users of financial reporting is information about the company's performance as measured by profit and its components. So that the financial statements have a very important meaning because it is a form of accountability in carrying out its activities during a performance-based budget year. The company's reported profit contains unclear or unparalleled observable accounting earnings and unobservable economic profits, called earnings opacity. The company's reported earnings may become unclear due to complex interactions between, at least three factors, namely managerial motivation, accounting standards, and the implementation of accounting standards. Reporting higher profits and hiding unfavorable profit realization (losses) that can trigger mixed the other hand. Furthermore, it was found that financial reporting could change due to management earnings.