Abstract:

Conflict of interest between managers and shareholders, or known as agency conflict, if not minimized, will cause losses, especially on the part of the shareholders. Bonding mechanism is one way to overcome agency conflicts. The purpose of this study is to analyze and provide empirical evidence regarding the determinants of financial reporting quality through a mechanism that is closely related to managers as agents, namely bonding mechanism represented by functional managerial entrenchment and convergent interest. The target sample plan is manufacturing companies listed on the Indonesia Stock Exchange from 2016 to 2019. This study will examine the effect of functional managerial entrenchment and convergent interest on financial reporting quality. This research is expected to improve financial reporting quality from the perspective of financial accounting, specifically based on bonding mechanisms. It aims to minimize agency problems from agency theory which has focused on differences in interests between agents and principals.