Abstract:

The purpose of this study is to find empirical evidence of the influence of Independent Director on Real Earnings Management (REM). Using information of manufacturing firms listed on the Indonesia Stock Exchange during the 2014-2018, REM is measured by Roychowdhury’s model (2006), whilst the presence of Independent Director is determined by the proportion of independent director on the board. The results show that independent director have a positive effect on REM. These results indicate the under-performance of independent director in their role as an important counterweight in the decision-making process, which may put non-controlling shareholders in an unfavorable situation. This study provides insight into the role of independent director in corporate governance mechanisms and may be of value to regulators and policy makers in revising the existing procedures of selecting independent director in the general meeting of shareholders.