Earnings Quality in The Retail Industry: The Role of Profit Growth, Capital Structure, and Liquidity in Retail Companies Listed on The Indonesia Stock Exchange (2019–2023)

Yetti Mayasari; Nengzih Nengzih

doi:10.30598/baileofisipvol2iss3pp268-285

Yetti Mayasari Universitas Mercu Buana
Nengzih Nengzih Universitas Mercu Buana

DOI: https://doi.org/10.30598/baileofisipvol2iss3pp268-285

Keywords: Earnings Quality, Profit Growth, Capital Structure, Liquidity, Financial Reporting

Abstract

Earnings quality is a crucial indicator that reflects the reliability of a company’s financial information. Retail companies listed on the Indonesia Stock Exchange (IDX) are expected to present financial reports with high-quality earnings to support accurate decision-making by both internal and external users. This study aims to analyze the impact of profit growth, capital structure, and liquidity on earnings quality in Indonesian retail companies during the 2019–2023 period. This research employs a quantitative approach using purposive sampling, resulting in a sample of 27 retail companies analyzed over five years. The data used are secondary data from corporate financial reports, and the analysis is conducted using multiple linear regression with the assistance of the Statistical Package for the Social Sciences (SPSS) software. The findings indicate that profit growth, capital structure, and liquidity have a significant positive effect on earnings quality. These results confirm that these three factors play a crucial role in generating more reliable earnings information. The novelty of this study lies in the simultaneous examination of the impact of profit growth, capital structure, and liquidity on earnings quality in the retail sector over the 2019–2023 period, which has not been extensively explored holistically in the context of Indonesia’s capital market. This research contributes to the development of social sciences, particularly in accounting and finance theories, specifically regarding the determinants of earnings quality. Additionally, it provides practical recommendations for company management in preparing more transparent and relevant financial reports. For investors, the findings of this study serve as a valuable reference in assessing a company’s financial health, helping to avoid potential investment losses caused by poor earnings quality.

Downloads

Download data is not yet available.

References

Al-Okaily, M., Alkayed, H., & Al-Okaily, A. (2024). Does XBRL adoption increase financial information transparency in digital disclosure environment? Insights from emerging markets. International Journal of Information Management Data Insights, 4(1), 100228. https://doi.org/https://doi.org/10.1016/j.jjimei.2024.100228

Al Janabi, M. A. M. (2024). Crises to Opportunities: Derivatives Trading, Liquidity Management, and Risk Mitigation Strategies in Emerging Markets BT - Liquidity Dynamics and Risk Modeling: Navigating Trading and Investment Portfolios Frontiers with Machine Learning Algorithms (M. A. M. Al Janabi (ed.); pp. 169–256). Springer Nature Switzerland. https://doi.org/10.1007/978-3-031-71503-7_3

ALShanti, A. M., Al-Azab, H. A. H., Humeedat, M. M., & AlQudah, M. Z. (2024). Exploring the evolution of creative accounting and external auditors: Bibliometric analysis. Cogent Business & Management, 11(1), 2300500. https://doi.org/10.1080/23311975.2023.2300500

Alyaarubi, H. J., Alkindi, D. S., & Ahmed, E. R. (2021). Internal Auditing Quality and Earnings Management: Evidence from Sultanate of Oman. Journal of Governance and Integrity, 4(2), 115–124. https://doi.org/10.15282/jgi.4.2.2021.6054

Anh, H. H., & Da Hanh, T. M. (2023). Determinants of the Manipulated Financial Statements of Enterprises Listed on the Vietnam Stock Exchange BT - Contemporary Economic Issues in Asian Countries: Proceeding of CEIAC 2022, Volume 1 (A. T. Nguyen, T. T. Pham, J. Song, Y.-L. Lin, & M. C. Dong (eds.); pp. 419–437). Springer Nature Singapore.

Asyifa, N. L., Rosini, I., & Nofryanti, N. (2024). Pengaruh Persistensi Laba dan Earning Growth Terhadap Kualitas Laba dengan Corporate Governance Sebagai Variabel Moderasi. Ekonomis: Journal of Economics and Business, 8(1), 491. https://doi.org/10.33087/ekonomis.v8i1.1514

Bansal, M. (2023). Do credit market incentives drive classification shifting in emerging markets? International Journal of Accounting & Information Management, 31(3), 564–582. https://doi.org/10.1108/IJAIM-01-2023-0012

Beck, T. (2023). Access to finance: adaptability and resilience during a global pandemic. Accounting and Business Research, 53(5), 565–579. https://doi.org/10.1080/00014788.2023.2219153

Buch, G., Schulz, A., Schmidtmann, I., Strauch, K., & Wild, P. S. (2023). A systematic review and evaluation of statistical methods for group variable selection. Statistics in Medicine, 42(3), 331–352. https://doi.org/10.1002/sim.9620

Chen, X., Wen, F., Xiao, J., & Tian, G. G. (2024). Weathering the Risk: How Climate Uncertainty Fuels Corporate Fraud. Journal of Business Ethics. https://doi.org/10.1007/s10551-024-05857-y

Chouaibi, Y., & Zouari, G. (2024). The mediating role of real earnings management in the relationship between CSR practices and cost of equity: evidence from European ESG data. EuroMed Journal of Business, 19(2), 314–337. https://doi.org/10.1108/EMJB-12-2021-0183

Dai, B., Min, S., & Wu, Q. (2024). Common Institutional Ownership and Corporate Leverage Manipulation. Journal of the Knowledge Economy. https://doi.org/10.1007/s13132-024-02229-9

Dang, H. N., Hoang, K., Vu, V. T., & Nguyen, L. Van. (2021). Do socially responsible firms always disclose high-quality earnings? Evidence from an emerging socialist economy. Asian Review of Accounting, 29(3), 291–306. https://doi.org/10.1108/ARA-11-2020-0174

Duarte, A. F., Lisboa, I., & Carreira, P. (2024). Does earnings quality impact firms’ performance? The case of Portuguese SMEs from the mold sector. Journal of Financial Reporting and Accounting, 22(4), 894–916. https://doi.org/10.1108/JFRA-12-2021-0444

Dyreng, S. D., Hillegeist, S. A., & Penalva, F. (2022). Earnings Management to Avoid Debt Covenant Violations and Future Performance. European Accounting Review, 31(2), 311–343. https://doi.org/10.1080/09638180.2020.1826337

Eberhard, K. (2023). The effects of visualization on judgment and decision-making: a systematic literature review. Management Review Quarterly, 73(1), 167–214. https://doi.org/10.1007/s11301-021-00235-8

Fauzi, A., Rosmiati, S., & Juliansyah, R. (2025). Building Farmers’ Economic Resilience: The Role of Quality Seeds, Fertilizers, and Land Size in Increasing Farmers’ Income. Baileo: Jurnal Sosial Humaniora, 2(2), 211–224. https://doi.org/10.30598/baileofisipvol2iss2pp211-224

Habib, A., Ranasinghe, D., Wu, J. Y., Biswas, P. K., & Ahmad, F. (2022). Real earnings management: A review of the international literature. Accounting & Finance, 62(4), 4279–4344. https://doi.org/10.1111/acfi.12968

Harari, L., & Lee, C. (2021). Intersectionality in quantitative health disparities research: A systematic review of challenges and limitations in empirical studies. Social Science & Medicine, 277, 113876. https://doi.org/https://doi.org/10.1016/j.socscimed.2021.113876

Henglin, M., Claggett, B. L., Antonelli, J., Alotaibi, M., Magalang, G. A., Watrous, J. D., Lagerborg, K. A., Ovsak, G., Musso, G., Demler, O. V., Vasan, R. S., Larson, M. G., Jain, M., & Cheng, S. (2022). Quantitative Comparison of Statistical Methods for Analyzing Human Metabolomics Data. Metabolites, 12(6), 519. https://doi.org/10.3390/metabo12060519

Isebor, M. (2024). Navigating Typical Complexities in Business: Questionable Payments, Nepotism, and Unethical Financial Reporting BT - Business Ethics in Africa, Volume I: Values, Profits and Responsibility (S. U. Ogbu & R. Ogbechie (eds.); pp. 85–107). Springer Nature Switzerland. https://doi.org/10.1007/978-3-031-64427-6_6

Lassoued, N. (2022). Capital structure and earnings quality in microfinance institutions. International Journal of Managerial Finance, 18(2), 240–260. https://doi.org/10.1108/IJMF-08-2020-0454

Luo, W., Tian, Z., Fang, X., & Deng, M. (2024). Can good ESG performance reduce stock price crash risk? Evidence from Chinese listed companies. Corporate Social Responsibility and Environmental Management, 31(3), 1469–1492. https://doi.org/10.1002/csr.2646

Ma, B., Di, Q., & Fu, M. (2025). Market-oriented–debt-to-equity swap, corporate social responsibility and earnings management. International Review of Economics & Finance, 98, 103882. https://doi.org/https://doi.org/10.1016/j.iref.2025.103882

Mamatzakis, E., Pegkas, P., & Staikouras, C. (2023). The impact of debt, taxation and financial crisis on earnings management: the case of Greece. Managerial Finance, 49(1), 110–134. https://doi.org/10.1108/MF-01-2022-0052

Mehzabin, S., Shahriar, A., Hoque, M. N., Wanke, P., & Azad, M. A. K. (2023). The effect of capital structure, operating efficiency and non-interest income on bank profitability: new evidence from Asia. Asian Journal of Economics and Banking, 7(1), 25–44. https://doi.org/10.1108/AJEB-03-2022-0036

Rahman, A., & Muktadir, M. G. (2021). SPSS: An imperative quantitative data analysis tool for social science research. International Journal of Research and Innovation in Social Science, 5(10), 300–302.

Ramezankhani, M., & Boghosian, A. (2024). A Transductive Learning-Based Early Warning System for Housing and Stock Markets With Off-Policy Optimization. IEEE Access, 12, 141762–141784. https://doi.org/10.1109/ACCESS.2024.3443145

Renaldo, N., Suhardjo, Suharti, Suyono, & Sevendy, T. (2023). Development of Intermediate Accounting Teaching Materials: Financial Accounting and Accounting Standards. Reflection: Education and Pedagogical Insights, 1(1 SE-Articles), 1–12. https://firstcierapublisher.com/index.php/reflection/article/view/2

Rizal S, M., Siraj, M. L., Syarifuddin, S., Tadampali, A. C. T., Zainal, H., & Mahmud, R. (2024). Understanding Financial Risk Dynamics: Systematic Literature Review inquiry into Credit, Market, and Operational Risks. Atestasi : Jurnal Ilmiah Akuntansi, 7(2), 1186–1213. https://doi.org/10.57178/atestasi.v7i2.927

Roffia, P., Henschel, T., & Getzin, F. (2025). Nice to value. Unraveling the nexus between management accounting use and financial performance: A quantitative study of SMEs. Journal of the International Council for Small Business, 6(1), 48–54. https://doi.org/10.1080/26437015.2024.2386267

Setiawan, W. Y., & Hutomo, Y. B. S. (2023). The Impact of The COVID-19 Pandemic on Indonesian Retail Companies’ Working Capital Management. KINERJA, 27(1), 1–11. https://doi.org/10.24002/kinerja.v27i1.6505

Siregar, R. Y., Gunawan, A. H., & Saputro, A. N. (2021). Impact of the Covid-19 Shock on Banking and Corporate Sector Vulnerabilities in Indonesia. Bulletin of Indonesian Economic Studies, 57(2), 147–173. https://doi.org/10.1080/00074918.2021.1956397

Skare, M., de las Mercedes de Obesso, M., & Ribeiro-Navarrete, S. (2023). Digital transformation and European small and medium enterprises (SMEs): A comparative study using digital economy and society index data. International Journal of Information Management, 68, 102594. https://doi.org/https://doi.org/10.1016/j.ijinfomgt.2022.102594

Subhani, I., Iqbal, J., Jamil, F., & Iqbal, J. (2022). Relevance of Earnings Metrics: A Comparative Analysis of EPS and CFO on the Pakistan Stock Exchange. Journal of Business and Economic Options, 5(4 SE-Articles), 16–25. http://resdojournals.com/index.php/jbeo/article/view/225

Swai, C. Z., Nkaizirwa, J. P., Hugo, A. K., Mahenge, C. A., & Komba, P. S. (2022). Strengthening Teacher Education in Tanzania: Student-Teachers’ and Tutors’ Satisfaction with College Facilities and Environment. Cogent Education, 9(1). https://doi.org/10.1080/2331186X.2022.2070053

Tarighi, H., Salehi, M., Moradi, M., & Zimon, G. (2022). Social Capital, Intellectual Capital, and Audit Fee: Conflicting Evidence from Iran. Economies, 10(2), 39. https://doi.org/10.3390/economies10020039

Wang, B., Zhang, Q., & Cui, F. (2021). Scientific research on ecosystem services and human well-being: A bibliometric analysis. Ecological Indicators, 125, 107449. https://doi.org/https://doi.org/10.1016/j.ecolind.2021.107449

Wang, Y., Tu, W., Kim, Y., Sinks, S., He, J., Cambon, A., Crackel, R., Hamilton, K., Kettermann, A., & Clark, J. (2023). Statistical methods for handling missing data to align with treatment policy strategy. Pharmaceutical Statistics, 22(4), 650–670. https://doi.org/10.1002/pst.2299

Zhang, D., & Lucey, B. M. (2022). Sustainable behaviors and firm performance: The role of financial constraints’ alleviation. Economic Analysis and Policy, 74, 220–233. https://doi.org/https://doi.org/10.1016/j.eap.2022.02.003

Zhang, X., Yao, G., Vishwakarma, S., Dalin, C., Komarek, A. M., Kanter, D. R., Davis, K. F., Pfeifer, K., Zhao, J., Zou, T., D’Odorico, P., Folberth, C., Rodriguez, F. G., Fanzo, J., Rosa, L., Dennison, W., Musumba, M., Heyman, A., & Davidson, E. A. (2021). Quantitative assessment of agricultural sustainability reveals divergent priorities among nations. One Earth, 4(9), 1262–1277. https://doi.org/10.1016/j.oneear.2021.08.015