Purpose: This study investigates the effect of corporate governance on financial performance by taking into account the mediating effect of earnings management.

Design: By using a structural equation modeling and partial least squares approach and a sample of listed banks in Indonesia observed between 2010 and 2015, this research proves that good corporate governance has a significant effect on earnings management and, in turn, that earnings management has an adverse impact on a company’s financial performance.

Findings: An increase in managerial and institutional ownership leads to a decrease in earnings management, which can improve a company’s financial performance.

Originality: This research shows that by applying good corporate governance mechanisms, a company can avoid agency conflicts, minimize earnings manipulation by managers, and obtain reliable company performance valuations.



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.