The directorial ability of the President was examined by the General Ability Index (GAI) developed by Custodio et al. The existence of the female commissioner is expected to increase transparency and encourage the content of information that will influence the share price (Gul et al., 2011). Moreover, the results show that the female commissioner has a high level of independence (Abbott et al., 2012).
Specifically, the accounting measurement system in accrual can be the proxy for earnings quality (Dechow et al., 2010). DeFond (2010) explains that there are only three models out of many choices that can be used to measure accrual, namely Jones (1991), Dechow & Dichev (2002), and Francis et al. Female appointment as director of the company is also responded positively by the market (Kang et al., 2010).
Contrary to Kang et al. 2010), Farrel & Hersch (2005) show an insignificant result between market reactions with the appointment of the female commissioner. According to several revenue quality proxies (Dechow et al., 2010), the existence of a female commissioner increases the quality of revenue, which is reflected by a lower level. Moreover, the increased information content is caused by the high degree of transparency (Gul et al., 2011).
Qorannoon tokko tokko (Adams & Ferreira, 2009; Srinidhi et al., 2011; Abbott et al. 2012) akka agarsiisanitti, komishinaroonni dubartootaa jiraachuun to’annoo fooyyessa.
Therefore, the high ability of the president director can increase the role of female commissioners, which ultimately implicates in the generation of high quality earnings. The determination of the observation period starting from 2011 to 2015 is based on the statement of Francis et al. In their research, Francis et al. 2005) state that the examination needs seven years of observation to include the calculation of cash flow in previous years and cash flow in one year ahead to analyze accrual residuals.
Cash flow data for the past year is taken from the company's financial report for 2010, while cash flow data for one year is taken from the financial report for 2016. Some identification of the analysis method is used to test the relationship between the commissary. , the ability of the CEO and the quality of earnings. 211 The General Ability Index (GAI) developed by Custodio et al. 2013) is used to measure CEO ability, a measure that captures the overall work experience of the CEO in public companies prior to the current position. 2013) construct five components in measuring GAI, which are (1) multiple positions, (2) number of firms, (3) number of industries, (4) CEO experience dummy, and (5) conglomerate experience dummy.
Information on each component can be gleaned from the financial reports, particularly in the biographical section of the CEO. This analysis is usually used to rank each component that is associated with one factor. Then, each factor will generate a certain number, and its number will be added up to add up the amount of ability of the CEO.
Earnings quality measurement is based on discretionary estimation error model adopted from Francis et al. For the first step, Francis et al. 2005) use this formula to examine each of 48 industry groups. To distinguish between the innate and discretionary factors, Francis et al. 2005) take the second stage of the exam.
So that Francis et al. 2005) is able to obtain the specific error that was caused by the managerial and errors that cannot be controlled by the company. As a result, the data from this research does not meet the requirement for second-stage investigation. Sizei,t : Company size measured by log of total assets in company i in year t.
RESULTS AND DISCUSSION 1. Descriptive Statistic
The results indicate the probability that there is no significant relationship between the percentage of female CEOs and the quality of earnings. The next variable, CEO proficiency, has a maximum value of 8.56 with the minimum of -1.02, since the mean is 0. That means there is a CEO with the highest ability of 8.56, as well as one with the lowest of -1.02.
The correlation value between the CEO's wealth and the quality of earnings is 0.001, which is more significant than 0.05. That value indicates that there is no correlation between the CEO's ability and the quality of earnings in hypothesis testing. Moderating variable in the form of interaction between the female commissioner and the competence of the chief executive shows a maximum of 1.70 and a minimum of -0.68.
This shows that the company with a female commissioner and the ability of the president director has the maximum value of 1.70, and has the company with the value of -0.68. On average, the company with the ability of a female commissioner and director president has a value of -.03. 215 other two variables, a correlation value between the ability of the female commissioner and the ability of the director of the president has the significance level more than 0.05 with the Pearson value of 0.020.
The t-value indicates that we do not find the effect on earnings quality of the ability of the CEO. However, we find that the interaction coefficient of female commissioner and presidential director ability is 0.334 and significant at the probability value of 0.0405. In the second hypothesis, we predict that CEO ability has a positive impact on earnings quality.
219 ability, could be measured in the president director's reputation, relates negatively to the firm's earnings quality. Hypothesis three covers the interaction between the ability of the president director and female commissioner in relation to earnings quality. The interaction between female commissioners and presidential directors has a positive coefficient with the probability value of 0.0405.
This means that the interaction between the female commissioner and the director president has a positive effect on the quality of income. Therefore, it can be concluded that the interaction of the ability of the commissioner and the president of the female director has a positive impact on the quality of the company's earnings.
Conclusion, Implication, and Limitation
Although the coefficient shows a negative sign, the interpretation is that company size has a negative relationship with earnings quality. This is because the measure of earnings quality is measured by the amount of accruals. Because of this, the coefficient also shows a negative amount and it can be interpreted that the size of the company has a positive impact on the quality of earnings.
With these results, it can be concluded that a female commissioner will carry out her function as a supervisor optimally when the director she supervises has the good skills. First, variable measurement for female commissioner is based on the total percentage of the female member of the board without concern for the level of position on the board in question. Future research should give different weight to the position of female commissioner, for example female commissioner as commissioner president is assigned a higher weight than normal commissioner position.
This measurement is not able to correctly describe the CEO's net worth, especially work experience in various industries. The GAI stipulates that we measure management ability by industry experience and conglomerate companies determined solely by the SIC code. Third, GAI measurement obscures the management capabilities of the chief executive officer (CEO). According to Dejong & Ling (2013), the CEO plays a relatively small role in the use of accounting discretion.
Therefore, further research should use other metrics such as the data envelopment analysis (DEA) developed by Demerjian et al. 2013) to measure the relationship between managerial ability and earnings quality. Fourth, in relation to managerial ability, a longitudinal or time series analysis can be conducted to determine the role of an able CEO in a company. Because of the probability, the role of the CEO will be known in the long-term performance of the company.
The influence of effective board of commissioners and audit committee on the informativeness of earnings: Evidence from Indonesian listed firms.
