ABSTRACT

This study took a sample of Indonesia Sharia Stock Index (ISSI) during 2011 until 2013 to reveal the effect of variables indpendent earnings power and firm size, as well as how big of the mediating variables namely earnings management and dividend policy can be motivation that increase shareholder wealth. The method used in this research is data crossection with Ordinary Least Square. While secondary data derived from the annual financial statements audited in idx.com website. The results of the study (α = 5 per cent) indicate that the earnings power does not affect on the value of earnings management. Then, the firm size affect on dividend policy. Directly, earnings power affect positive significantly on shareholders wealth and earnings management as a mediating variables is rejected. Then firm size have a significant effect on shareholders wealth directly and dividend policy as a mediating variable is rejected.

Keywords: Shareholders wealth, dividend policy, earnings management, earnings power, firm size, ISSI.