Abstract

This study tries to test whether the controlling generation (founder vs. descendant) of family companies in Indonesia affects

earnings management. To prove this, this study took samples from manufacturing group companies listed on the Indonesian stock

exchanges from 2012 to 2015. The total sample we used in this study was 172 observations. Modified Jones model is used as a

proxy for earnings management. Based on the results of the analysis it can be concluded that the controlling generation has a

negative effect on earnings management. Trend analysis results also show that family companys owned and managed by firstgeneration

earnings management tend to be stable for 4 consecutive years compared to family group companies owned and

managed by the second generation.

Keywords: Accrual Earnings Management, family & controller generation companies