THE INTERSECTION OF EARNINGS MANAGEMENT AND FINANCIAL REPORTING INTEGRITY IN RURAL BANK: A MULTI-FACTOR ANALYSIS

Nurshadrina  Kartika Sari; Isti Fadah; Yuli  Hariyati; Nurhayati Nurhayati

doi:10.31967/prmandala.v5i0.1180

Nurshadrina Kartika Sari Institute Technology and Science Mandala
Isti Fadah University of Jember
Yuli Hariyati University of Jember
Nurhayati Nurhayati University of Jember

DOI: https://doi.org/10.31967/prmandala.v5i0.1180

Abstract

This study aims to examine the influence of Non-Performing Loans (NPL), Return on Assets (ROA), Net Interest Margin (NIM), Capital Adequacy Ratio (CAR), Loan Loss Provision (LLP), Audit Quality, Firm Size and Earnings Management to Financial Reporting Integrity, practices at Rural Banks Indonesia for the 2019-2023 period. The results reveal that NPL significantly impacts both earnings management and the integrity of financial statements, while CAR and earnings management also affect financial statement integrity. As a microfinance institution with limited segmentation, rural bank prioritizes credit distribution as its primary income source and carefully manages loans to prevent NPL increases that could harm its financial health and reputation. High NPL levels can negatively impact the capital adequacy ratio (CAR) due to the anticipation of credit risk. Therefore, rural bank must maintain financial stability indicators, such as NPL and CAR, in their operations and financial reporting. Compliance with banking regulations is crucial for bank of all sizes, ensuring that financial statements are presented transparently and accountably, facilitating informed decision-making.