THE EFFECT OF BUSINESS STRATEGY AND EARNINGS MANAGEMENT ON RISK BANKRUPTCY (Empirical Study of Manufacturing Companies Listed on the Indonesia Stock Exchange in 2018-2022)

This Bankruptcy risk is a problem that has received great attention from many
researchers around the world. Bankruptcy risk is affected by many different factors.
Bankruptcy risk is the company's inability to fulfill its obligations and if this risk occurs,
the company needs to take legal action to submit a bankruptcy filing in order to re-regulate
its debts or liquidate its assets so that it can pay the company's obligations. Some of the
actions that can be taken by the manager as an agent delegated by the principal is to make
the best business strategy for the company. When companies make policies or business
strategy decisions that are wrong in the context of managing the company, then there is a
possibility that this will tend to encourage management to carry out moral hazard through
earnings management actions to manipulate financial reports so that they look good in the
eyes of investors.
This study uses secondary from manufacturing companies listed on Indonesia
Stock Exchange. The data used the annually financial reports for the 2018 – 2022 period,
which were obtained through official website of the IDX and the website of each company.
The research sample includes 112 companies with 560 observations. Data analysis was
performed using a logistic regression model.
The results of this study show that business strategy cost leadership has a significant
negative effect on the risk of bankruptcy. This show that the higher level implementation
of business strategy cost leadership, the lower company risk on bankruptcy. Furthermore,
business strategy differentiation has a significant positive effect on the risk of bankruptcy.
This show that the higher level implementation of business strategy differentiation, the
higher company risk on bankruptcy. While earnings management has a significant
negative effect on the risk of bankruptcy. This show that the higher level implementation
of accrual earnings management, the lower company risk on bankruptcy.
Keywords : Business Strategy, Cost Leadership, Differentiation, Earnings Management,
Risk Bankruptcy.