The Effect Of Profitability, Solvency, And Size Of The KAP On The Timeliness Of Financial Statements In The LQ-45 Company Listed On The Indonesia Stock Exchange

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The Effect of Profitability, Solvency, and Size of KAP on Timeliness of Financial Statements in LQ-45 Companies Listed on the Indonesia Stock Exchange

Introduction

The timeliness of financial statements is a crucial aspect of a company's financial reporting performance, as it directly affects investor confidence and decision-making. In the context of the capital market, timely financial statements can increase investor trust and encourage better investment decisions. This study aims to evaluate the effect of profitability, solvency, and size of the Public Accountant Firm (KAP) on the timeliness of the delivery of financial statements in companies that are members of the LQ-45 index on the Indonesia Stock Exchange.

Background

The LQ-45 index is a widely followed stock market index in Indonesia, comprising 45 companies listed on the Indonesia Stock Exchange. The index is designed to represent the performance of the Indonesian stock market and is widely used by investors and analysts as a benchmark for investment decisions. The timeliness of financial statements is a critical aspect of a company's financial reporting performance, as it directly affects investor confidence and decision-making.

Methodology

This study used a sample of 45 companies in three research periods, totaling 135 observations. The data analysis method applied was logistical regression analysis with the Hosmer and Lemeshow's Goodness of Fit Test model test. The study aimed to evaluate the effect of profitability, solvency, and size of the KAP on the timeliness of financial statements in LQ-45 companies.

Results

The test results show that partially, the solvency variable and KAP size have a significant effect on the timeliness of financial statements in LQ-45 companies. Conversely, profitability variables do not have a significant impact on the timeliness of financial statements. However, when seen simultaneously, the variable profitability, solvency, and KAP size together affect the timeliness of the delivery of financial statements.

In-Depth Analysis

The effect of the timeliness of financial statements is very important in the context of the capital market, because on-time financial statements can increase investor confidence and encourage better investment decisions. In this case, a solvency variable that reflects the company's ability to fulfill its short-term obligations plays a crucial role. Companies with a good level of solvency tend to be more able to compile and submit financial reports in a timely manner. This shows that good debt and working capital management can have a positive impact on the effectiveness of the delivery of financial information.

The size of the KAP is also an important variable in this study. Larger and well-known KAPs often have better resources and systems for managing audit and reporting processes. Therefore, companies that use large KAP tend to be more disciplined in delivering their financial statements on time. In other words, support from professional and trusted KAP can help improve the company's financial reporting performance.

Meanwhile, profitability, although it is an important factor in the continuity of the company, does not have a significant impact on the timeliness of financial statements. This can be caused by various external factors that affect the company, such as market pressure or management that is less effective in managing reporting time.

Conclusion

Based on the research findings, companies listed in the LQ-45 index on the Indonesia Stock Exchange need to pay attention to the solvency variables and the size of the KAP in an effort to increase the timeliness of financial statements. Although profitability does not have a direct effect, a deeper understanding of these aspects can assist companies in increasing investor transparency and trust. In the future, further research can be carried out to explore other factors that might affect the timeliness of financial statements and their impact on the performance of shares in the market.

Recommendations

Based on the study's findings, the following recommendations are made:

  1. Companies listed in the LQ-45 index should prioritize solvency and KAP size: Companies should focus on maintaining a good level of solvency and using a large and well-known KAP to improve the timeliness of financial statements.
  2. Investors should consider solvency and KAP size: Investors should consider the solvency and KAP size of a company when making investment decisions, as these factors can affect the timeliness of financial statements.
  3. Further research is needed: Further research is needed to explore other factors that might affect the timeliness of financial statements and their impact on the performance of shares in the market.

Limitations

This study has several limitations, including:

  1. Sample size: The sample size used in this study was limited to 45 companies.
  2. Data availability: The data used in this study was limited to the available data from the Indonesia Stock Exchange.
  3. Methodology: The study used a logistical regression analysis with the Hosmer and Lemeshow's Goodness of Fit Test model test, which may not be the most suitable method for this study.

Future Research Directions

Future research directions include:

  1. Exploring other factors that affect timeliness: Further research is needed to explore other factors that might affect the timeliness of financial statements and their impact on the performance of shares in the market.
  2. Using a larger sample size: Future studies should use a larger sample size to increase the generalizability of the findings.
  3. Using a more suitable methodology: Future studies should use a more suitable methodology, such as a structural equation modeling (SEM) approach, to analyze the relationships between the variables.
    Frequently Asked Questions (FAQs) about the Effect of Profitability, Solvency, and Size of KAP on Timeliness of Financial Statements in LQ-45 Companies Listed on the Indonesia Stock Exchange

Q: What is the main objective of this study? A: The main objective of this study is to evaluate the effect of profitability, solvency, and size of the Public Accountant Firm (KAP) on the timeliness of the delivery of financial statements in companies that are members of the LQ-45 index on the Indonesia Stock Exchange.

Q: What is the significance of the LQ-45 index? A: The LQ-45 index is a widely followed stock market index in Indonesia, comprising 45 companies listed on the Indonesia Stock Exchange. It is designed to represent the performance of the Indonesian stock market and is widely used by investors and analysts as a benchmark for investment decisions.

Q: What are the key findings of this study? A: The key findings of this study are that partially, the solvency variable and KAP size have a significant effect on the timeliness of financial statements in LQ-45 companies. Conversely, profitability variables do not have a significant impact on the timeliness of financial statements. However, when seen simultaneously, the variable profitability, solvency, and KAP size together affect the timeliness of the delivery of financial statements.

Q: What is the importance of solvency in this study? A: Solvency is an important variable in this study, as it reflects the company's ability to fulfill its short-term obligations. Companies with a good level of solvency tend to be more able to compile and submit financial reports in a timely manner.

Q: What is the role of KAP size in this study? A: KAP size is also an important variable in this study, as larger and well-known KAPs often have better resources and systems for managing audit and reporting processes. Therefore, companies that use large KAP tend to be more disciplined in delivering their financial statements on time.

Q: Why does profitability not have a significant impact on timeliness? A: Profitability, although it is an important factor in the continuity of the company, does not have a significant impact on the timeliness of financial statements. This can be caused by various external factors that affect the company, such as market pressure or management that is less effective in managing reporting time.

Q: What are the implications of this study for companies listed in the LQ-45 index? A: The study's findings suggest that companies listed in the LQ-45 index should prioritize solvency and KAP size to improve the timeliness of financial statements.

Q: What are the implications of this study for investors? A: The study's findings suggest that investors should consider solvency and KAP size when making investment decisions, as these factors can affect the timeliness of financial statements.

Q: What are the limitations of this study? A: This study has several limitations, including a limited sample size, limited data availability, and the use of a logistical regression analysis with the Hosmer and Lemeshow's Goodness of Fit Test model test.

Q: What are the future research directions? A: Future research directions include exploring other factors that might affect the timeliness of financial statements, using a larger sample size, and using a more suitable methodology, such as a structural equation modeling (SEM) approach.

Q: What are the practical implications of this study? A: The practical implications of this study are that companies listed in the LQ-45 index should prioritize solvency and KAP size to improve the timeliness of financial statements, and investors should consider these factors when making investment decisions.

Q: What are the theoretical implications of this study? A: The theoretical implications of this study are that the study contributes to the understanding of the factors that affect the timeliness of financial statements, and provides insights into the role of solvency and KAP size in this context.