CEO Narcissism, Company Value and Earnings Management in Industrial Sector of Indonesia

Purpose: (i) Analyze and test CEO Narcissism Against Corporate Value and Earnings Management; (ii) Analyzing and testing the effect of CEO Narcissism Intervening on Company Value and Earnings Management in Manufacturing Companies in the Industrial Sector Listed on the Indonesia Stock Exchange for period 2016-2020 Methodology: This study uses descriptive analysis, a type of quantitative research, which, when viewed from the data analysis method The data analysis technique used in the study used linear regression. Then for the company's value using the Tobin's Q ratio and to assess the level of earnings management using the Modified Jones Model Findings: CEO narcissism has a positive effect on firm value, which means that every increase in CEO narcissism will increase firm value. CEO narcissism has a positive and significant effect on earnings management which this result explains that every increase in CEO narration will increase earnings management. CEO narcissism has a positive and significant effect on earnings management which this result explains that every increase in CEO narration will increase earnings management. Originality/Value: This research is to have a view terms of the Effect of CEO Narcissism on Company Value and Earnings Management as an Intervening Variable in Manufacturing Companies in the Industrial Sector Listed on the Indonesia Stock Exchange for the 2016-2020 period in terms of contributions in the field of education show the number of detecting fraudulent financial reporting; (2) the change of directors financial reporting, and (3) an effect on detecting fraudulent financial reporting. The results show a positive relationship between profile


Introduction
Profit is one of the important benchmarks that attract the attention of external parties used in assessing company performance by users of financial statements. This is in line with the Statement of Financial Accounting Concepts (SFAC) No.1 (1987) (Wandeca, 2012) that earnings information material is the main concern for assessing performance or management accountability. Responsibility arises because narcissism can affect cooperation, trust, risk-taking, motivation, decision-making, and long-term performance (Rani, 2021). In research (Godkin & Allcorn, 2011) The existence of management actions that report company profits by not describing the actual condition of the company results in the quality of the profits generated will be of doubtful quality as a decision-making medium.
Narcissism is an attitude of avoiding a bad image and forming a good image that cannot be separated from the attitude of individual narcissism. The narcissistic attitude has a great desire for the assertiveness of other people who are focused on the expertise they have (Kelly, 2017) obtained CEO (Chief Executive Officer) has a very important role in achieving good in a company. The CEO's responsibilities include developing and implementing high-level strategies, making company decisions, managing company operations and overall company resources, and acting as the main point of communication between the board of directors and operational management (Source: investopedia.com). The role of the CEO in each company is different, depending on the size of the company. In small-scale companies, the CEO has many roles in the company. However, in large-scale companies, CEOs are more concerned with higher-level strategy and overall management ability to grow and develop (Growth), the company's ability to get sustainable projects (Sustainable), and the company's ability to be able to compete (Competitive) with other companies which is an indicator of the success of a company. . Management behavior in the accrual basis process allow earnings management to increase or decrease the accrual number in the income statement.
Earnings management generally referred to as accruals earnings management is an action taken through accounting selection policies to obtain certain objectives, for example, to increase the value of the company or for the personal interests of company management. Earnings management can be defined as interference between two parties with a specific purpose by the manager in the profit recording process which has its objectives. Earnings management often involves a windowdressing of financial statements, especially the recording of earnings. if managers manipulate accruals that have no consequences with cash flows. Earnings management can be done in two ways. First, change the accounting method, which is a visible form of earnings management. Second, changing estimates and accounting policies that determine accounting numbers is a hidden form of earnings management.
Within a company, Managers can manage information about parties outside the company, such as creditors and investors. This arrangement of information occurs when managers have the authority to choose different methods for posting transactions and for selecting records according to accounting principles. This authority is used by management to manage earnings and managers have a lot of information within the company and know this information before external parties.
This information allows managers to act more opportunistically by obtaining personal benefits in terms of the company's financial reporting, managers can practice earnings management regarding the results of the company's financial statements. One way for managers to influence the level of reported earnings is to practice earnings management. Earnings management is related to the selection of accounting methods carried out by managers in financial reporting to increase profits or reduce profits to suit the interests of managers or the interests of the company and the parties involved in the contract (Indra Kusuma & Mertha, 2021).
The method used by managers in practicing earnings management is accrual-based accounting because this method is considered more appropriate in providing financial information and providing a clearer picture of the company's financial condition. However, the accrual method is very vulnerable to manipulation because accrual accounts are generally nominal and based on estimates. This is used by managers to maximize their interests. There are two perspectives in understanding the behavior of managers on earnings management practices, namely the opportunistic behavior perspective and the efficient contracting perspective (Putra, 2011). Company value is a description of the condition of a company during a certain period (Indra Kusuma & Mertha, 2021). Firm value reflects the good or bad operations in a company, so this also affects the prosperity of shareholders (Suhadak et al., 2019). The level of profit is one of the determining factors for the value of the company because the level of profit in the company's annual financial statements generally describes the results of the company's operational performance for one period. When the company's profit increases, this will affect the market response to the value or price of the company's stock so that the share price also increases. This increasing share price reflects the prosperity of the shareholders or it can be said that the shareholders benefit from the increase in the share price, because the share price is the result of an assessment of investment decisions, funding, and dividend policy.
In Indonesia, several cases occur in earnings management practices such as the Toyota automotive company. Tokyo, as reported by Kompas.com "The profit of the Japanese auto giant Toyota slumped for the first time in five years. In fact, Toyota has sold more cars in the first quarter of 2017 than in 2016," quoted the BBC on Thursday (11/5/2017). Toyota acknowledged that the slump in profits was caused by high costs and fluctuations in the exchange rate. Toyota's profit in the first quarter of 2017 was recorded at 1.83 trillion yen or 16.1 billion US dollars, this figure is down 21% compared to a profit in the first quarter of 2016. Toyota's management has also warned that profits in 2018 will be lower. This is due to the strengthening of the Japanese Yen exchange rate. Toyota's prediction is based on the projection that the Yen exchange rate will be around the level of 105 per US dollar until March 2018.
This level is lower than in the previous financial year. Toyota has lost its status as the car manufacturer in Indonesia with the highest sales. This status is now carried by the German car manufacturer, Volkswagen. Toyota sold 10.25 million units of cars in the first quarter of 2017, higher than 10.19 million units in the same period the previous year. However, revenue from car sales in the first quarter of 2017 fell to 27.6 trillion yen. Toyota is now in a struggle to maintain its business in the United States, its largest market. Sales plunged in North America as Toyota struggled to meet the demand for larger cars, such as sport utility vehicles (SUVs), which became cheaper in the future due to lower fuel prices. (Quoted from the source Kompas.com).
In 2019, the Indonesia Stock Exchange (IDX) will summon the directors of PT Tiga Pilar Sejahtera Food Tbk (AISA) to ask for an explanation related to the results of the Some of the above phenomena can explain that investors use profits in making decisions, so these profits cannot explain the actual state of profits in the company's financial statements. While the quality of earnings in the financial statements is an important element for stakeholders for contracts and investment decisions.
Research on narcissism in accounting found that companies led by narcissistic CEOs tend to publish misstatements in financial statements (Rijsenbilt and Commandeur 2013). (Rani, 2021), perform real earnings management (Olsen, Dworkis, and Young which affects earnings management practices that occur in Sunbeam Company and its CEO, namely J. Dunlap who has manipulated the company's financial statements. All reports that are produced turn out to be the result of engineering and not following the reality that occurred. This began to emerge in July 1998 when an article appeared saying this and the article became known as the baron's article. The emergence of this problem to the public led to a board meeting to discuss this and in the end, the board of directors decided to fire Dunlap. Subsequently, an investigation was conducted on Sunbeam Company by the SEC (Security Exchange Commission).
During its investigation, the SEC found that from the final quarter of 1996 to June 1998, Sunbeam's management had succeeded in inventing a restructuring lie to increase the stock price, thereby blinding the company's value. To achieve this, the management has used improper earnings management techniques to falsify company reports or results and hide bad financial conditions. This research is motivated by the increasing number of CEO phenomena that occur in several companies, both companies in the world and including in Indonesia. Some of the above phenomena have attracted researchers to study CEO narcissism as an aspect that influences earnings management practices in a company. The Industrial Manufacturing Sector is the unit of analysis in this study because the Industrial Manufacturing Sector is one sector that is in the spotlight for investors. This is supported by sources obtained from data from the Indonesia Stock Exchange (IDX) where stock movements in manufacturing companies in the Industrial sector have increased from 2016-2020 (Source: Kemenperin.go.id).
The research on CEO narcissism is based on the Upper Echelon Theory decision making a chief executive officer and consequently stems from CEO characteristics (Rachman, 1984). Endah et al. (2021) theoretically propose that CEO narcissism as a personality trait is related to the quality of corporate earnings. Therefore, highly narcissistic CEOs tend to make vague accounting choices to best present their company's financial status. By inflating the perceived performance of the company, they try to achieve self-improvement through self-affirmation and/or admiration from third parties (Back et al., 2013) so that if the financial statements in companies are listed with high profits, it will affect the value of the company and increase in value. company stock.
Previous studies have been carried out in the context of developed countries such as the research conducted by (Taleatu et al., 2020), but cases of narcissism towards earnings management practices often occur in the context of developed countries and are still limited in developing countries such as in Indonesia. Therefore, this study is expected to contribute to additional literature on specific problems that occur in developing countries such as Indonesia. In Indonesia itself, narcissism is a phenomenon that still receives less attention from academic circles, especially among accounting graduates. Meanwhile, the relationship between narcissism and fraudulent behavior, such as earnings management practices, is very important to study in countries with high indications of corruption. Literature Review (Amernic & Craig, 2011) Using discourse, written documents, and language written by the CEO. Destructive narcissism is increasingly being recognized as a serious nuisance to good corporate leadership and ethical behavior. (Godkin & Allcorn, 2011) Using an organizational image model of resistance to arrogant narcissistic behavior When destructive narcissists reach positions of power unethical behavior occurs.

This study uses Industrial Sector
Unethical decisions become reinforced in organizational structures and practices and embedded in technology. (Hsieh et al., 2014) Using descriptive statistical analysis statistics found that CEOs who are too confident tend to have discretionary accruals that increase income (Febyani, 2014)  The results of the research on CEO narcissism have an impact on earnings management behavior, but also have an impact on company performance through earnings management practices or actions. (He et al., 2022) Using OLS to examine the effect of salary differences in TMT on real earnings management. Pay differentials in TMT limit real activity manipulation and further increase firm value. In addition, the indirect effect is stronger when product market competition is high. (Kontesa et al., 2021) This study uses descriptive statistics then the regression is performed using a control panel regression for the year the fixed effect of narcissistic CEOs has a positive relationship with earnings management. This means that narcissistic CEOs have a tendency to manage company profits to fulfill their egos, which brings a new perspective to agency theory. (Savitri & Siswantoro, 2021) This study uses a sample of Islamic Banking in Indonesia from 2014-2018, to measure CEO narcissism using the CEO photo size from the annual report, measuring earnings management using loan loss provisions. CEO narcissism variable has no effect on earnings management in Islamic banking. This is contrary to the upper echelon theory which states that the psychological aspect of the CEO will affect the company's results. (Yook & Lee, 2020) This study collects datasets of listed Korean companies listed on the Korea Exchange from 2010-2016. CSR rating size data were obtained from the Korea Corporate Governance Service. CEO narcissism promotes CSR initiatives and that CSR increases firm value in the capital market. However, the results do not support our prediction that CSR mediates the relationship between CEO narcissism and desired organizational outcomes. (Taleatu et al., 2020) This study adopted a It can be concluded that higher narcissistic CEOs have an excessive degree of focus on setting unrealistic targets for the company. Highlighted in the scheme of giving company bonuses, if the CEO has the maximum performance to generate company profits, the practice of earnings management is often a shortcut taken by the CEO in achieving company targets to generate maximum profits. Targets that are too high and unrealistic make narcissistic CEOs take unethical actions by practicing earnings management to achieve profit targets that have been determined by the company.
The higher the narcissism of the CEO, it leads to higher the earnings management practices and results in poor quality financial reports. Based on the description that has been described previously and the literature review to obtain the results of the

The Research Tool
The scope of this research consists of three variables, namely the independent variable, namely the influence of CEO narcissism and the dependent variable, namely firm value and earnings management as an intervening variable. The data used is quantitative data with secondary data sources, namely financial and non-financial data of companies in Manufacturing companies in the Industrial sector in 2016-2020.

H3 CEO Narcissim (X) Company Value (Y) H1
photo, signature size, and CEO gender in the company's annual report.

The Sample Population
This study uses industrial sector manufacturing companies with a population of 55 companies. a sample that meets the criteria of as many as 27 companies listed on the Indonesia Stock Exchange from 2016-2020 was selected using the purposive sample method with the following criteria: 1.
Manufacturing companies in the industrial sector listed on the Indonesia Stock Exchange in 2016-2020.

2.
Companies that have complete information regarding the 2016-2020 annual financial statements.
Company criteria and sample companies can be seen in table 1 and 2 as follows:

Data Analysis
The data analysis technique used in the study used linear regression. Then for the value of the company using the Tobin's Q ratio and to assess the level of earnings management using the Modified Jones Model and using descriptive analysis which is calculated using the average, mean, maximum and minimum values that are useful for providing views on each variable. This study uses an independent variable where CEO is the variable, the dependent variable is the value of the company which is the variable, and earnings management is the intervening variable in this study. And using multiple linear regression analysis aims to test the level of CEO narcissism as an independent variable and to test firm value as an independent variable through earnings management which is the intervening variable.

Research Limitations
This study only examines companies in the industrial sector so the results of the study do not comprehensively explain the condition of CEO narcissism, corporate earnings, and earnings management, besides that the variables measured are only limited to CEO narcissism which should also be studied for broader variables in determining company profits. and earnings management

Descriptive Variable
Description Analysis Descriptive statistical analysis aims to provide an overview or description of data. This analysis was carried out using the mean, standard deviation, variance, maximum, and a minimum of the data obtained as follows:

Model Diagnostic
Based on panel data testing in terms of strengthening the decision results for model selection, the data comparison can be seen as follows:   shows that in general, the Random Effect Model (REM) model is the best model. perspective in agency theory.

The Effect of CEO Narcissism on Earnings Management
The estimation results show that CEO narcissism has a positive and significant effect on earnings management which this result explains that every increase in CEO narration will increase earnings management. This is explained theoretically based on Upper Echelon which explains that CEO characteristics can affect the activities of a company where CEOs who have a narcissistic spirit tend to be more aggressive and will show their performance excessively in a company. Thus, the characteristics of the CEO have a large influence which shows that the strategic choice is very influential and is influenced by the demographic characteristics of the CEO that affect the cognitive base and value of the brand.
In line with this, how many studies show the same conclusions, several studies found a positive effect of CEO characteristics on earnings management, namely Hsien and Johnstone (2014) with the results of research on aggressive CEO characteristics that will support an increase in discretionary accruals proven to have an impact on improving earnings management of a company. . In line with this, the study of Devi and Sulindawati (2016) found that the characteristics of an aggressive CEO affect detecting fraudulent financial reporting. This study is also supported by Capalbo et.al andAlicia et.al (2017), Kotesa et.al (2017), and Lee (2020) with the results of the study that there is a positive and significant relationship between CEO narcissism and earnings management.

Effect of Earnings Management on Firm Value
The estimation results show that earnings management has a positive and significant effect on firm value. The results of this study explain that any increase in earnings management will significantly increase firm value. The results of the study are in line with Signaling Theory which explains that managers as company managers know more about internal information and company prospects in the future than owners (shareholders) it causes information asymmetry. Managers are required to give a signal about the condition of the company to the owner. The signal given is a reflection of the value of the company through the disclosure of accounting information such as financial statements. The financial statements are important for external users of the company because that group is in a condition that is at least a high level of certainty. The asymmetry between management and owners provides an opportunity for managers to carry out earnings management to increase firm value.
The results of this study are in line with several research studies that prove that earnings management has a positive and significant effect, namely Devie (2015) and Taleatu Adetula (2020) who find that increasing earnings management supported by information from company managers as management elements is proven to increase firm value. Meanwhile, it is different from Aziza's research (2019) which finds that earnings management does not affect firm value and earnings management cannot mediate the effect of institutional ownership on firm value, managerial ownership on firm value, frequency of board of commissioners meetings on firm value, and frequency of audit committee meetings. to the value of the company.

Conclusions
The conclusions in this study are 1. CEO narcissism has a positive effect on firm value, which means that every increase in CEO narcissism will increase firm value.

2.
CEO narcissism has a positive and significant effect on earnings management which this result explains that every increase in CEO narration will increase earnings management.
3. CEO narcissism has a positive and significant effect on earnings management which this result explains that every increase in CEO narration will increase earnings management.

4.
Recommendations for further research to classify CEO narcissism in terms of cognitive level, besides that it is necessary to add variables that affect earnings management and firm value such as corporate governance, gender diversification, and Corporate Social Responsibility (CSR).