Merger, Capital Adequacy, and Earning Management in Conventional or Sharia Banks

The research purpose is to test whether banks in Indonesia choose mergers or perform earnings management to meet the minimum capital adequacy requirements. In addition, this study also distinguishes how the earnings management behavior in both conventional banks and Sharia banks. The research population was all Banks in Indonesia. The sample in this study was all banks (conventional and Sharia banks) listed on the Indonesian stock exchange from 2019 to 2022. We use purposive sampling method to collect samples. The data analysis technique used in the study was the STATA. The results showed a positive effect between earnings management and the capital adequacy ratio in conventional and Sharia banks. Sharia banks were less likely to perform earnings management than conventional banks. These results also indicated that banks prefer mergers over earnings management to meet the minimum capital adequacy requirements.