




































60 

 

Finance, Accounting and Business Analysis 
Volume 5 Issue 1, 2023 

http://faba.bg/       
ISSN  2603-5324 

 

Accounting Conservatism and Earnings Responsiveness: An Empirical 

Study of Public Companies in Indonesia 

 

Adi Gunanto  

 

Study Program, Master of Accounting, Universitas Muhammadiyah Surakarta, Indonesia 

 

Info Articles   Abstract 

 

 

History Article: 

Submitted 9 May 2023 

Revised 27 May 2023 

Accepted 1 June 2023 

 

  

Purpose: The purpose of this study is to analyze the influence of 

accounting conservatism, profitability, growth opportunities, and 

default risk on the earnings responsiveness coefficient of mining sector 

companies listed on the Indonesia Stock Exchange during the period 

of 2020-2022. 

Design/Methodology/Approach: This study utilizes a quantitative 

research design with purposive sampling technique to select a sample 

of 60 mining sector companies listed on the Indonesia Stock Exchange 

during the period of 2020-2022. The data collected from the financial 

reports of the selected companies is analyzed using classical 

assumption tests and multiple regression analysis. 

Findings: The results of this study indicate that accounting 

conservatism has a significant positive effect on the earnings 

responsiveness coefficient of mining sector companies listed on the 

Indonesia Stock Exchange during the period of 2020-2022. However, 

profitability and default risk variables do not have a significant effect 

on the earnings responsiveness coefficient. On the other hand, growth 

opportunities have a significant negative effect on the earnings 

responsiveness coefficient. 

Practical Implications: The findings of this study can be useful for 

practitioners in making managerial decisions, especially in enhancing 

the earnings responsiveness of mining sector companies listed on the 

Indonesia Stock Exchange. Practitioners can utilize accounting 

conservatism as a tool to improve earnings responsiveness. 

Additionally, this study provides insights for regulators in determining 

policies related to the earnings responsiveness coefficient. Regulators 

can consider growth opportunities in their decision-making processes. 

Originality/Value: This study contributes to the accounting literature 

by revealing the influence of different factors on the earnings 

responsiveness coefficient of mining sector companies in Indonesia. 

The results of this study can also serve as a basis for further research on 

other factors that influence the earnings responsiveness coefficient of 

companies in other sectors. 

Paper Type:  Empirical Research.  

 

Keywords:  

accounting conservatism, 

profitability, growth 

opportunities, default risk, 

earnings responsiveness 

coefficient 
 

 

 

 

JEL: G32, G11 

 

   

 
 

* Address Correspondence:   

E-mail : adigunamanusia@gmail.com 

 

mailto:sadikaden1999@gmail.com
https://orcid.org/0009-0003-9578-1814


Adi Gunanto / Finance, Accounting and Business Analysis, Volume 5, Issue 1, 2023 

 

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INTRODUCTION 

 

The increasingly competitive market requires every company to maintain transparency in disclosing 

financial and non-financial information, especially for those already listed in the stock market (Alia and 

Sarees 2023). Financial reports are important factors in the development of the stock market, as users of 

financial reports can predict the company's performance and evaluate the potential for investment in the 

stock market. Investors pay close attention to earnings information as an indicator of company performance. 

However, in addition to earnings information, other information is needed to predict a company's stock 

returns, such as the earnings responsiveness coefficient. A high value of the earnings responsiveness 

coefficient indicates that the reported earnings are of good quality, while a low value of the earnings 

responsiveness coefficient can indicate market distrust in the quality of earnings (Xue 2020; Cui et al. 2023). 

Therefore, the earnings responsiveness coefficient can be used as one perspective in assessing the quality of 

a company's earnings based on market response. 

In addition to profit information, investors also need to pay attention to other factors that can affect 

a company's performance, such as conservative accounting policies (Wu et al. 2022). Information on the 

application of conservatism in accounting can influence the decisions of financial statement users. The 

concept of conservatism in accounting results in lower recognition and measurement of revenue and assets 

and higher recognition of liabilities (Houaneb et al. 2023). This leads to a reduction in profit in the current 

period and an increase in profit in the following period. This means that investors will feel confident and 

creditors will be satisfied with their decision to invest in the company. 

Profitability is also closely related to the value of earnings. In companies with high profitability, the 

influence of accounting earnings on stock prices will be greater than in companies with low accounting 

earnings growth (Khalilov and Osma 2020). Therefore, the higher the level of profitability of a company, 

the greater the likelihood of unexpected earnings that will increase the value of the company's earnings 

response coefficient. The next factor, growth opportunities, is also very important in describing the growth 

prospects of a company in the future. Investors tend to respond more strongly to companies with high growth 

opportunities, as they are considered capable of providing promising returns in the future. Thus, investors 

must be able to identify the right investment decisions based on accurate and balanced information. 

There are several reasons why this research is highly relevant and interesting to conduct. Firstly, in 

the era of digitization and globalization like today, competition among companies is becoming increasingly 

fierce, requiring companies to have the right strategies to survive and grow in the competitive market. One 

such strategy is optimizing the use of company resources to create growth opportunities that will provide 

long-term benefits for the company and investors. Secondly, default risk and uncertainty of investment 

returns still pose significant problems in the stock market, so understanding how factors such as accounting 

conservatism, profitability, default risk, and growth opportunities affect the earnings response coefficient can 

help investors and stakeholders make wiser investment decisions. Finally, this research has significant 

novelty as it uses more specific data and research objects, namely mining sector companies listed on the 

Indonesia Stock Exchange (IDX) during the period of 2020-2022. 

 

LITERATURE REVIEW 

 

A Systematic Review of Accounting Conservatism 

Accounting conservatism is one of the accounting principles commonly used in accounting practice. 

A systematic review of accounting conservatism can help us understand this principle more deeply (Zhang 

et al. 2019; Sharma and Kaur 2021; Sun et al. 2022; Tambolo and Cevolani 2023). One example of a 

systematic review that can be conducted is to study the effect of accounting conservatism on the quality of 

financial information. In this case, accounting conservatism can help minimize the risk of errors or 

inaccuracies in financial statements, thus improving the quality of financial information presented. However, 

on the other hand, the application of accounting conservatism can also cause bias in the presentation of 

financial information, as it tends to report losses rather than gains. 

In addition, a systematic review of accounting conservatism can also be conducted by considering the 

factors that influence its application. One factor that affects the application of accounting conservatism is the 

level of uncertainty in the business environment. The higher the level of uncertainty, the more likely 

accounting conservatism is to be applied, as it can help reduce the risk of loss. In addition, another factor 

that affects the application of accounting conservatism is the stakeholders' interests in financial reporting. 

For example, if stakeholders prioritize the safety and stability of the company over growth or profit, they 

may be more likely to apply accounting conservatism in financial reporting (Hsieh et al. 2019; Sun et al. 

2023). 

 

 



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The Role of Profitability 
Profitability plays an important role in calculating the earnings response coefficient. The earnings 

response coefficient is a ratio calculation that measures how much a company's earnings will change when 

revenue changes (Hakim et al. 2023). In calculating the earnings response coefficient, profitability is 

measured using return on assets, which is a ratio that measures how efficiently a company generates earnings 

from its assets. The higher a company's return on assets, the greater the likelihood of having a higher earnings 

response coefficient. 

Thus, the level of profitability of a company greatly affects the earnings response coefficient. 

Companies with a high return on assets can more easily generate profits when their revenue increases and, 

therefore, have a higher earnings response coefficient. However, it is important to remember that the 

calculation of the earnings response coefficient is also influenced by other factors, such as cost structure and 

leverage (Biddle et al. 2022). Therefore, it is important for financial managers to pay attention to various 

factors that affect the earnings response coefficient, including profitability, when making financial decisions. 

 

Investor Confidence 
Growth opportunities, or growth prospects, are an important factor considered by investors in making 

investment decisions (Noh et al. 2023). This is because company growth is seen as an indicator of success 

and potential for high investment returns. Investor confidence in growth opportunities can be reflected in the 

increase in stock prices and trading volume in the capital market. 

However, investor confidence in growth opportunities must be accompanied by careful evaluation of 

potential risks involved. Companies that focus on growth often experience a decrease in short-term 

profitability due to their investments (Cerqueira and Pereira 2020; Le and Moore 2022). Therefore, it is 

important for investors to understand how companies manage their growth and how it affects the overall 

performance of the company. With proper evaluation, investors can benefit from the potential growth 

generated by the company. 

 

Confidence Level of The Difference in Corporate Default 

The earnings response coefficient is a measure of a company's net income sensitivity to changes in 

revenue. One factor that can affect the earnings response coefficient is default risk. Default risk refers to the 

likelihood of a company failing to pay its debt or failing to meet other financial obligations. As default risk 

increases, the earnings response coefficient tends to decrease (Zhang 2023). This is because investors are less 

confident in companies with high default risk, so they are more cautious in responding to changes in a 

company's revenue. 

The difference in default risk in the coefficient of profit response can be observed among companies 

with different risk categories. Companies with low default risk tend to have higher profit response coefficients 

than those with high default risk (Jin and Wu 2022; Ho et al. 2023). This can be explained by the higher 

investor confidence in companies considered to have low default risk. On the other hand, companies with 

high default risk are considered to have a greater likelihood of defaulting on debt, so investors tend to be 

more cautious in responding to changes in company revenue. Therefore, the difference in default risk in the 

coefficient of profit response can be an important factor in analyzing a company's financial performance. 

 

METHODS 

 

This research was conducted using a quantitative method that relied on secondary data derived from 

the annual financial reports of mining sector companies listed on the Indonesia Stock Exchange during the 

period of 2020-2022. The data was obtained through direct access to the official website of the Indonesia 

Stock Exchange, www.idx.com. Meanwhile, the population used in this research consisted of mining sector 

companies in Indonesia during the specified period. The research sample was selected using purposive 

sampling technique, where the samples were chosen based on specific criteria. The criteria for sample 

selection included: companies that published financial reports on the Indonesia Stock Exchange during the 

research period, companies that used the Indonesian rupiah as the currency in their financial statements, 

and companies that had positive profits or equity. 

The analysis conducted will involve processing the collected data, such as statistical analysis and 

hypothesis testing, to identify and examine the relationships between the variables under investigation. 

Subsequently, the analysis results can provide a better understanding of the contribution of accounting 

conservatism to the mining sector, as well as its implications for financial reporting and decision-making 

within it. Therefore, the research can also provide valuable and in-depth insights for stakeholders in the 

http://www.idx.com/


Adi Gunanto / Finance, Accounting and Business Analysis, Volume 5, Issue 1, 2023 

 

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mining sector, academics, and accounting practitioners in understanding the importance of accounting 

conservatism in the context of the mining industry in Indonesia.  

There are 60 companies that meet the criteria as samples in this research. Here is the list of selected 

companies.  

Table 1. List of Sample Mining Sector Companies in Indonesia 

No. Company Name No. Company Name 

1. PT. Adaro Energy Tbk.  31. PT. Transcoal Pacific Tbk. 

2. PT. Akbar Indo Makmur  Stimec Tbk. 32. PT. Astrindo Nusantara  Infrastruktur Tbk. 

3. PT. Atlas Resources Tbk. 33. PT. Energi Mega Persada  Tbk. 

4. PT. Borneo Olah Sarana  Sukses Tbk. 34. PT. Medco Energi Internasional Tbk. 

5. PT. Baramulti Suksessarana Tbk. 35. PT. Mitra Investindo Tbk - MITI 

6. PT. Bumi Resources Tbk. 36. PT. Sugih Energy Tbk - SUGI 

7. PT. Bayan Resources Tbk. 37. PT. Super Energy Tbk - SURE 

8. PT. Dian Swastatika Sentosa Tbk. 38. PT. Merdeka Copper Gold  Tbk. 

9. PT. Golden Energy Mines  Tbk. 39. PT. Resources Asia Pasifik Tbk. 

10. PT. Garda Tujuh Buana  Tbk. 40. PT. Wilton Makmur Indonesia Tbk. 

11. PT. Harum Energy Tbk. 41. PT. Saranacentral Bajatama Tbk. 

12. PT. Indika Energy Tbk. 42. PT. Betonjaya Manunggal  Tbk. 

13. PT. Indo Tambangraya Megah Tbk. 43. PT. Citra Tubindo Tbk. 

14. PT. Resource Alam Indonesia Tbk. 44. PT. Gunawan Dianjaya Steel Tbk. 

15. PT. Mitrabara Adiperdana  Tbk. 45. PT. Gunung Raja Paksi  Tbk. 

16. PT. Bukit Asam Tbk. 46. PT. HK Metals Utama Tbk. 

17. PT. Golden Eagle Energy  Tbk. 47. PT. Steel Pipe Industry of  Indonesia Tbk. 

18. PT. TBS Energi Utama  Tbk. 48. PT. Krakatau Steel (Persero) Tbk. 

19. PT. Trada Alam Mineral  Tbk. 49. PT. Lionmesh Prima Tbk. 

20. PT. Trans Power Marine  Tbk. 50. PT. Optima Prima Metal  Sinergi Tbk. 

21. PT. Batulicin Nusantara  Maritim Tbk. 51. PT. Aneka Tambang Tbk. 

22. PT. Capitol Nusantara Indonesia Tbk. 52. PT. Bumi Resources Minerals Tbk. 

23. PT. Exploitasi Energi Indonesia Tbk. 53. PT. Central Omega Resources Tbk. 

24. PT. Dwi Guna Laksana  Tbk. 54. PT. Ifishdeco Tbk. 

25. PT. Alfa Energi Investama  Tbk. 55. PT. Vale Indonesia Tbk. 

26. PT. Mitrabahtera Segara  Sejati Tbk. 56. PT. Tembaga Mulia Semanan Tbk. 

27. PT. Pelita Samudera Shipping Tbk. 57. PT. Alakasa Industrindo  Tbk. 

28. PT. Indo Straits Tbk. 58. PT. Alumindo Light Metal  Industry Tbk. 

29. PT. Rig Tenders Indonesia  Tbk. 59. PT. Cita Mineral Investindo Tbk. 

30. PT. Sumber Global Energy  Tbk. 60. PT. Indal Aluminium Industry Tbk. 

Source: Indonesia Stock Exchange, www.idx.com, 2023  

 

The above company is divided into sub-sectors of coal production, oil refining production, natural 

gas production, gold production, iron production, steel, and metal production, mineral production, copper, 

and aluminum. The reason why researchers chose these sub-sectors is because the companies have 

implications that can be analyzed, namely, the companies tend to operate in environments with high risks, 

allowing them to adopt a conservative approach in financial reporting. The profitability of the companies is 

also highly influenced by fluctuations in commodity prices and market volatility. Growth opportunities can 

be related to new explorations, operational expansions, or product diversification within this sub-sector. 

Default risk in terms of debt payments and business sustainability are important considerations in examining 

the financial aspects of companies in this mining sub-sector, and the earnings responsiveness coefficient 

reflects the extent to which a company can generate changes in earnings in response to changes in sales or 

economic conditions. By selecting companies in this sub-sector and analyzing aspects such as accounting 

conservatism, profitability, growth opportunities, default risk, and earnings responsiveness coefficient, we 

can gain better insights into the financial condition, risk management, and growth potential of companies 

in the industry.  

http://www.idx.com/


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Source: data processed by researchers, 2023 

Figure 1.  Conceptual Framework 

 

The above framework is a model of theoretical study, empirical study, and synthesis of the framework 

study that will underlie the hypotheses, so that they can be tested for their validity. 

 

Formulation of Hypotheses 
Based on the indication of the phenomenon that occurs and supported by relevant theories, prior to 

being based on the facts obtained through data collection, the hypotheses proposed in this study are as 

follows:   

 

H1: Accounting Conservatism affects Earnings Response Coefficient 

H2: Profitability affects Earnings Response Coefficient 

H3: Growth Opportunities affect Earnings Response Coefficient 

H4: Default Risk affects Earnings Response Coefficient  

 
This hypothesis is in line with the researcher's objective, as the process of discovery has the 

characteristics of being systematic, empirical, and based on relevant theory. In this study, a research model 

is used that involves testing the coefficient of determination (R2) and classical assumption tests consisting of 

tests for normality, multicollinearity, autocorrelation, and heteroscedasticity. The coefficient of 

determination test is used to evaluate how much variability in the dependent variable can be explained by 

the independent variable. Meanwhile, classical assumption tests are used to examine the basic assumptions 

that must be met in regression analysis, such as data normality, no multicollinearity, no autocorrelation, and 

no heteroscedasticity (Chen et al. 2023; Azarifar 2023). By using these tests, it is expected that the research 

results obtained have met the basic assumptions required for analyzing data through regression. 

 

Earnings Response Coefficient: 

 

CAR(t)  =  𝛴(𝐴𝑅(𝑖)) 𝑓𝑟𝑜𝑚 𝑖 = 1 𝑡𝑜 𝑖 = 𝑡  (1) 
Where, 

CAR(t)  : accumulated abnormal return at time t 

AR(i)  : abnormal return in the i-th time period 

Σ  : shows the abnormal return addition operation from i=1 to i=t 
i=1 to i=t : shows the 1st time range and ends at the tth time 

 

Input Analysis 

Phenomenon : Accounting 
conservatism, profitability, 
and growth opportunities 

influence the earnings 
responsiveness coefficient, 
which can assist investors and 
stakeholders in making wiser 

investment decisions 

 

Process Analysis 

Methods : 
Used to measure the extent of the influence of accounting conservatism, 
profitability, growth opportunities, and default risk as antecedent variables on 
the earnings responsiveness coefficient as the consequent variable. In this 
context, hypothesis testing and measurement are conducted to examine the 

relationship between these variables. 

Accounting 

Conservatism 

Earnings 

Responsiveness 

Coefficient 

Consclusions & 

Advice : 

Obtained from the 

Discussions 

 

 

Output Analisis 

 

Outcame Analisis 

 

Profitability 

Growth 

Opportunities 

Default  

Risk  

Research Hypothesis 



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𝑅𝑖 −  (𝛼 +  𝛽𝑅𝑚)𝑅𝑖 −  (𝛼 +  𝛽𝑅𝑚)  (2) 
Where ; 

Ri  : rate of return of the asset or security being analyzed 

α  : intercept estimation constant from the market (Rm) or systematic risk 

β   : beta regression coefficient of asset sensitivity to changes in market returns (Rm) 

 

Ri, t =  (𝑃𝑡 –  𝑃𝑡 − 1) / 𝑃𝑡 − 1      (3) 
Where, 

Ri,t  : rate of return on securities in asset prices from period t-1 to period t 

Pt  : asset price in time period t 

Pt-1  : asset price in time period t-1 

 

Accounting Conservatism: 
  

ρ =  1 − (6 ∗  Σ(D²)) / (n ∗  (n² −  1))      (4) 
Where ; 

ρ  : correlation between this year's profit and previous year's profit 

Σ  : sigma denoting the sum 

D  : difference in ranking between this year's profit and the previous year's profit 

N  : the number of observations of this year's profit pair and the previous year's profit 

 

The concept of accounting conservatism is related to a conservative approach in recognizing revenue 

and expenses in financial statements calculated with earnings persistence. As a result, the correlation 

coefficient can be calculated to evaluate the sustainability of profits between two time periods. A correlation 

coefficient approaching 1 indicates a strong relationship, while a coefficient approaching 0 indicates a weak 

relationship between this year's profit and the previous year's profit. 

 

Profitability: 

 

ROA =  ( Net Income / (( Beginning Total Assets +  Ending Total Assets ) / 2)) x 100%       (5) 
 

Growth Opportunities: 

 

M/B =  Stock Market Price Per Share / Book Value Per Share                                        (6) 
 

Default Risk: 
 

Lit =  𝑇𝑈𝑖𝑡 / 𝑇𝐴𝑖𝑡                                                              (7) 
 

 

Lit  : liquidity ratio, measuring the company's ability to fulfill obligations 

TUit  : total short term debt, total short term liabilities of a company in a given time period 

TAit  : short-term total assets, the total amount of assets available in the short term 

 

In this study, a multiple regression analysis model is used to test the relationship and influence of 

several independent variables on one dependent variable. This analysis is used to estimate the population 

mean value or the value of the dependent variable's average based on the independent variables used. This 

regression model can measure the strength and direction of the relationship between variables and is used to 

test hypotheses in this study. The following is the formula for the regression model used. 

 

Coefficient of Earnings Response Y = β0 + β1 Accounting Conservatism + β2 

Profitability + β3 Growth Opportunities + β4 Default Risk + βkXk + ε 

      (8) 

 

Where ; 

Y :  is the dependent variable 

β0 :  is the constant intercept 

β1 :  to βk are the regression coefficients that indicate the influence of independent variables X1 to 

                 Xk on Y. X1 to Xk are independent variables 

ε    :  is the error or residual 

 



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This formula is used to estimate the average value of the dependent variable (Y) based on the values 

of the independent variables (X1 to Xk) using a linear equation model. The process of estimating regression 

coefficients is done by minimizing the error (ε) between the observed values of Y and the predicted values 

by the regression model. 

 

RESULT AND DISCUSSION 

 
Multiple linear regression analysis is a statistical method used to study the relationship between 

independent variables and a dependent variable. In this analysis, the basic assumption is that the relationship 

between independent variables and the dependent variable is linear, and there is homoscedasticity and 

residual independence. The methodology used in multiple linear regression analysis includes selecting the 

appropriate regression model, testing basic assumptions, testing significance, testing model feasibility, partial 

regression analysis, and testing for multicollinearity. A good understanding of this methodology ensures 

accurate and reliable results. 

 

Table 2. Multiple Linear Regression Analysis 

Modeling 

Unstandardized 

Residual 

Variable              β tcount Sig. 

(Constant)       0,072 0,586 0,569     

Accounting Conservatism        0,411 2,053 0,031 

Profitability        -0,090 -0,187 0,894 

Growth Opportunities       -0,008 -2,902 0,004 

Default Risk       -0,061 -0,607 0,571 

Fcount        2,409   

R2        0,101   
AdjustedR2        0,098   

Sig. 0,001b   

Sources: the data is processed, researchers from IBM SPSS Statistics version 25.0. 

 

The significance value of the accounting conservatism variable indicates that accounting conservatism 

has an effect on the earnings response coefficient, thus H1 is accepted. However, the significance value of 

the profitability variable indicates that profitability does not have an effect on the earnings response 

coefficient, thus H2 is rejected. In addition, the significance value of the growth opportunities variable 

indicates that growth opportunities have an effect on the earnings response coefficient, thus H3 is accepted. 

However, the significance value of the default risk variable indicates that default risk does not have an effect 

on the earnings response coefficient, thus H4 is rejected. 

After conducting data testing, the classical assumption analysis consisting of kolmogorov-smirnov 

normality test showed that the data is normally distributed, followed by the variance inflation factor 

indicating the absence of multicollinearity issues. Furthermore, it is free from heteroscedasticity as shown 

by the glejser test and does not contain indications of autocorrelation as durbin watson test for data 

distribution. The following are the results of the classical assumption analysis : 

 

Table 3. Classical Assumption Analysis 

Variable 
Kolmogorov-

Smirnov P-value 

Variance 

Inflation Factor 

Glesjer 

Test 

Durbin 

Watson 

Unstandardized Residual : 0,118   2,250 

Accounting Conservatism  1,211 0,966  

Profitabilitas  1,970 0,327  

Growth Opportunities  1,828 0,971  

Default Risk  1,220 0,264  

Sources: the data is processed, researchers from IBM SPSS Statistics version 25.0. 

 

DISCUSSIONS 

 
In this study, the variable of accounting conservatism has a significant influence on the earnings 

response coefficient. This indicates that the higher the accounting conservatism of a company, the lower its 

earnings response coefficient. This is supported by the test results, where the significance value of T-test is 

obtained as a p-value of 0.031 < α 0.05. The earnings response coefficient reflects the extent to which changes 

in a company's earnings can be explained by changes in market earnings. Therefore, investors should 

consider the factor of accounting conservatism when making investment decisions. This means that behind 



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the influence of accounting conservatism on the earnings response coefficient is the fact that a conservative 

approach requires companies to be more cautious in recognizing earnings. In situations where companies 

face uncertainty or risk, they are more likely to delay the recognition of earnings or reduce their value. This 

can reduce earnings fluctuations and result in a lower earnings response coefficient. 

Meanwhile, the profitability variable does not have a significant influence on the earnings response 

coefficient. This indicates that investors do not need to pay too much attention to profitability factors when 

making investment decisions. This is supported by the test results, where the significance value of T-test is 

obtained as a p-value of 0.894 > α 0.05. However, this does not mean that profitability is not important for 

the sustainability of a company. Profitability remains an important factor in business continuity. The non-

significant influence of profitability in this study on the earnings response coefficient indicates that in a 

specific context, profitability does not have a direct relationship with the extent to which changes in a 

company's earnings are influenced by changes in market earnings. 

Furthermore, the growth opportunity variable has a significant influence on the earnings response 

coefficient. This indicates that the higher the growth opportunity of a company, the higher its earnings 

response coefficient. This is supported by the test results, where the significance value of T-test is obtained 

as a p-value of 0.004 < α 0.05. Investors should consider the growth opportunity factor when making 

investment decisions because companies with high growth opportunity can provide greater returns in the 

future. This finding can conclude that companies with high growth opportunity tend to have higher earnings 

response coefficients. Growth opportunity reflects the potential of a company to generate earnings growth 

in the future. Therefore, investors should consider this factor in investment decision making. 

Lastly, the default risk variable does not have a significant influence on the earnings response 

coefficient. This is further supported by the test results, where the significance value of T-test is obtained as 

a p-value of 0.571 > α 0.05. This indicates that investors do not need to pay too much attention to default 

risk factors when making investment decisions. Default risk reflects the risk of a company's failure to pay in 

the event of bankruptcy. However, investors still need to consider default risk. Nevertheless, default risk 

does not directly affect the extent to which changes in a company's earnings are influenced by changes in 

market earnings. 

The findings of this research are consistent with previous studies (Hamdan 2020; Wijayanti et al. 

2020; Paramita et al. 2020; Khalifa et al. 2022; Du et al. 2022; Liu et al. 2023; Sa'ad et al. 2023; Basu et al. 

2023) that show the influence of the accounting conservatism and growth opportunity variables on the 

earnings response coefficient, as well as the lack of influence of the profitability and default risk variables on 

the earnings response coefficient. This indicates that these factors indeed have a significant influence on the 

earnings response coefficient and should be considered by investors in making investment decisions. 

Furthermore, the findings of this research are not in line with studies conducted by (Jaggi et al. 2022; 

Jategaonkar et al. 2023; Ivanov and Faulkner 2023; D’Augusta and Grossetti 2023; Ritonga et al. 2023) that 

indicate a negative influence of the accounting conservatism and growth opportunity variables on the 

earnings response coefficient. This means that both variables indicate that the increase in a company's 

earnings is not fully reflected in the reported earnings changes and the focus of the company on long-term 

growth and development weakens the earnings response to changes in earnings under certain conditions. 

Overall, this research recommends that investors consider accounting conservatism and growth 

opportunity factors when making investment decisions, while profitability and default risk factors should 

not be considered as primary factors. However, investors still need to consider all these factors holistically 

when making investment decisions. Researchers, in the context of this scientific study, observe opportunities 

in terms of collaboration between net profit margin, tax efficiency, return on equity, and return on 

investment, which can have a significant impact on future research. This is because the collaboration of these 

strategies provides companies with opportunities to enhance profit growth by optimizing profitability, 

managing taxes efficiently, increasing their own capital returns, and selecting investments that yield high 

returns. In future research, these factors can be combined in the analysis to provide deeper insights into how 

the collaboration between these indicators supports company profit growth. 

 

CONCLUSION 

 

To make better investment decisions, investors need to consider all relevant factors holistically and 

not just focus on a single factor. The conclusion of this research indicates that accounting conservatism and 

growth opportunities are significant factors in determining earnings response coefficients, thus these factors 

need to be seriously considered in investment decision-making. Additionally, investors should also take into 

account profitability and default risk as part of the holistic consideration in investment decisions. Although 

these two factors do not have a significant impact on earnings response coefficients, they still play an 

important role in determining a company's performance. 



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Therefore, investors need to conduct comprehensive holistic analysis involving all relevant factors in 

investment decision-making. Investors should pay attention to accounting conservatism and growth 

opportunities as significant factors in determining earnings response coefficients. Furthermore, profitability 

and default risk factors should also be considered in holistic analysis, despite not having a significant impact 

on earnings response coefficients. By conducting comprehensive holistic analysis, investors can make better 

investment decisions and minimize the risk of losses. 

These findings emphasize that investors need to conduct in depth analysis involving all these factors 

to make better investment decisions, supported by theoretical studies such as accounting conservatism 

theory, earnings response theory, investment theory, and firm performance theory. In addition, companies 

should provide transparent financial reports, maintain a focus on long-term growth, strive to strengthen 

profitability, and have effective risk management strategies to demonstrate to investors. This will provide 

confidence and aid in investment decision making. 

The findings of this research are not directly related to the post-COVID-19 outbreak, either globally 

or in Indonesia. However, these findings are more general and applicable to the overall investment situation. 

The values discussed are related to the importance of considering relevant factors holistically in making 

investment decisions, which include accounting conservatism, growth opportunities, profitability, and 

default risk. Although not explicitly related to the post-COVID-19 outbreak, the researchers acknowledge 

that the principles described remain relevant in situations before or after the pandemic. As an investor, it is 

necessary to consider in-depth analysis and understand these factors to help make much better investment 

decisions, regardless of the context of the post-COVID-19 outbreak. 

 

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