Earnings Management Moderating Corporate Risk Strategies and Financial Performance

Corporate risk strategies, including the use of derivative transactions and comprehensive risk management frameworks, are widely adopted to mitigate financial volatility and enhance company performance. However, their effectiveness often appears inconclusive in empirical studies, suggesting that the transparency of reported outcomes is a critical, yet under-explored, influencing factor. This study investigates this ambiguity by examining the moderating role of earnings management on the relationship between corporate risk strategies and company performance, focusing on publicly listed companies within the Indonesian market. Employing a quantitative approach, the study analyzes financial data from a sample of 150 companies on the Indonesia Stock Exchange from 2018 to 2023 using Structural Equation Modeling (SEM). The analysis confirms that both derivative transactions (Path Coefficient = 0.32, p < 0.001) and risk management (Path Coefficient = 0.45, p < 0.001) have a significant positive impact on company performance. Crucially, the findings reveal that earnings management acts as a significant negative moderator, diminishing the positive effects of both derivative transactions (Path Coefficient = -0.15, p = 0.041) and risk management (Path Coefficient = -0.12, p = 0.047). The results demonstrate that the benefits of strategic risk management can be significantly weakened by opportunistic earnings manipulation, underscoring the imperative for greater financial transparency. This research concludes that for stakeholders to accurately assess corporate health, a focus on earnings quality is essential, and highlights the potential for advanced FinTech solutions to enhance data integrity, detect manipulation, and support more resilient financial ecosystems.