Earnings Quality as a Mediator in the Relationship between Fraud Diamond and Firm Value: Evidence from Indonesia

This study investigates the mediating role of earnings quality in the relationship between the Fraud Diamond framework and firm value in Indonesian manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2020 to 2024. Using agency and stakeholder theories as the theoretical foundation, four fraud risk factors, financial target, ineffective monitoring, change in auditor, and change in director are examined for their direct and indirect effects on earnings quality and firm value. Data from 120 firm-year observations were analyzed using descriptive statistics, classical assumption tests, regression analysis, path analysis, and the Sobel test. The findings indicate that financial targets and ineffective monitoring negatively affect earnings quality, while changes in auditor and changes in director show no significant impact. Furthermore, earnings quality positively influences firm value and mediates the effect of financial target and ineffective monitoring on firm value. These results provide insights for regulators, investors, and corporate management on the importance of strengthening governance mechanisms to enhance earnings quality and safeguard firm value.