Management discussion and analysis (MD&A) disclosure provides a
manager’s perspective of the firm’s performance. This study analyses whether
MD&A disclosure can strengthen the statistical correlation between earnings
quality and stock returns and whether MD&A disclosure and earnings quality
are positively related to stock returns. Using panel data of 427 firm-year
observations from 61 companies listed in the Indonesia Stock Exchange (IDX),
this study finds a statistically significant correlation between MD&A activity
and earnings quality. The firm-year dates ranged from 2014 to 2020 and
included small, medium, and large capitalised companies. This study finds that
MD&A disclosure is significantly correlated to positive stock returns while
earnings quality is significantly correlated with negative stock returns. After
MD&A disclosure moderates, earnings quality strengthens these correlations.
This study suggests that the Indonesia Financial Service Authority Board (OJK)
can increase efficiency in the financial system by providing measures that
incentivise managerial MD&A disclosure. It also suggests that firms that
perform MD&A disclosure strengthen the correlation between earnings quality 
and stock returns. This study adds to the body of knowledge in decision 
usefulness and signalling theory by integrating MD&A disclosure to strengthen
the correlation of earnings ability on stock returns.