Abstract
The capital market reactions are proxied by cumulative abnormal return (CAR) and stock trading volume (STV) activity, while for the earnings information the proxy of unexpected earnings was used. This research used independent samples tests. The result shows that when measured by CAR, the market does not show any different reaction, but when measured by STV, the market reactions of the income smoothing group are significantly different from those of the non-income smoothing group. Then the sample were split into two group of positive earnings surprise and negative earnings surprise. The positive earnings surprise group shows no different market reaction when measured by CAR, but show different market reaction when measured by STV. The negative earnings surprise group shows no different market reaction when measured by CAR and STV.
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