THE IMPACT OF BOARD INDEPENDENCE, PROFITABILITY, LEVERAGE, AND FIRM SIZE ON INCOME SMOOTHING IN CONTROL OF AGENCY CONFLICT

Agustin Ekadjaja,Andre Chuandra Andre Chuandra,Margarita Ekadjaja Margarita Ekadjaja

doi:10.31933/jemsi.v1i3.104

Agustin Ekadjaja, Andre Chuandra Andre Chuandra + Show 1 more

Open Access

https://doi.org/10.31933/jemsi.v1i3.104

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Abstract

This research is aimed to earn empirical results about the effect of board independence, profitability, leverage and firm size on income smoothing. The study used purposive sampling as its sampling method on manufacture companies that’s listed on BEI for years 2015-2017. Information for this research was acquired from multiple online sources that store financial reports of companies. This research used Eckel Index to determine if a corporation did an income smoothing on its financial report or not. The results were significant relationships between board independence and income smoothing and between profitability and income smoothing while insignificant relationships were found in between leverage and income smoothing and between firm size and income smoothing. To improve this study there are mulitple ways that has been written in conclusion part.

Highlights

Companies that conduct business operations will produce financial reports regularly
The results of the analysis provide information that the Leverage variable has no significant effect on the Income Smoothing variable and the third alternative hypothesis (H03) which states the Leverage variable has a significant effect on the Income Smoothing variable is rejected
The results of the analysis provide information that the Firm Size variable has no significant effect on the Income Smoothing variable and the fourth alternative hypothesis (H04) which states the Firm Size variable has a significant effect on the Income

Summary

Introduction

Management's efforts to intervene in earnings information in financial statements aimed at increasing the expectations of corporate stakeholders who have a desire to know the financial condition and performance of the company are referred to as earnings management. It is realized by the company management, how important the earnings information is when determining policy to prepare financial statements based on various principles and methods of applying to account for the purpose of achieving certain targets or goals. According to Dewata, Sari, and Fithri (2016), the agency relationship between the principal and the agent can cause conflict because both try to maximize their respective utilities

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