Effect Of Income Smoothing Research Articles

Income Smoothing and Overvaluation

Purpose: This research evaluates two views of the effect of income smoothing on stock overvaluation. There is a view that income smoothing impairs the usefulness of profit information by distorting the economic substance of a company. While another view is income smoothing can serve as a means of conveying classified information within a company. With the two views, it is unclear to predict income smoothing's relevance to overvaluation of stocks. Therefore, this paper aims to analyze the relationship between income smoothing and stock overvaluation in the capital market. Design/methodology/approach: The study conducted on the KOSPI and KOSDAQ markets from 2011 to 2020, and measured income smoothing using the methods suggested by Leuz et al. (2003), Park et al. (2011), and Tucker and Zarowin (2006). For stock overvaluation, the method of Rhodes-Kropf et al. (2005) used. Findings: This study provided empirical evidence that there is a negative relation of income smoothing with stock overvaluation, which may be interpret that income smoothing may lower stock overvaluation. In other words, priv-ileged information delivered by the manager through income smoothing may alleviate the overvaluation of stocks caused by excessive stock price relative to its intrinsic value. This result was more observable as the greater majority shareholder ownership interest, the greater the foreign investors share, and for companies listed on the KOSDAQ. Research limitations/implications: This study makes contribution to the literature by supplying other evidence on the effect of income smoothing on capital market and supplies meaningful guidance to capital market stakeholders. Originality/value: This study is valuable not only because it expands earlier research on income smoothing and stock overvaluation, but also because it empirically confirms the usefulness of income smoothing in the capital market.

Pengaruh Perataan Laba dan Corporate Social Responsibility Disclosure Terhadap Reaksi Pasar dan Resiko Investasi (Studi Empiris Pada Perusahaan Manufaktur Yang Terdaftar Di Bursa Efek Indonesia)

The market reacts to news regarding company earnings, which further suggests that earnings revisions have a negative effect on market reactions. This means that the greater the profit moderation action, the weaker the market reaction to company profit news. CSR agents cannot strengthen or weaken the relationship between income smoothing and market response. This research aims to determine the effect of income smoothing and disclosure of corporate social responsibility on market reactions and investment risk in manufacturing companies listed on the Indonesia Stock Exchange. This research focuses on problem solving to explain the relationship between one variable and another. others in qualitative and quantitative analysis. Based on the research results, it can be concluded that income smoothing does not have a significant effect on market reactions. CSR disclosure does not have a significant effect on market reactions. Income smoothing does not have a significant effect on investment risk. The moderating variables of profit and CSR disclosure, if examined together or simultaneously, do not have a significant influence on increasing market response. Based on the calculation results, it can be seen that there is a difference between investment risk and income smoothing. This disclosure will also produce positive abnormal returns because it contains information that has economic value. With the insights from this research, it is hoped that investors will be able to make investment decisions that will bring extraordinary returns to the market.

The Influence Of Profitability And Financial Leverage On Earnings Management And Its Impact On The Value Of Manufacturing Companies In The Indonesian Stock Ex-change (Case Study Of The Automotive Sub-Sector Period 2018-2022)

The practice of income smoothing still occurs in the Indonesian economy. There are sever-al cases of income smoothing that have occurred, including at PT. Kimia Farma Tbk, PT and Lippo Tbk where these companies have published different financial reports. The purpose of this research is to determine the direct effect of profitability on income smoothing, fi-nancial leverage on income smoothing, profitability on company value, financial leverage on company value, the indirect effect of profitability on company value through income smoothing, financial leverage on company value through income smoothing and Income smoothing has a direct effect on company value. This research uses a mixed method. The population used in this research is automotive sub-sector manufacturing companies listed on the Indonesia Stock Exchange for the 2018-2022 period. The sampling method is to use a purposive sampling technique so that the samples obtained are 50 samples. The re-search results show that there is no direct influence of profitability on income smoothing, there is no direct influence of financial leverage on profit smoothing, there is a direct influ-ence of profitability on firm value, there is no direct influence of financial leverage on firm value, there is no indirect influence income smoothing between profitability and company value, there is no indirect effect of income smoothing between financial leverage on com-pany value and there is no direct effect of income smoothing on company value.

The Effect of Income Smoothing and Dividend Policy on Tax Avoidance in Indonesia

This study aims to examine the effect of earnings smoothing and dividend policy on tax avoidance practices in manufacturing companies listed on the IDX for the 2016-2020 period. This study takes population and samples from financial reports and annual reports of manufacturing companies that contain financial transactions in companies listed on the Indonesia Stock Exchange for the 2016-2020 period. The results of this study indicate that earnings smoothing has a significant effect on tax avoidance in manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the 2016-2020 period. Then, dividend policy has a significant effect on tax avoidance found in manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the 2016-2020 period. Furthermore, profit smoothing and dividend policy together have a significant effect on tax avoidance practices.

PENGHINDARAN PAJAK, INCOME SMOOTHING DAN NILAI PERUSAHAAN PADA PERUSAHAAN MANUFAKTUR DI INDONESIA

Tax avoidance and income smoothing are important issues that impact the company's operations. The complexity between these two phenomena affects firm value, which is often influenced by family ownership, which influences how manufacturing companies avoid tax avoidance and income smoothing. This study aims to examine the effect of tax avoidance and income smoothing on firm value, with family ownership as a moderating variable. Hypothesis testing was carried out using a multiple regression model with panel data for manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the 2012-2021 period. The results show that tax avoidance has a negative effect on firm value. Tax avoidance is high risk and can reduce company value. This study also found that income smoothing has a positive effect on firm value. Companies tend to do income smoothing to meet market expectations and get benefits in the form of lower debt costs. In addition, this study shows that family ownership strengthens the negative effect of tax avoidance on firm value. However, this study did not find any moderating effect of family ownership on the effect of income smoothing on firm value.
 Keywords: Firm Value, Tax, Income Smoothing

The Influence Of Managerial Ability And Foreign Ownership On Firm Value: Income Smoothing As Mediating Variable

This research is aimed to investigate the effect of managerial ability and foreign ownership to decrease income smoothing as a mediating effect influence on value of firm. This research uses logistic regression analysis method to investigate the effect of managerial ability and foreign ownership on income smoothing, and multiple regresion linear to investigate the effect of managerial ability, foreign ownership, and income smoothing on value of firm, and Sobel's test to investigate the effect of income smoothing as mediating variable. The results of this research shown that managerial ability have not a significant effect on income smoothing and firm performance, but foreign ownership have a significant effect on income smoothing and value of firm, and income smoothing have a significant effect on value of firm. In addition, Sobel's test results showed that income smoothing do not mediate the effect of managerial ability and foreign ownership on value of firm

Risk-sharing function in internal capital markets: Evidence from intragroup reinsurance activities

This study explicitly investigates the risk-sharing function of internal capital markets by analyzing intragroup reinsurance (a substitute for capital) activities in the United States' non-life insurance sector. We find supporting evidence that intragroup reinsurance participants are generally associated with smoother income flows, and such an income smoothing effect exists for both ceding and assuming firms. Further to prior studies, we find that internal reinsurance ceded exerts both direct and indirect effects on premiums growth in the aftermath of the financial crisis in 2007 and 2008. In addition to direct capacity support, the reduction in income volatility is another channel through which intragroup reinsurance enhances ceding firms' premiums growth. In the presence of market turmoil, the risk-sharing function can lower member firms' insolvency risk and thus enable them to pursue business growth.

PENGARUH PERATAAN LABA DAN STRUKTUR MODAL TERHADAP NILAI PERUSAHAAN DENGAN RISIKO PASAR SEBAGAI VARIABEL MODERASI

The purpose of this research is to examine the effect of income smoothing and capital structure on firm value with market risk as a moderating variable. The population in this research are manufacturing companies subsector pharmacy listed on the Indonesia Stock Exchange (IDX) in 2014 – 2021. This research uses multiple regression analysis using the SPSS 26 program. The sample selection uses a purposive sampling method which produces 72 sample that are worth observing and researching. Based on the analysis results show that, income smoothing has a negative impact on firm value, capital structure has not a negative impact on firm value and market risk has not strengthes income smoothing on firm value and market risk. The result of this research have several practical and theoritical implications, companies must minimize the practice of income smoothing so that published financial reports reflect the actual condition of the company in order to increase the firm value along with investor confidence to invest.

The Role of Integrated Reporting in Income Smoothing, Tax Avoidance, Idiosyncratic Risk – Case of Manufacturing Sector

Purpose : Idiosyncratic risk directly affects investment. The failure to foresee the risk may cause investors to suffer an enormous capital loss. Thus, this study investigates the effect of corporate policies, i.e., income smoothing and tax avoidance, on idiosyncratic risk. The use of integrated reporting as moderating variable is essential in these associations.
 Method : The analysis includes 90 manufacturing companies listed on the Indonesia Stock Exchange from 2016 to 2020, obtaining a total sample of 450 firm-year. Multiple linear regression models for panel data are employed to test the hypotheses.
 Findings : Our findings suggest that tax avoidance positively correlates with idiosyncratic risk, while integrated reporting strengthens these relationships. In contrast, income smoothing is not associated with idiosyncratic risk. However, the interaction between income smoothing and integrated reporting is negatively associated with idiosyncratic risk. Our finding proves that idiosyncratic risk can be costly due to porous corporate policies. It bridges investors understanding of idiosyncratic risk and improves their foresight, allowing them to anticipate managers’ transgression. A better understanding of idiosyncratic risk may also help local tax authorities to improve compliance risk management for taxation purposes. This study demonstrates that market regulators may benefit from enhanced integrated reporting implementation by listed companies.
 Novelty : This study includes integrated reporting, which encourages companies to be more transparent in providing information to the public, as a moderating variable in testing the effect of income smoothing and tax avoidance on idiosyncratic risk, which are rarely used in previous references.
 Keywords : Idiosyncratic Risk; Income Smoothing; Tax Avoidance; Integrated Reporting; Manufacturing Company

Ukuran Perusahaan Memoderasi Pengaruh Penilaian Aset Biologi dan Income Smoothing terhadap Volatilitas Laba

PSAK 69 effective January 1, 2016 has provided direction regarding the valuation of biological assets from historical value to Fair value which uses the basis of market prices which always fluctuate in line with the demand and supply of biological assets.The purpose of this study was to examine the effect of valuation of biological assets on earnings volatility by moderating firm size in manufacturing companies in the agricultural sector in Indonesia and Malaysia for the period 2016 to 2020. This study uses quantitative methods with secondary data sources with samples used through purposive sampling where the total data is 220 company year data. The results of this study are that Biological Asset Valuation and Income Smoothing have a positive effect on earnings volatility, then for the moderating variable Firm size cannot strengthen the effect of biological asset valuation on Earning Volatility and can strengthen the effect of Income Smoothing on Profit Volatility.

Pengaruh Income Smoothing, Firm Size, Dan Financial Leverage, Terhadap Company Performance

Before making a decision, investors will analyze the company's performance first, one of the ratios used by investors to measure the level of success of a company's performance in assessing shares, the difficulty of investors regarding the valuation of undervalued shares, requires investors to analyze fundamentally, one of which is price to book value. PBV) which shows stock prices are categorized as expensive and cheap in buying and selling shares, investors will definitely choose cheap stocks to maximize profits (return), so the authors are interested in conducting a more in-depth empirical study of the company's performance through proxied stock valuation. with PBV and the factors that influence it. The purpose of this study was to determine the effect of income smoothing, firm size and financial leverage on company performance in the consumer goods industry sector listed on the Indonesia Stock Exchange (IDX) for the 2017-2019 period. The research method used in this research is descriptive and associative methods. The data analysis technique used is multiple linear regression analysis. The results of this study indicate that income smoothing and firm size have a positive and significant effect on company performance, while financial leverage has a negative and insignificant effect on company performance.
 
 Keywords: Income Smoothing, Firm Size, Financial Leverage, Company Performance
 

Earnings Quality: Impact of Income Smoothing, Earnings Persistence, Book Tax Difference with Good Corporate Governance as Moderation

This study has a purpose to determine the effect of Income Smoothing, Earnings Persistence, Book Tax Difference on Earnings Quality and moderating effect of Good Corporate Governance. Using 98 sample data from manufacturing entities on the Indonesia Stock Exchange in 2015-2020, a negative effect of earnings persistence on earnings quality, and a positive effect of differential book tax on earnings quality found in this study, while income smoothing does not. In addition, it was found that good corporate governance by institutional ownership as a proxy strengthens the effect of income smoothing on earnings quality and weakens the effect of book-tax differences on earnings quality. This finding can be used by investors in assessing the quality of earnings from financial information issued by issuers so that future earnings prediction analysis can be measured properly so that the desired return target is achieved.

Moderation of Financial Constraints in Transfer Pricing Aggressiveness, Income Smoothing, and Managerial Ability to Avoid Taxation

This study examines the effect of transfer pricing aggressiveness, income smoothing, and managerial ability in tax avoidance with financial constraints as a moderating variable. The samples were manufacturing companies listed on the Indonesia Stock Exchange in 2015 to 2018. The study analyzed a form of panel data with a fixed-effect model approach. The result was transfer pricing aggressiveness and income smoothing had positives effects on tax avoidance. Managerial ability reduces tax avoidance, while financial constraints did not. Furthermore, financial constraints did not moderate the effects of transfer pricing aggressiveness on tax avoidance. Financial constraints strengthened the positive effects of income smoothing and the negative effects of managerial ability on tax avoidance. This study provides input to the tax authorities in formulating policies, as well as input for risk analysis on tax potential.
 Keywords: transfer pricing aggressiveness, income smoothing, managerial ability, financial constraints, tax avoidance.

Income smoothing and audit fees

In this study, we examine the effect of income smoothing on auditors' pricing decisions. Analyzing a sample of 12,823 firm-year observations from U.S. companies in non-regulated industries for the period 2000–2018, we find that income smoothing is negatively associated with audit fees, suggesting that auditors favorably view smoothed earnings. This result holds when we control for other variables that have been identified as determinants of audit fees in prior literature, including client-specific (e.g., client size, audit complexity, litigation risk, and corporate governance), auditor-specific (e.g., auditor quality, auditor tenure, and auditor expertise), and engagement-specific (e.g., audit opinion, busy season, reporting lag) factors. Our results also hold across (1) alternative smoothing measures (with and without considering the use of accruals to smooth earnings), (2) different sources of income smoothness (innate vs. discretionary components) and (3) various robustness tests. Overall, our evidence supports the notion that auditors perceive income smoothing as signaling rather than opportunistic behavior, and thus charge lower audit fees. To our knowledge, this is the first study that examines income smoothing directly from the perspective of auditors.

“The Effect Of Profitability On Dividend Payment Through Income Smoothing As Moderator (Survey On Pharmaceutical Companies Registered In Indonesia Stock Exchanges in Period of 2015-2019)”

This research was performed quantitatively through explanatory approach. Secondary data from audited financial reports on pharmaceutical companies listed on the Indonesia Stock Exchange were employed and analyzed using Regression Moderation Analysis (RMA). As many as 45 samples were involved and chosen using purposive judgment sampling. The test results showed that the profitability measured by the net profit margin proxy had a significant and negative effect directly on dividend payments as measured by the dividend payout ratio. This was indicated by the significant level of the pair value of 0.0000. The effect of Income Smoothing on dividend payments was positive but not significant with a pair value of 0.8941. The effect of the interaction variable between net profit margin and income smoothing on positive dividend payments was insignificant with a pair value of 0.5768, while the influence of the net profit margin, income smoothing, and interaction variables on dividend payments had a significant and simultaneous effect by 70.81%. The interaction value is greater than 0.05, which is 0.5768, indicating that there is no moderating effect of income smoothing on the relationship between net profit margin and dividend payments. Therefore, income smoothing tends to have a positive relationship, which means that when the income smoothing variable increases, it weakens the conducive relationship with the net profit margin, but income smoothing can strengthen the relationship between dividend payments. This means that the more decrease the net profit margin, the more decrease the ability to pay dividends as well.

Income Smoothing, Earnings Management and the Credibility of Accounting Information

This study investigated the effect of income smoothing and earning management on the credibility of accounting information of listed manufacturing companies in Nigeria. Data used were extracted from the annual reports and accounts of the selected sixteen (16) firms for a period of 10 years (2010-2019) while content analysis was adopted in measuring accounting information credibility. Multiple linear regression analysis (OLS) method was adopted for the analysis. The result revealed that income smoothing and earnings management had statistically insignificant effect on fundamental qualitative characteristics (FQC), while income smoothing and earnings management had statistically significant effect on enhancing qualitative characteristics (EQC). However, the study obtained that income smoothing and earnings management had positive and significant effect on the credibility of accounting information of the listed manufacturing companies in Nigeria. The study opined that managers should ensure that accounting information is credible, possesses desirable accounting information qualities of relevance, and faithful representation, also verifiable, comparable, understandability, and timeliness.

CEO inside debt, income smoothing, and stock price informativeness

I examine whether the informativeness of income smoothing varies with the extent to which the CEO holds inside debt (i.e. pension benefits and deferred compensation). I document that for firms where the CEO holds less inside debt, income smoothing reduces stock price informativeness. This result suggests that CEOs with lower inside debt smooth earnings to conceal firms’ underlying economic performance. I also find that the negative effect of income smoothing on stock price informativeness for firms whose CEOs hold less inside debt is more pronounced when firms have higher debt financing, lower analyst coverage, or weaker corporate governance.

The factors affecting the bank’s credit impairment losses by adopting IAS on PSAK 55 in Indonesia

Loan loss provisions in banks plays a vital role in maintaining the stability and health of banks, as well as fulfilling the function of banks in channeling public funds. This study aims to determine the effect of income smoothing and the behavior of procyclicality against reserves of credit losses losses, as well as the role of adoption of IAS 39 in PSAK 55 in moderating the influence of these two variables. The object of this study are conventional commercial banks that are listed on the Indonesia Stock Exchange within the research period of 2008-2017. By using purposive sampling method, I obtained 20 bank samples and 196 observations. The hypotheses in this research are tested using multiple regression analysis. This study shows that income smoothing has a positive influence on loan loss provisions, whereas procyclicality and IAS 39 adoption in PSAK 55 do not affect loan loss provisions significantly. Meanwhile, IAS 39 adoption in PSAK 55 weakens the positive influence of income smoothing, however it cannot moderate the influence of procyclicality on loan loss provisions.

The impact of the income smoothing on the accounting Earnings quality

The study aimed to demonstrate the impact of the income smoothing on the accounting Earnings quality (represented by the earnings persistence and earning predictability and accruals quality), )An applied study in a sample of Iraqi banks operating in Erbil governorate(.and determined the duration of the study, to include the five years from 2013-2017, and the study was applied to the sample (10) Banks listed in the Iraqi stock market. and to assess the practice of income smoothing in banks sample study.Then, to examine the impact of income smoothing on the earnings quality to decide whether income smoothing can serve as either a tool to enhance earnings quality or a tool for opportunistic behavior.The study took accounting mechanisms of governance as additional factors in this study. And used in the study simple regression analysis of the test hypotheses of the study in addition to the use of Eckel index (Eckel) to classify banks sample of the study to the smoothed and non-smoothed banks. The study concluded that there is a significant statistical effect of income smoothing on the earnings persistence and earning predictability, but there is no significant statistically effect of income smoothing on the Earnings quality represented by the accruals quality. The results also indicated that the percentage of banks classified as smoothed banks according to the Eckel index (60%) of the sample banks and (40%) of the sample banks were classified as non-income smoothed banks. One of the most important recommendations of the study is the need to strengthen the governance mechanisms and urge companies to implement them, because of the role of this proposal in increasing transparency and disclosure, which helps to reduce undesirable administrative practices, in addition to the importance of the ethical and behavioral aspect and the need to make users of accounting information aware of the financial misinformation that can occur through income smoothing practices and an interest in increasing the effectiveness and efficiency of the external audit profession as one of the mechanisms of external accounting for governance.

Profit and equity trade‐offs in the management of small pelagic fisheries: the case of the Japanese sardine fishery*

The management of small pelagic fisheries is difficult due to environmental regime changes that generate multi‐decadal cyclic fluctuations in stock abundance. Lagged management responses to environmental factors can amplify the effects of fishing and may even result in stock collapse. In this paper, we develop an age‐structured bioeconomic model to explore the effectiveness of alternative management approaches for cyclically fluctuating small pelagic fish stocks. The fishery outcomes are evaluated against the overall profit of the fishery and the intertemporal distribution of fishing profits. The model is parameterised for the Japanese sardine fishery, once the largest fishery in Japan, which has experienced a prolonged period of stock collapse over the last 100 years. The results show that the duration of fishery collapse is mostly determined by the extent of cyclic fluctuations in the recruitment of immature sardines, but the effects of the fluctuations on the fishery are heightened by the cumulative impact of fishing. We further show that restricting fishing reduces the fishery’s overall profits, but smooths the intertemporal distribution of profits, resulting in greater intergenerational equity. This income smoothing effect is particularly pronounced when the stock exhibits high levels of cyclic fluctuations.