Effect Of Income Smoothing Research Articles

PENGARUH INCOME SMOOTHING, KEBIJAKAN DEVIDEN, LEVERAGE DAN UKURAN PERUSAHAAN TERHADAP EARNINGS RESPONSE COEFFICIENT DAN FUTURE EARNINGS RESPONSE COEFFICIENT

This study is aimed to examine the effect of income smoothing, dividend policy, leverage and firm size on earnings response coefficient and future earnings response coefficient. The population used in this study are all non:financial companies listed in Indonesia Stock Exchange.from 2007 until 2013. The main data used in this research is the data in 2011 and 2012. This research uses financial data from 2007 because the data required in the calculation of income smoothing over the last 5 years for income smoothing in 2011, while stock returns data in 2013 reflects the future returns for 2012. Completed and selected financial data this research are 103 companies, so that the samples in this research using 2-year period are 206. For examining data, this research uses panel data regression model. After running chow test and hausman test, the most suitable method for the regression is fixed effects method. This research shows that income smoothing has positive influence significantly on ERC, but has negative influence significantly on FERC. While, leverage has no influence significantly on ERC, but has negative influence significantly on FERC. Furthermore both dividends andfirm size have no influence on ERC and FERC.

The relationship between tax avoidance and firm value with income smoothing

Purpose The purpose of this paper is to investigate the relationship between tax avoidance, firm value and managerial ability in Tehran Stock Exchange and Over the Counter (OTC), according to the related theoretical foundations. Design/methodology/approach To calculate the managerial ability in this study, DEA is used based on the accounting data, company profile and industry and the hypotheses are estimated in a period of 12 years during 2004 to 2015 in TSE and OTC. Within the previous studies, to test the hypotheses, only the classical regression method is usually used and most of the times the effect of macroeconomic variables is not considered. In this study, in a new act for testing the hypotheses, three statistical methods are used, that is, classical regression models, mixed effects multilevel models and Bayesian multilevel models. Also in this study, the test of structural change is used to control the effects of macroeconomic variables, like inflation and other economic and political influence, on the results. Findings The results of these three methods show that the effect of income smoothing and earnings quality on the relationship between tax avoidance and firm value are significant. Originality/value Although several studies are conducted so far on the subject of the study, the current study is the first project which combined Bayesian econometrics. Therefore, the results are quite noble.

이익유연화가 재무제표 비교가능성에 미치는 영향

본 연구는 이익유연화가 재무제표 비교가능성에 미치는 영향을 분석하였다. 비교가능성 측정치는 De Franco et al.(2011)의 측정방법에 따라 산출하여 사용하였다. 이익유연화는 Tucker and Zarowin(2006)의 측정방법과 수정 Jones 모형(Dechow et al. 1995)에 따라 재량적 발생액을 산출하여 사용하였다.BR 본 연구의 분석결과를 통해서 이익유연화 수준이 높을수록, 그리고 이익유연화할 가능성이 높은 그룹에서 재무제표 비교가능성이 증가한다는 것을 확인하였다. 경영자가 이익유연화를 통해서 미래 이익에 대한 더 많은 정보를 시장에 전달하여 경영자와 이해관계자간의 정보비대칭을 완화하고 투자자들이 부담하는 정보위험을 낮춤으로써 재무제표 비교가능성을 증가시킨다는 것을 의미한다.BR 추가분석에 따른 결과는 다음과 같다. 첫째, 이익유연화를 위한 이익조정은 비교가능성을 추가적으로 증가한다는 것을 확인하였다. 이익유연화 역시 이익조정의 한 형태이지만 이익변동성이 큰 기회주의적 이익조정과 다른 효과, 즉 재무제표 비교가능성을 향상시킨다는 것을 의미한다. 둘째, 변수들간의 관계에 대한 내생성을 통제하기 위해 변화변수를 사용하여 모형을 만들어 추가분석하였고, 이익유연화가 증가할수록 비교가능성이 증가하는 것을 확인함으로써 본 연구의 결과를 강건하게 한다.BR 본 연구를 통해서 이익유연화가 재무제표 비교가능성을 증가시킨다는 결과를 제시하였고, 이익변동성이 큰 기회주의적 이익조정과 이익유연화를 위한 이익조정이 재무제표 비교가능성에 서로 다른 영향을 미친다는 것을 확인함으로써 Sohn(2016)의 연구를 확장하였다.

A Study on the Effect of Income Smoothing on Market Liquidity and Stock Price Crash Risk

A Study on the Effect of Income Smoothing on Market Liquidity and Stock Price Crash Risk

PENGARUH INCOME SMOOTHING, GOOD COORPORATE GOVERNANCE, PERSENTASE KEPEMILIKAN MANAJERIAL DAN FIRM SIZE TERHADAP TINGKAT PENGUNGKAPAN LAPORAN KEUANGAN

This research aims to examine the effect of Income Smoothing to the level of disclosure of financial reports. The implementation of good corporate governance effects to the level of disclosure of financial reports, managerial ownership effects the to the level of disclosure of financial reports and firm size effects to the level of disclosure of financial reports. The sample used in this research is the top 10 company CGPI (Corporate Governance Perception Index) in the period from 2010 to 2014. Hypotheses are test by multiple linear regression. The results show that Income Smoothing is a positive influence on the level of disclosure of financial statement. There are positive effect between good corporate governance to the level of disclosure of financial reports. There is no positive correlation between percentage of managerial ownership to the level of disclosure of financial reports and positive influence of company size and the level of disclosure of financial statements.
 
 Keywords: financial statement disclosure, income smoothing, good corporate governance, managerial ownership, and firm size

Investigation the Effect of Income Smoothing and AuditorâÂÂs Opinion on theFinancial Bankruptcy of Companies Listed in the Tehran Stock Exchange

The aim of study is to investigate the effect of income smoothing and auditor’s opinion on the financial bankruptcy of companies listed in Tehran stock exchange. In the analyses was used data of 70 companies listed in Tehran Stock Exchange in the period 2006 to 2013 and research hypotheses were analyzed with the help of statistical method of logistic regression. Significant variable coefficients and the model was confirmed in 95% confidence level. The research results showed that there is significant relationship between income smoothing and auditor’s opinion with financial bankruptcy of companies.

Pengaruh Manajemen Laba, Kinerja Perusahaan dan Ukuran Perusahan terhadap Keputusan Reklasifikasi Aset Keuangan pada Perusahaan Perbankan di Indonesia

This study aims to determine wheter the company’s decision to reclassify their financial assets is affected by earnings management, company’s performance, and company’s size. This research also aims to determine wheter the earnings management practices are differences before and after the implementation of (2006) amendment of PSAK No.55.The results shows that: (1) There’s a simultaneously effect of income smoothing, accrual earnings management, company’s performance, and company’s size to reclassification probabilities; (2) Accrual earnings management and company’s size have partial significant effect to reclassification probabilities; (3) Income smoothing and company’s performance don’t have partial significant effect to reclassification probabilities; (4) There’s no differences in income smoothing before and after the implementation of (2006) amendment of PSAK No.55.

Income smoothing and the cost of debt

The literature on income smoothing focuses on the effect of earnings smoothing on the equity market. This paper investigates the effect of income smoothing on the debt market. Using the Tucker–Zarowin (TZ) statistic of income smoothing, we find that firms with higher income smoothing rankings exhibit lower cost of debt, suggesting that the information signaling effect of income smoothing dominates the garbling effect. We also find that the effect of earnings smoothing on debt cost reduction is stronger in firms with more opaque information and greater distress risk.

Income Smoothing and Debt Covenants: Evidence from Technical Default

We examine whether income smoothing affects the frequency of technical default in private loan contracts. We find that income smoothing is associated with a lower frequency of “spurious technical default” when the borrower’s economic performance has not declined, but the loan nevertheless enters technical default. In contrast, we find no association between income smoothing and technical default when the borrower’s creditworthiness declines — “performance technical default.” This evidence is consistent with borrowers smoothing income to reduce noise in earnings, and inconsistent with opportunistic motives. Further, we find evidence that the efficiency-enhancing effect of income smoothing is incorporated into the initial loan terms, as debt contracts to borrowers exhibiting greater income smoothing are more likely to include income statement covenants and have lower interest rates.

PENGARUH RISIKO KEUANGAN, DIVIDEND PAYOUT RATIO, DAN NILAI SAHAM TERHADAP PERATAAN LABA PADA PERUSAHAAN MANUFAKTUR DI BURSA EFEK INDONESIA (BEI)

This study aims to determine the financial risk, dividend payout ratio and the value of stocks on income smoothing effect on manufacturing companies, especially in the field of food and beverage listed on the Indonesia Stock Exchange. The independent variables in this study is a financial risk, dividend payout ratio and the value of stocks, while the dependent variable of this research is income smoothing. This study uses 10 manufacturing company engaged in the field of food and beverage and the teraftar in Indonesia Stock Exchange 2011-2014 period. This study uses a sampling technique used was purposive sampling method of testing this hypothesis using multiple linear regression analysis model to examine the effect of financial risk, dividend payout ratio and the value of stocks on income smoothing. The results of this study examines the financial risk has no effect on income smoothing while the dividend payout ratio and the value of stocks significant influence on income smoothing. Keywords: Financial Risk, Dividend Payout Ratio, Value Stocks, Income Smoothing

PERANINCOME SMOOTHING DALAM MENINGKATKAN EARNINGS INFORMATIVENESS

The purpose of this study was to obtain empirical evidence of income smoothing effect on earnings informativeness. Earnings informativeness is the information content of future returns that reflected from return (Tucker and Zarowin, 2006). This study will develop a CKSS concept that developed by Collins et al. (1994), which tested the earnings informativeness through future earnings response coefficients (future earnings response coefficient / FERC) in measuring the influence of the stock return movement in future earnings. The samples in the study were determined by using purposive sampling, which took samples of non-financial companies, with years of observation from 2004 to 2011. The research sample includes 104 non-financial companies listed on the Indonesia Stock Exchange. This study using SPSS 20 version, as multiple regression analysis (multiple regression). Tests conducted on the interaction effect of income smoothing with future earnings to return. The test results in this study showed a significant positive value, indicated that income smoothing action able to strengthening the relationship of earnings and return. This proves that income smoothing action is not always biased (garbles), but this action is aimed as efficient communication, because the information generated by company is significantly can be used as a prediction of future information. These results are consistent with Zarowin (2002), Tucker and Zarowin (2006), Cahan et al., (2008), as well as Hamzawi and Alfatooni (2011).

Income Smoothing, Information Uncertainty, Stock Returns, and Cost of Equity

This paper examines the effect of income smoothing on information uncertainty, stock returns, and cost of equity. I show that income smoothing through both total accruals and discretionary accruals tends to reduce firms' information uncertainty, as measured by stock return volatility, analyst earnings forecast dispersion, and analyst earnings forecast error. Further, I provide evidence that stocks of income smoothing firms are priced with a premium. Controlling for earnings shocks and other firm characteristics, income smoothing firms have significantly higher abnormal returns around earnings announcement. In addition, I show that income smoothing reduces firms' implied cost of equity or expected returns. The result is more robust over short horizons up to two years.

Income Smoothing and the Cost of Debt and Credit Ratings

The goal of this research is to examine the effect of income smoothing on the cost of debt and the credit rating. The statistic community is the accepted firms in Tehran’s stock exchange during 1385-1389, that the statistic sample has chosen from them. Also in this research we used Jones’ modified model for measuring the discretionary accruals (measure of income smoothing). And we used regression analysis for testing the research hypothesis. The results of this research show that there is significant and negative relation between income smoothing and cost of debt. And also there is significant and direct relation between income smoothing and firm’s credit rating.

Income Smoothing, Information Uncertainty, Stock Returns, and Cost of Equity

This paper examines the effect of income smoothing on information uncertainty, stock returns, and cost of equity. I show that income smoothing through both total accruals and discretionary accruals tends to reduce firms’ information uncertainty, as measured by stock return volatility, analyst earnings forecast dispersion, and analyst earnings forecast error. Further, I provide evidence that stocks of income smoothing firms are priced with a premium. Controlling for earnings shocks and other firm characteristics, income smoothing firms have significantly higher abnormal returns around earnings announcement. In addition, I show that income smoothing reduces firms’ implied cost of equity or expected returns. The result is more robust over short horizons up to two years.

The effect of income smoothing on the informativeness of stock price

PurposeThe purpose of this paper is to investigate whether income smoothing does indeed improve the informativeness of stock prices about firms' future earnings and cash flows. Also an approach to studying the effects of income smoothing is presented.Design/methodology/approachThis study uses data from 1992‐2006 and runs regressions on each of the 560 industry‐year cross‐sections. The data compiled from the financial statements of firms were collected for each year available from the Tehran Stock Exchange database. Income smoothing is defined as the management of accruals to reduce time‐series variation in income, and uses a cross‐sectional version of the Jones model, modified by Kothari, Leone and Wasley. Smoothing is measured as the variation of net income relative to the variation in CFO, or the correlation between changes in accruals and changes in CFO. Informativeness is measured as the coefficient on future earnings (cash flows) in a regression of current stock return against current and future earnings (cash flows and accruals).FindingsThe findings suggest that income smoothing enhances the information content of the effect of stock price on future earnings, thus improving the ability of market participants to make informed decisions about the allocation of capital resources.Originality/valueAlthough previous research on the subject of income smoothing in an emerging market has been documented, its effect on stock prices efficiency is largely unknown. Thus, this paper presents an approach to studying the effects of income smoothing and the knowledge that the ability to manage earnings could improve stock prices efficiency could be useful for academics and policymakers in this market.

The Effect of Income Smoothing, Accounting Conservatism, and Earning Information on the Earnings Response Coefficient

This research aims to analyze the influence of income smoothing, conservatism accountancy, and earnings informastion towards earnings response coefficient. The population in this research are all of the manufacturing companies listed on the Indonesia Stock Exchange (IDX) in the period 2015 - 2017. The sample selection by using purposive sampling and obtain a sample of 78 companies or 234 observation data. The data analysis method used in this multiple regression analysis by using SPSS version 24. The simultaneously result showed that income smoothing, conservatism accountancy and earnings information with simultaneously affect to earnings response coefficient. The partially result showed that conservatism accountancy affect negatively to earnings response coefficient while income smoothing and earnings information do not affect to earnings response coefficient.

Optimal Smoothing of Profit Via Overhead Allocation

Income smoothing, as defined in Statistical Activity Cost Theory (SACT), is the rational statistical adjustment of periodic accounting earnings to reduce their time volatility around average long‐term profit per period. This article demonstrates how overhead cost allocations can be applied to smooth accounting earnings optimally in accordance with this definition. Such an approach parallels earlier work, such as that by Lane and Willett (1997, 1999), in which a depreciation formula was derived and applied for this purpose. In particular, it is shown that, to realize an income smoothing effect in profit making firms, the usual optimal strategy is to over‐allocate costs, giving support to the accounting principle of conservatism.

Accruals, Income Smoothing and Bond Ratings

We examine the role of accounting accruals in bond ratings in this paper. Accruals provide information about firms' future performance not only through their effects on the levels but also the volatility of reported earnings. We show that bond ratings are significantly related to accruals and their income-smoothing effect. Relative to cash flows, accrual-based earnings either in levels or in volatility dominate cash flows in explaining bond ratings. Incremental to cash flows, accruals that are higher or make income smoother are associated with more favorable bond ratings. Accruals also receive larger weight in bond ratings when they serve the income-smoothing function. Finally, we show that accrual management may not be responsible for the over-time downward trend in bond ratings.

To match or not to match?

This paper analyses the income smoothing effect of the matching principle in accounting. Income smoothing, under Gibbins and Willett [Gibbins, M., Willett, R., 1997. New light on accrual, aggregation and allocation, using an axiomatic analysis of accounting numbers' fundamental and statistical character. Abacus 33(2), 137–167], is the variance reduction of periodic accounting earnings to make these closer to the long-term profit per period. A conjecture made in Gibbins and Willett was that the accountant's technique of matching revenues and expenses will always smooth accounting earnings. This paper examines this conjecture and shows that, on average, matching smooths earnings if the firm is in profit, but does not always smooth earnings when the firm is making a loss. It seems that the accountant's ‘conservative’ practice of recognising losses when these are foreseeable, rather than when just realised, is consistent with profit smoothing. The paper concludes that matching and conservatism are not merely ad hoc or traditional rules, which accountants arbitrarily apply, but have a rational basis in the sense that they can allow better estimation of the long-term profitability of the firm.

An Explanation for Accounting Income Smoothing

It is widely believed that corporate managers often engage in income smoothing, taking actions to dampen fluctuations in their firms' publicly reported net income. One reason given for this is that managers think that investors pay more for a firm with a smoother income stream. (See Ronen and Sadan [1981].) While there have been many empirical studies attempting to document whether or not income smoothing actually occurs, there has been little exploration of why a manager might rationally want to smooth his firm's income. Explaining why smoothing might be observed, and how it can result in an increased stock price, is the focus of this paper. In two recent studies, Lambert [1984] and Dye [1988] demonstrate, in agency settings, that a risk-averse manager who is precluded from borrowing and lending in the capital markets has an incentive to smooth his firm's reported income. In this paper, in contrast, it is shown that within a market setting an incentive exists for a manager to smooth income that is independent of either risk aversion or restricted access to capital markets. The market setting is also useful in that it allows for the analysis of the effect of income smoothing on stock prices. It is shown here that if a manager can choose which of two periods to recognize certain income, he may prefer the choice that is expected to