Profit Smoothing Research Articles

Pengaruh Risiko Keuangan, Nilai Perusahaan dan Ukuran Perusahaan Tehadap Perataan Laba

This research aims to analyze the influence of financial risk, company value and company size on income smoothing. This research was conducted by analyzing the financial reports of companies in the Consumer Non-Cyclicals sector listed on the Indonesia Stock Exchange (BEI) during the period 2018 to 2022. The sample used in this research was 16 companies in the Consumer Non-Cyclicals sector listed on Indonesia Stock Exchange during the period 2018 to 2022 using a purposive sampling technique. The data used in this research is secondary data in the form of financial reports from each company that has been used as a research sample. Logistic regression method was used as research methodology in this study. Analysis of research results using the help of Eviews 12 software. The results of this study show that Financial Risk partially has no effect on Profit Planning, Company Value partially has no effect on Profit Smoothing, Company Size partially has an effect on Profit Planning and simultaneously Financial Risk, Company Value and Company Size influence Income Smoothing.

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.

Modelling profitability of private equity: A fractional integration approach

This paper analyses the stochastic behaviour of private equity returns (a measure of profitability) applying fractional integration to an extensive dataset including quarterly data spanning the last four decades for various geographical areas (US, Europe, Asia/Pacific, the Rest of the World and Total) and investment types (Buyout & Growth Equity, Venture Capital & Fund of Funds, Infrastructure, Natural Resources, Real Estate, Subordinated Capital & Distressed as well as the aggregate category All Types). The results support the hypothesis of stationarity and mean reversion in all cases; however, there are differences in the degree of persistence across regions, the series for Europe being the closest to a short-memory process, while those for the US exhibit long memory, which implies that shocks have long-lived effects. Differences are also found in the results by asset class. The implications of these findings for private equity management, profit smoothing and return benchmarking are briefly discussed.

The Effect of Profitability, Leverage and Dividend Payout Ratio on Profit Smoothing in Manufacturing Companies Listed on the IDX for the 2018 – 2020 Period

Income smoothing is an action that is deliberately carried out by management to regulate the profits presented in the financial statements in accordance with the normal level of profit desired by the company's management. The purpose of this study was to determine the effect of Profitability, Leverage and Dividend Payout Ratio on Income Smoothing in Manufacturing Companies Listed in Indonesia Stock Exchange for year 2018-2020. The population in this study were all manufacturing companies listed on the Indonesia Stock Exchange in 2018 - 2020 as many as 193 companies. Based on the results of this study indicate that profitability partially has a significant negative effect on income smoothing, it can be proven that the significant value is 0.001 <0.05. Leverage partially has no effect on income smoothing, it can be proven that the significant value is 0.113 > 0.05. Dividend payout ratio partially has a significant negative effect on income smoothing, it can be proven that the significant value is 0.009 <0.05. Profitability, leverage and dividend payout ratio simultaneously affect income smoothing. It can be proven that the calculated F value is 5.181 and the f table value is 2.83, where the calculated f value is greater than the f table value, namely 5.181 > 2.83 with a significance value of 0.004 <0.05.

Implications of IFRS 17 in European financial stability: accounting methodology and evaluation modelling

The purpose of this document is to provide an overview of IFRS 17 and its possible practices according to a context analysis conducted by EIOPA and ESMA. Furthermore, the implications of the standard will be evaluated with respect to a traditional life and pension products. This requires a deeper insight into the standard, the construction of fictive insurance product and the determination of measurements techniques. With the recent release of the standard, IFRS 17 is unexplored to many within the insurance industry. Thus, the effects of the standard on the financial statements of insurance companies and strategies for reaching objectives such as profit smoothing are yet unknown. Furthermore, the standard is principle based and does hence not specify a practice. Therefore, to determine a practice that complies with the standard and enables achievements of desired objectives is vital. In conclusion, IFRS 17 is expected to bring substantial benefits to financial stability in the EU, mainly through the transparency channel; the requirements in IFRS 17 may push insurance corporations to improve internal processes, including enhancing their internal risk management frameworks.

Football players and asset manipulation: the management of football transfers in Italian Serie A

ABSTRACT Research question: We consider player trading as one of the distinctive features of football clubs’ business models and how these models have been influenced since the implementation of Financial Fair Play (FFP). Considering the Italian financial and economic context in the football sector, we investigate whether Serie A football clubs adopt earnings manipulation as a result of trading players’ economic rights. Research methods: The empirical analysis includes the football clubs competing in the Italian Serie A from 2005 to 2018. Using an unbalanced panel dataset composed of 275 club-year observations (38 different clubs), our estimations are run by using fixed effects OLS models. Clubs’ net capital income from sales of football players is used as a proxy of earning manipulation. We control for clubs’ football performance, size and reputation. Results: and Findings: By applying Bartov’s model based on asset sales, our results confirm the adoption of asset manipulation behaviours in the football industry, wherein players’ economic rights sales are a preponderant financial item affecting economic performance. Specifically, net income from trading players is significant and positively linked with Serie A clubs’ profitability, while leverage is significant after the introduction of FFP and especially for the most prominent Serie A clubs. Implications: Our results confirm that Italian Serie A has been chronically dependent on player trading to maintain their financial sustainability. UEFA’s regulations could be assessed and modified to enable them to prevent and reveal the real activities and dynamics behind the player transfer market (profit smoothing behaviours).

Designing a Model for Examining the Relationship Between Earnings Quality and Stock Liquidity on the Stock Exchange

The present study was conducted to provide evidence to clarify the relationship between earnings quality and stock liquidity as well as assess the impact of earnings quality on stock liquidity. In this study, 96 companies listed in Tehran Stock Exchange during the 5-year period of 2011-201 as statistical population were surveyed. The independent variable in this study is earnings quality, which is measured by two indices (accruals quality and earnings smoothing). Stock Liquidity Measurement Two liquidity variables that are dependent variables are used: liquid float percentage, number of trading days, and control variable. Combined regression model and data were used to test the hypotheses. The results of sub tests showed that the accruals quality was inversely and significantly correlated with the percentage of free float stocks and the number of trading days; however, the results showed that profit smoothing was inversely and significantly correlated. It has a number of trading days, unless sufficient evidence is found to show a significant relationship between earnings smoothing and the percentage of free float stocks.

Profit Equalization Reserve and Investment Risk Reserve: Issues and its Application

The Islamic Financial Institution (IFI) is a unique financial institution which has special characteristics, maqāsid, worldview, risk, and opportunity. One of the methods used to mitigate the unique risk of Islamic banks is the Profit Equalization Reserve (PER) and Investment Risk Reserve (IRR). However, there are some issues related to PER and IRR. Some issues have been identified in the Islamic Financial Services Board (IFSB) guidance note, including profit smoothing and other issues yet to be discussed. This paper tries to observe issues related to PER and IRR and their application in some Islamic banks using content analysis method on their annual reports and/or financial statements. The paper concludes that PER and IRR will bring bigger issues and risks to Islamic banks. This leads the writer to suggest that the regulator reconsider its permissibility. In addition, the paper also finds that the concept of PER and IRR has low acceptance among Islamic banks.

PROFITABILITAS MEMODERASI FINANCIAL LEVERAGE DAN PERTUMBUHAN PERUSAHAAN TERHADAP PERATAAN LABA

The purpose of this study is to determine and analyze the effect of Profitability Moderating Financial Leverage and Company Growth partially and together on Income Smoothing. The research method used in this study is a quantitative method. Data taken is secondary data from manufacturing companies listed on the IDX. Based on the results of the study, the following findings are found: The Effect of Financial Leverage based on Return On Assets (ROA) on income smoothing from research results Provides information that Financial Leverage based on Return on Assets (ROA) has a positive and significant effect on income smoothing (ROA) Income Smoothing). The influence of company growth based on Return On Asset Equity (ROE) on income smoothing based on the results of research that has been done can be concluded that company growth has a significant and significant effect on income smoothing, so if there is an increase in company growth then income smoothing will increase. The Effect of Financial Leverage on Profitability Moderated Profit Flattening It can be concluded that Financial Leverage and Company Profitability moderated Growth simultaneously influence Profit Smoothing. The effect of company growth on profit smoothing moderated by profitability, it can be concluded that company growth has significant and significant effect on income smoothing with moderated profitability. Effect of Financial Leverage, company growth which is moderated by profitability to income smoothing, it can be concluded that Financial Leverage and Company Growth which is moderated by Profitability have a simultaneous effect on Income Smoothing. Keywords: profitability, financial leverage, income smoothing.

Effect of Continuity and Smoothing of Profit on Corporate Profit- Stock Returns With Taking into Account the Heterogeneous Relationship of Profit - Efficiency on Companies Admitted to the Tehran Stock Exchange

The purpose of this study was to investigate the effect of continuity and smoothing of profits on the relationship between corporate profits - Stock efficiency taking into account the heterogeneous profit relationship – efficiency on companies admitted to the Tehran Stock Exchange, generally, profit has always been a factor in investor decisions. In this regard, on the one hand, accounting and stock returns are linked together, on the other hand, the variable of earnings quality is related to accounting profit and stock returns. So it may be that the question arises what is the effect of the continuity and smoothing of profits on the relationship between accounting profit and stock returns? The present research seeks to answer this question; as a result, the main question of the research is presented as follows: What is the effect of continuity and smoothing of earnings on the relationship between earnings and stock returns for listed companies in Tehran Stock Exchange? To check this, the data of 123 companies listed in Tehran Stock Exchange during the years 2012-2016 were used; data was analyzed using the Logit method using Eviews10 software. Evidence and empirical findings have shown that; both profit continuity and profit smoothing criteria have significant effects on the heterogeneous relationship between current period earnings and stock returns.

The Impact of Creative Accounting on the Probability of Fraud in the Companies Accepted in the Tehran Stock Exchange

Accountants use the accounting knowledge to manipulate the accounting figures and convert those figures to what the management wants. Because directors have direct and indirect benefits in financial statements. This may be the motivation for fraud and manipulation of the financial statements by the executives, and as a result, managers want to mislead the users of the financial statements and this is a creative accounting. The purpose of this study is to investigate the effect of creative accounting and fraud probability that is measured by Bhasin model. At the level of companies accepted in Tehran stock exchange for the period of 2011-2015, for checking the validity of the hypotheses, the logistic regression test are Used. The results of this study indicate that there is a significant relationship between profit smoothing and the probability of fraud, which means that fraudulent companies tend to be more likely to smooth profits than non-fraudulent companies, which can be said today, profit smoothing is one of the new fraud methods. Another aspect of this research is the lack of a significant relationship between external financing and fraud probability.

Effect of Continuity and Smoothing of Profit on Corporate Profit- Stock Returns With Taking into Account the Heterogeneous Relationship of Profit - Efficiency on Companies Admitted to the Tehran Stock Exchange.

The purpose of this study was to investigate the effect of continuity and smoothing of profits on the relationship between corporate profits - Stock efficiency taking into account the heterogeneous profit relationship – efficiency on companies admitted to the Tehran Stock Exchange, generally, profit has always been a factor in investor decisions. In this regard, on the one hand, accounting and stock returns are linked together, on the other hand, the variable of earnings quality is related to accounting profit and stock returns. So it may be that the question arises what is the effect of the continuity and smoothing of profits on the relationship between accounting profit and stock returns? The present research seeks to answer this question; as a result, the main question of the research is presented as follows: What is the effect of continuity and smoothing of earnings on the relationship between earnings and stock returns for listed companies in Tehran Stock Exchange? To check this, the data of 123 companies listed in Tehran Stock Exchange during the years 2012-2016 were used; data was analyzed using the Logit method using Eviews10 software. Evidence and empirical findings have shown that; both profit continuity and profit smoothing criteria have significant effects on the heterogeneous relationship between current period earnings and stock returns.

Interest Rate Pass-Through to the Rates of Core Deposits: A New Perspective

Within a Salop framework, this paper shows that banks' profit smoothing can explain incomplete pass-through of market rates to the rates of core deposits. Using time series data of deposit and lending rates of local German banks, this paper will show that local banks pass through return variations to their depositors. To the degree to which market rates influence new business lending rates, there is, therefore, an indirect channel through which market rates affect the rate of core deposits. In the absence of capital market alternatives for core deposits, this indirect channel explains why changes in the market rate affect the rate of core deposits only slowly and fractionally.

Atributos da Qualidade da Informação Contábil em Empresas Participantes do Mercado Acionário Brasileiro

The objective of this study is to analyze the quality of accounting information in companies participating in the Brazilian stock market. The sample studied consists of 101 non-financial companies listed on the BM&FBovespa, from 2003 to 2014. The study is descriptive, using documentary research and quantitative analysis. Based on the individual calculation of the attributes of persistence, predictability and profit smoothing for each company, we developed a ranking of the quality of accounting information using the multi-criteria analysis method TOPSIS and entropy. Then the determinants of company positioning in the ranking of accounting information quality were analyzed using the t test for means and multivariate linear regression. By separating the companies into two groups, the business characteristics of sales growth, level of corporate governance, return on assets and issuance of ADRs presented means with statistically significant differences. However, in explaining the positioning of companies in the ranking of quality of accounting information, only sales growth showed a statistically significant negative relationship, confirming existing empirical evidence that companies with high growth have lower persistence of profits.

Studying the Relationship between Economic Massive Changes with Earnings Management of Listed Companies in Tehran Stock Exchange

Abstract. This study investigates the relationship between earnings management and profitability of companies listed in Tehran stock exchange and its purpose is to examine the existence of earnings management phenomenon of listed companies in Tehran stock exchange. One of the executives' main objectives about earning management is creation a more stable flow, in order to support higher earning payments. More stable earnings flow can be perceived as a lower risk that leads to higher stock prices and lower costs. Tendency of business unit management to increase investors' predictive power and reduce corporate risk by earnings stability and reduce its frequency can be consider as the other objectives of earning smoothing. The level of earning frequency can be effective on risk of company and thus the capital cost of firm. It can be affective in future debt contracts and therefore earning payments in future. The aim of the research is to establish the relationship between exchange growth rate and inflation rate with the average return on equity in the smoother earning company and non-smoother earning company. Financial data (2006 - 2013), the population and sample volume obtained by Cochran test, are equals to 75 companies. In the second stage, by using Acle indices, sample member companies based on three levels, net profit, operating profit and margin profit had been separated. Investigation results confirm the possibility of smoothing and the relationship between independent variables and return on equity of companies listed in the Stock Exchange. The main outcome of the study suggest with which a significant correlation between the increase in exchange rate and inflation rate in companies that do not make profit smoothing, there is not significant different between exchange increases rate and inflation rate and the stock return between two types of companies had been mentioned above.

Do Shariah Complaint Companies Indulge in Income Smoothing? Evidence from Pakistan

The purpose of this paper is to discover the existence of income smoothing in the Pakistani Shariah complaint companies. Although theory of Islamic finance does not renounce profit smoothing, this study will observe the type of smoothing behavior taken on by the executives. Real smoothing and artificial smoothing are the two types of income smoothing. For decreasing income variability real smoothing encompasses on making production and speculation decisions. In contrary, artificial smoothing is achieved through accounting practices. We tested our study on 30 Shariah complaint companies in Pakistani capital market while using the artificial income smoothing over the period of 2008-2012. We concluded that 26.67% of the companies are artificial income smoothers.

Investing in biogas: Timing, technological choice and the value of flexibility from input mix

In a stochastic dynamic frame, we study the technology choice problem of a continuous co-digestion biogas plant where input factors are substitutes but need to be mixed together to provide output. Given any initial rule for the composition of the feedstock, we consider the possibility of revising it if economic circumstances make it profitable. Flexibility in the mix is an advantage under randomly fluctuating input costs and comes at a higher investment cost. We show that the degree of flexibility in the productive technology installed depends on the value of the option to profitably re-arrange the input mix. Such option adds value to the project in that it provides a device for hedging against fluctuations in the input relative convenience. Accounting for such value we discuss the trade-off between investment timing and profit smoothing flexibility.

Bank Owners or Bank Managers: Who is Keen on Risk? Evidence from the Financial Crisis

In this paper, we analyse whether bank owners or bank managers were the driving force behind the risks incurred in the wake of the financial crisis of 2007/2008. We show that owner controlled banks had higher profits in the years before the crisis, and incurred larger losses and were more likely to require government assistance during the crisis compared to manager-controlled banks. The results are robust to controlling for a wide variety of bank specific, country specific, regulatory and legal variables. Regulation does not seem to mitigate risk taking by bank owners. We find no evidence that profit smoothing drives our findings. The results suggest that privately optimal contracts aligning the incentives of management and shareholders may not be socially optimal in banks.

Bank Owners or Bank Managers: Who is Keen on Risk? Evidence from the Financial Crisis

In this paper, we analyse whether bank owners or bank managers were the driving force behind the risks incurred in the wake of the financial crisis of 2007/2008. We show that owner controlled banks had higher profits in the years before the crisis, and incurred larger losses and were more likely to require government assistance during the crisis compared to manager-controlled banks. The results are robust to controlling for a wide variety of bank specific, country specific, regulatory and legal variables. Regulation does not seem to mitigate risk taking by bank owners. We find no evidence that profit smoothing drives our findings. The results suggest that privately optimal contracts aligning the incentives of management and shareholders may not be socially optimal in banks.