Analysis of Differences in Financial and Market Performances That Do or Do Not Practice Income Smoothing
Abstract
This study aims to examine differences in profitability, liquidity, leverage, stock returns, and share risk in real estate companies that do and do not practice income smoothing. The population of this study is companies publicly traded on the Indonesian Stock Exchange, from which sample of 32 companies was acquired for each of the three years of the study, giving 96 items in total. The indicators used in the study are return on assets (ROA) to measure profitability, current ratio (CR) to measure liquidity, debt-to-equity ratio (DER) to measure leverage, capital gains from stock prices to measure stock returns, and standard deviation of stock returns to measure stock risk. Analysis technique using independent samples t-testing and Mann-Whitney t-testing. The results of the study show that there is no difference in ROA, CR, DER, stock returns, and share risk between income-smoothing and non-income-smoothing companies.
Keywords: Return on Assets; Current Ratio; Debt-to-Equity Ratio; Stock Return; Stock Risk; Income Smoothing
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References
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Market Reaction on Announcement of Information of the Earned Company on the Exchange Jakarta Securities. Indonesian Accounting Research Journal, January Vol. 3: 35-53.
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Income Smoothing. Journal of Business Finance and Accounting, December: 1179-1193.
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Smoothing of Reported Income and Risk-Adjusted Returns. Journal of Economics and Finance, Summer: 141-159.
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and Investment Risk in a Public Company on the Jakarta Stock Exchange. Journal of Accounting & Auditing, Diponegoro University.
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Companies Included in the LQ 45 Group.
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of Public Companies in Indonesia. National Accounting Symposium VII. Denpasar
Nasir, Arifin., and Suzanti, Anna. (2002). Analysis of the Effect of Income Smoothing on Market
Risk Shares and Stock Returns of Public Companies on the Jakarta Stock Exchange.
Noviana, S.R., and Yuyetta, E.N.A. (2011). Analysis of Factors Influencing Profit Smoothing
Practices (Empirical Study of Manufacturing Companies Listed on IDX Period 2006-2010). Journal of Accounting & Auditing, Vol.8, No. 1 (November).
Ronen, J., and Sadan. (1975). Classificatory Smoothing: Alternative Income Models. Journal of
Accounting Research, Vol. 13, pp: 133-149.
Riyanto, Bambang. (2001). Basics of Corporate Spending, BPFE, Yogyakarta
Salno, H. M., and Baridwan, Zaki. (2000). Analysis of Income Smoothing: Factors Affecting and
Relating to the Performance of Shares of Public Companies in Indonesia. Indonesian. Accounting Research Journal, January Vol. 3: 17-34.
Samlawi, Ahmad., and Sudibyo, Bambang. (2000). Income Smoothing Behavior Analysis Based
On Company Performance in the Market. National Accounting Symposium III, IAI-Compartment of Educator Accountants.
Subekti, Imam. (2005). Association Between Profit Smoothing Practices and Capital Market
Reactions in Indonesia. National Symposium on Accounting VIII. Solos: 223-237.
Sugiarto, Sofa. (2003). Profit Equation in anticipating the company's future earnings
Manufacturing listed on the Indonesia Stock Exchange. National Symposium
Accounting VI, Gadjah Mada University, Yogyakarta.
Market Reaction on Announcement of Information of the Earned Company on the Exchange Jakarta Securities. Indonesian Accounting Research Journal, January Vol. 3: 35-53.
Azhari, Fadhli. (2010). Analysis of Factors Influencing Income Smoothing of Manufacturing
Companies of Basic and Chemical Industry Sector Listed in Indonesia Stock Exchange (2004-2008). Essay, Gunadarma University.
Ashari, Nasuniyah., Hian C. Koh, Soh L. Tan, and Wei H. Wong. 1994. Factors Aff ecting Income
Smoothing Among Listed Companies in Singapore. Accounting and Business Research. Vol 24, No. 96: 291-301.
Barnea, A.J Ronen., and S. Sadan. (1976). The Implementation of Accounting Objectives- An
Application in Extraordinary Items. Accounting Review, January: 56-67
Belkaoui, Ahmed Riahi., (2006). Accounting Theory. Issue 5, Jakarta: Salemba Empat.
Beattie, V., Brown, S., Ewers, D., John, B., Manson, S., Thomas, D., & Turner, M. (1994).
Outstanding Items And Profit Revenue Approach: Positive Accounting Approach, Journal of Business Finance & Accounting.
Brigham., and Houston. (2017). Fundamentals of Financial Management. Salemba Empat, Jakarta.
Bruce S. Koch. (1981). Income Smoothing: An Experiment. The Accounting Review, July: 574-
585.
Budiasih, Igan. (2009). factors influencing the practice of income brokering. Journal Accounting and
Business, Vol 4, No.1, .Pg. 1 – 14. Udayana University.
Eckel, N. (1981). The Income Smoothing Hypothesis Revisited. Abacus, 11: 28-40.
Fudenberg, D., and Tirole, J. (1995). A Theory of Income and Dividend Smoothing Based on
Incumbency Rates. Journal of Political Economy, February.
Garizi, A. Z., Homayoun A., Firouzi B. A. (2011). The Impact of Income Smoothing on
Companies Abnormal Return. Australian Journal of Basic and Applied Sciences, Vol. 5,
pp: 245-251.
Ghozali, Imam., and Chariri, Anis. (2017). Accounting Theory. Semarang, Diponegoro University
Publishing Agency.
Harmono. (2009). Financial Management Based on Balanced Scorecard Theory, Case, and
Business Research Approaches. Jakarta: PT Bumi Aksara.
Hartono, Jogiyanto. (2010). Portfolio Theory and Investment Analysis. Yogyakarta: BPFE.
Heyworth, S. R. (1953). Smoothing Periodic Income. Accounting Review, January: 32-39.
Jensen, Michael C., and William H. Meckling. (1976). Theory of the Firm: Managerial Behavior,
Agency Cost and Ownership Structure. Journal of Financial Economics, 3: 305-306.
Jin, Liauw She., and Machfoedz, Mas’ud. (1998). Factors Affecting The practice of Income
Smoothing on Registered Companies on the Jakarta Stock Exchange. Indonesian Accounting Research Journal, Vol. 1, No. 2, (July)
Khafid, M., Mahfud, M.K., and Chariri, A. (2002). Earnings Smoothing Analysis: Effects on
Market Reaction and Investment Risk in Public Companies in Indonesia. MAKSI Journal, Vol.1, August 2002.
Michelson, S. E., Jordan-Wagner, J., and Wooton, C. W. (1995). A Market Based Analysis of
Income Smoothing. Journal of Business Finance and Accounting, December: 1179-1193.
Michelson, S. E., Jordan-Wagner, J., and Wooton, C. W. (2000). The Relationship between: The
Smoothing of Reported Income and Risk-Adjusted Returns. Journal of Economics and Finance, Summer: 141-159.
Muid, Dul., & Catur, Nanang P. (2005). The Effect of Earnings Management on Market Reaction
and Investment Risk in a Public Company on the Jakarta Stock Exchange. Journal of Accounting & Auditing, Diponegoro University.
Murni, S.A and Santoso, S. (2007). Analysis of Profit Smoothing Practices in Manufacturing
Companies Included in the LQ 45 Group.
Murtanto. (2004). Income smoothing: Factors that Affect and Relate to the Performance of Shares
of Public Companies in Indonesia. National Accounting Symposium VII. Denpasar
Nasir, Arifin., and Suzanti, Anna. (2002). Analysis of the Effect of Income Smoothing on Market
Risk Shares and Stock Returns of Public Companies on the Jakarta Stock Exchange.
Noviana, S.R., and Yuyetta, E.N.A. (2011). Analysis of Factors Influencing Profit Smoothing
Practices (Empirical Study of Manufacturing Companies Listed on IDX Period 2006-2010). Journal of Accounting & Auditing, Vol.8, No. 1 (November).
Ronen, J., and Sadan. (1975). Classificatory Smoothing: Alternative Income Models. Journal of
Accounting Research, Vol. 13, pp: 133-149.
Riyanto, Bambang. (2001). Basics of Corporate Spending, BPFE, Yogyakarta
Salno, H. M., and Baridwan, Zaki. (2000). Analysis of Income Smoothing: Factors Affecting and
Relating to the Performance of Shares of Public Companies in Indonesia. Indonesian. Accounting Research Journal, January Vol. 3: 17-34.
Samlawi, Ahmad., and Sudibyo, Bambang. (2000). Income Smoothing Behavior Analysis Based
On Company Performance in the Market. National Accounting Symposium III, IAI-Compartment of Educator Accountants.
Subekti, Imam. (2005). Association Between Profit Smoothing Practices and Capital Market
Reactions in Indonesia. National Symposium on Accounting VIII. Solos: 223-237.
Sugiarto, Sofa. (2003). Profit Equation in anticipating the company's future earnings
Manufacturing listed on the Indonesia Stock Exchange. National Symposium
Accounting VI, Gadjah Mada University, Yogyakarta.
Published
2023-04-30
How to Cite
PRIHATNI, Rida; ULUPUI, I Gusti Ketut Agung.
Analysis of Differences in Financial and Market Performances That Do or Do Not Practice Income Smoothing.
E-Jurnal Akuntansi, [S.l.], v. 33, n. 4, p. 1032-1044, apr. 2023.
ISSN 2302-8556.
Available at: <https://ojs.unud.ac.id/index.php/akuntansi/article/view/92771>. Date accessed: 04 may 2024.
doi: https://doi.org/10.24843/EJA.2023.v33.i04.p11.
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