ANALYSIS OF FACTORS AFFECTING INCOME SMOOTHING AND THE EFFECTS TO THE COMPANY VALUE Case Study of Manufacturing Companies Listed in Indonesia Stock Exchange Period 2008-2012

Abstract

Income Smoothing is a practice done by management to present a steady and predictable income stream by using accounting techniques to manage income fluctuations from one period to another. Basically, Income smoothing is actually one of the management‟s ways to perform earnings management. Improvements of relations with creditors, investors, and workers are the benefits of Income Smoothing practice by management. This research is designed to examine factors that can be identified with the incidence of income smoothing practice and its influence to the company value among listed manufacturing companies at Indonesia Stock Exchange. 47 manufacturing companies are being sampled with purposive sampling selection method within a period of five years beginning in 2008 until 2012. This research was using Eckel Index to classify between the companies with Income Smoothing practice and the companies with no Income Smoothing practice. The variables used in this study are the income smoothing, Company value, Profitability, Leverage, and Size of Company. Statistical analysis used in this study was to statistically test using descriptive statistics, regression and logistic regression models through multivariate testing. The results of classification showed income smoothing practices by listed manufacturing companies in the Indonesian Stock Exchange. In the multivariate analysis for three independent variables, Profitability, Leverage, and Size of Company have significant relationship with the Income Smoothing practice. In the regression analysis, Income smoothing has no relationship with Company Value.