Determinants of income smoothing practice in Indonesian manufacturing companies / Angelina Sagita and Patricia Diana

Income is a highly informative account that stakeholders can use to evaluate a company's performance. A positive signal will be generated if profit levels remain consistent; consequently, management frequently endeavors to present earnings that are consistent. The primary aim of this study was to gather empirical data regarding the impact of company size, financial leverage, profitability, cash holding, and firm value on the implementation of income smoothing practices. The sampling technique used was purposive sampling while the data analysis method utilized was logistic regression. The sample that passed the criteria was 47 companies during the period from 2017 to 2020. Income smoothing practices was indicated using the Eckle index. The results obtained show that only firm size and firm value had a significant effect on income smoothing. Based on data analysis, it was found that management tends to flatten earnings on account items that require consideration in calculations such as impairment reserves and bad debts. This study deepens prior results with explanations on what smoothing actions were carried out on which accounts in the financial statements