The purpose of this research is to obtain empirical evidence about the effect of profitability, leverage and institutional ownership on income smoothing with effective tax rates as mediating variable. The sample used in this research is 35 property, real estate and building construction companies from a total population of 56 companies listed consistently on Indonesia Stock Exchange in 2017-2019. The side technique used is purposive sampling and the valid data was 35 companies. This study uses Structural Equation Model (SEM) which was helped by Smart PLS 3.0. The results showed that institutional ownership has a positive effect on income smoothing, leverage has a positive effect on effective tax rates, profitability has a negative effect on effective tax rates, while profitability, leverage and effective tax rates has no effect on income smoothing. Also, effective tax rates have no effect on mediate profitability and leverage through income smoothing. The implication of this research is the need to increase cautiousness of stakeholders in reading financial reports due to the possibility of income smoothing which could lead into inaccurate decisions.
This study has a purpose, namely to empirically examine the influence of firm size, profitability, leverage, and audit committee towards income smoothing in manufacturing companies listed in Indonesia Stock Exchange from 2017-2019. This study used 75 samples from manufacturing companies that have been selected using purposive sampling method with total 225 data for three years. The data used are secondary data in the form of financial statements. This research used econometric views (EViews) version 11 software to process the data. The result of research shows that firm size, profitability, and leverage have negative significant influence towards income smoothing, meanwhile audit committee has no significant influence towards income smoothing. The implication of this research is the need for transparency of financial reports regarding profit and debt, as well as an increase in the role of the audit committee to reduce income smoothing practices at various firm sizes.
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