The Impact of Audit Committee, Firm Size, Profitability, and Leverage on Income Smoothing

Abstract

The objective of this study is to examine the impact of the audit committee, firm size, profitability, and leverage on income smoothing in manufacturing companies listed in Indonesia stock exchange for the period of 2013-2015. Regression statistics are employed to analyse the secondary source of data collected from the annual report of the companies. Measurement of income smoothing is proxied by discretionary accruals. The results of the study reveal that the firm size has a direct positive influence on income smoothing in the listed manufacturing companies in Indonesia. In essence, the more significant a firm size, the more actively performed income smoothing practices. In contrast, profitability indicates an adverse effect on income smoothing in the listed manufacturing companies. The adverse effect indicates that the higher the profit generated, the lesser the income smoothing practices performed. Similarly, leverage posits an adverse effect on income smoothing in the manufacturing sector. This indicates the smaller the risk of companies debt, the more exceptional the practice of income smoothing occurs. The audit committee size similarly shows a negative influence on income smoothing in the listed manufacturing companies. This finding indicates the larger audit committee size, the smaller practice of income smoothing. This occurs because the audit committee oversight function on financial reporting is more efficiently performed. The result of this research shows the contribution to theory, practice, and method, especially in developing countries.

The Moderating Role of Good Corporate Governance on the Influence of Company Size, Share Value, Profitability, and Financial Leverage on Income Smoothing (Study of Primary Consumer Goods Companies listed on the BEI in 2020-2022)

“…According to Moses (1987), companies with significant total assets tend to smooth their profits (I. et al, 2019). This is in line with research (Pradnyandari & Putra Astika, 2019), (Indrawan & Damayanthi, 2020), (Nurani, 2021), and (Saputri & Suwarno, 2023). Thus, the first hypothesis is that company size positively affects profits.…”

The Impact of Audit Committee Structure on Capital Structure: A Case of Omani Listed Companies

“…This finding is interesting and important for all listed companies to use AC size as a controlling tool of leverage. The result is aligned with the agency theory, which suggests that audit committee size may work to reduce the conflict between the board of directors and management under the corporate governance system (Indrawan et al, 2018).…”

Profitability, Firm Value, Income Smoothing: The Moderating Role of Firm Growth

“…Previous studies has examine income smoothing using profitability (Artawan et al, 2020;Arum & Aminah, 2017;Fitri et al, 2018;Fitriani, 2018;Gunawan & Hardjunanto, 2020;Haniftian & Dillak, 2020;Herdjiono et al, 2019;Indrawan & Damayanthi, 2020;Oktaviasari et al, 2018;Oktoriza, 2018;Oktyawati & Agustia, 2014;Peranasari & Dharmadiaksa, 2014;Sellah & Herawaty, 2019;Setyaningtyas & Hadiprajitno, 2014;Yanti & Dwirandra, 2019), firm size (Arum & Aminah, 2017;Benandri & Andayani, 2018;Fitri et al, 2018;Fitriani, 2018;Gunawan & Hardjunanto, 2020;Indiraswari & Rahmayanti, 2022;Indrawan & Damayanthi, 2020;Lahaya, 2017;Lim, 2022;Nathania & Nugroho, 2023;Nugraha & Dillak, Julianti, 2018;Oktaviasari et al, 2018;Oktoriza, 2018;Peranasari & Dharmadiaksa, 2014;Setyaningtyas & Hadiprajitno, 2014;Sunetri et al, 2022), firm risks (Benandri & Andayani, 2018;Lahaya, 2017;Leviany et al, 2019;Masning et al, 2022;Peranasari & Dharmadiaksa, 2014), dividend policy (Bobby et al, 2022;…”