Factors affecting income smoothing practice: Insights from the Indonesian capital market
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Eko Suyono 
, Adi Wiratno, Atiek Sri Purwati, Irianing Suparlinah, Rasyid Mei Mustafa, Puji Lestari
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
The objective of this quantitative study is to examine the factors that influence income smoothing practices in the Indonesian capital market, including share ownership by groups/institutions, family-owned firms, and industrial sectors, with firm size serving as a control variable. This study used a purposive sampling technique to acquire a sample of 112 businesses over the years 2017 to 2021, yielding 560 observations by using a panel data approach. The findings indicate that neither share ownership by a group/institution nor a family-owned firm has a substantial impact on income smoothing practice. Among industrial sectors, only the sector of consumer products significantly influences income smoothing. As a control variable, business size has a favorable influence on income smoothing. This paper provides empirical evidence on financial accounting research, namely on the subject of income smoothing and the quality of earnings reporting, despite a number of limitations, such as a relatively short observation period.
Keywords: Share Ownership by Group/Institution, Family-Owned Firm, Income Smoothing, Industrial Sectors, Firm Size
Authors’ individual contribution: Conceptualization — E.S. and A.W.; Methodology — A.W. and A.S.P.; Writing — Original Draft — E.S., A.S.P., and P.L.; Writing — Review & Editing — I.S. and P.L.; Supervision — R.M.M. and P.L.; Project Administration — I.S. and R.M.M.; Funding Acquisition — E.S. and R.M.M.
Declaration of conflicting interests: The Authors declare that there is no conflict of interest.
JEL Classification: G32, G34, M41, M48
Received: 02.11.2022
Accepted: 27.01.2023
Published online: 30.01.2023
How to cite this paper: Suyono, E., Wiratno, A., Purwati, A. S., Suparlinah, I., Mustafa, R. M., & Lestari, P. (2023). Factors affecting income smoothing practice: Insights from the Indonesian capital market. Corporate & Business Strategy Review, 4(1), 57–68. https://doi.org/10.22495/cbsrv4i1art6
