The Influence of Company Size And Profitability On Income Smoothing In Companies Enlisted In Indonesia Stock Exchange.

TIIESIS

TEE INI'LLIENCE

OT

COMPANY

SIZE AND

PROUTABILITY

ON

INCOMf,

SMOOMING IN

COMPANIES ENLISTED

IN

INDONf,

SL{

STOCK

EXCHANGE

By:

RIJBY

.wAIfYfI

Thesis is

subnite.l

in

partiallunlhent

ofthe

rcqtnenentlot

the

b@helot

in

Ac,ontins

Depa

nchtolFac

h\ olEcononE

DEPARTIIMENT

OF

ACCOTI\rT

FACULTY

OE

ECONOI4IC

ANDALASt

rvERSrTX/r

PADAN':

02153

046

'lhe

_Objecrive

ol

thh

study is

lo exafri.€

_{the innucnces}

ol

conpany

_{siTe and}

pronrabilit] individually atul sindltmcousLy

on

incoore

sm.othinc.

lhe

obsened

popularion

is

the

shole

mmuJircrurins

md

financial

ector conpdics

enlisled

in

lnd.ncsia

Slock

lxchbgc

nr

peiod

ol

rcd

2002

util

2006

Popuhirn

samples

re

laken

b)

lmlyi.e

purposilc

sMDlins

nelhod.

The selecled

conpmy lhal

match

t,

be

rhe

samDl€s

ol

thG

rcsearch

c.nsisl

of

l5

conpanies

Resuch

dsien

scd in

lhis

Esearchis

hlF&csh

tesl

Esarch nclhodll]at isdoneby

usins simplc

liicddsssior

lnd

doublc l irear

Egressnrn.

lhcresultollhiserudysh.wthatrheEhaposilivebdmr

sigrificanr ellccr

oapmlirabiliq

individually

on

iircone

sooolni.g.

l1rcre

de

effecls

ol

proiitlbiliry

dd

compmy situ

simulhcousl)

tormrd

income

smoothinC Pmfitability

eivcs nesatire eJlecrs

$hil.

comp.ny si,es sive

t.snilo

efccls.

Based on lhe

reslll

oi

indcx

eckclcalculalion

(1981).

it cm

be realized thal the conpanies enlisted in lndoncsia

Srock

E\cndsc

conduct

indofr. smoothi4

praclice.

Ll.

B,tlgruutrd

of lhe Srndy

one of

fic

akemarives whe€ rhe

inc.me aner hxarion usua

ly

contains rhc

ion

porentiaLl]

naknrc

a blumd

visidn xbdur ths

invenoh sholld

bea*are

h

making a

deisi..

For rha( ftason.

vaiousryp€

of

accountiig inlomatiotr

is

needed

lo

dcscribc

rhc work

of

emiter

cofrp lc

rclf

and rmnsparei

tl].

FRqrcntl!.Tlre inve{o6con.cm

qith

rhe

(rtngrh

or rhe }eakness

ol

a company.

lbey

focus

oi

rhc

c.frpanl\

net income. and not

lmurirg

with Ihc oNrarion incofre. While. rhe

truec.hpanr

s ncr incomecln hc seen

liom

ihe opemtion inco'ne. rhe ner

opemtional

iiens

which are

one

.frhe

comm.n

rii,)ni

hlcn

by management to

inctoa*

fituncial

b.ftr

lmk

is eamin! mrnagemeni

Thi\3.iiun(inbedonei \ari.u\$.l5lor\!nainptrrpor.

lncohc

inlomatioi

is

a rcry

csscnrial aspecr

for

b.$

comprny s

inlemrl dnd

e(enal

padies.

lt

is a conponenr of comnany fi nancial stsrement

'?ied o

evr

i1r

m

rrs/n

q

tc4

rnerre.

topre*nkrivc

inconet

pocncr-

in

.

long

iem,

and

to padn! dE

risk

ol

Onc

olrhc

rasons in

doins incomc smooihing is

to

lulil

compary

olncr

\

necds, such

d

inctoasins rhc c.mDany value. so that the compaiy

$illb€

cotrsidered as a low ri5krompan)

(fo$er

in Dwiarniniand

Nurkholir

2001)

and

incEasine

the

price

of

company

sek

(Ki*chcnhcitcr

and Melunad- 2002). Anorher

rd)n

i5 ro gain penonal

stislaclion

ofnecesit),

3s

ii

gcnin8 compensalion

(Et al

wild

in

Paol. 2004). and

in kccpiig

ftcn

ecuparion position

(|udenbeEand

lircle

in Spohr.1004).

Throulh thc conpany man.Sehcnr hrsacenain pu.pose and rcaso' in

doing inc.me smoothirg. lhe action keeps haling

r.apdbili!

olchanglng ihe

con Ient

.l

in

fomrtion

ol compai,

\

income The

pr

sence

.f

rh is in lonn alion

changes on a

cohp.ny\

ncr incomc, in mmy ways.

sill

leave an influential

imper.n

the Bacrion

olthosc,uing

thc reLabd

infomriion.

as

well6

rhe

appLicdion

of

lncome

$onhing

in a

company.

Ihes

are rhe thines rhar

iiancial

shEnent

uer

should be

a*arc

ot

sincc borh added

or

reduced lnfomalion wilLpossibly b€ able to

l{d

inlo

a}niAdecision n.kine.

lifiuencing

factos on income snmrhing

ar

varidl.

ar rdld

b]

sdme

late

Gearchcs.

Those

fecloE

are

conp.ny sizc.

p.ofihbiLi!.

indusbl

secioB,

dsk

prids, opcftrioi levoftle,

bonus

pld

and narionaLity But in

Based

on

dr

analysis and

iudy

rhar has been conducle!, lhose

lollowins

co'dlsions

dr

resultcd:

l)

Thec

h a posilirc

butnotsignificrntelTectofcodpany

sizc individually

on income smooth in _s phctice in

gopubliccompsy

_{in lndonesi. Srock}

Exohange in year 2002-2006.

lt

shorvs thal compan! sizc variable has

rege$ion

coemcient in posirive value (0,051) and p !aluc that is biggrr

rhan 0,05

(0,a0$n.05)

So

tha!

lhe conclusion is

conpan,

si2e has rhe

posnive elTect bur rhis

vdiabe does.ot

influence

incone{froothing

pncricc

strilicetly.ll

is

consincd

b

llmainir

Esrch

Esuli (1991)i

Jin

dd

Machtbedz

(j993)tarinins m (2000):dd

Yusuf and soBya

(2004).

2)

There is a rceative but nol

siEnifica

cmeotolpDfilability

individualty

on

incom€

smooding

in

compaies

enlislcd

ln

lndo.esia

SrNk

Exchange

yelr

2002 2006.

lt

shows that

pronhbilily

v.riablc

has rhe

reeEssion

c.eflicienr

in

negarire value (-0.073)

.id

p

lrlue

rhar is b.eser rl

rn

n n5 /0.11q;.11.05)

<o.ha...he

con!.1!ol

!.ompd)

,r

h6

r

eeatr.

eFefl

bur

.nh

!J'

role

Jue.

-o'

in

'e-

-

ilnre

smoothing signilicantly. h is noi consistenr to rcscaruh results

olNaN4

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