ABSTRACT
This study examines the effect of income smoothing and risk response in the Indonesian ma rket as a proxy variable of shareholder wealth. The research methodology used is based Wang and Williams(2006). The sample used in this study were 110 companies listed on the Stock Exchange during the five years(2007-2011). Hypothesis testing using panel regression analysis. The results of this study indicate that here is no effect of income smoothing on the market response. This study also proves that the risk of companies doing income smoothing is higher than that does not do income smoothing.