The Influence of Profitability and Income Tax on Income Smoothing Rankings
Abstract: Income smoothing
is logical and rational action that managers attempt to reduce abnormal
variation in earnings using special tools in accounting. The objective of this
study is to investigate the influence of profitability and income tax on income
smoothing rankings of the companies in basic industry and chemical sectors
listed in Indonesia Stock Exchange. Statistical sample of the present study is
formed from 45 companies in 2014. ROA is used as the proxy of profitability. In
calculating the income smoothing, it is used Tucker-Zarowin (TZ) statistic for
five year from the year 2010 to 2014 amounted to 225 firm-years observations.
Income smoothing is measured by the negative correlation between the change in
discretionary accruals and change in pre-discretionary income. The results from
the hypotheses testing indicated that there is a negative and significant
relationship between profitability and income smoothing. However, it is also
found that there is no significant relationship between variables of income tax
and income smoothing.
Key words: profitability,
income tax, income smoothing rankings, Tucker-Zarowin (TZ) statistic.
Penulis: RATNANINGRUM
