Analysis of income smoothing practices in PROPER companies
Baiq Sarah Fitria Febriani, Muhammad Ali Fikri & Nurabiah
Abstract
This study aims to find out and analyze whether income smoothing practices exist in companies with the Corporate Performance Rating Program in Environmental Management (PROPER). The research sample consisted of 57 PROPER companies in the Indonesia Stock Exchange (IDX) from 2017 to 2021. The data were measured by the Index Eckel using quantitative descriptive analysis. The findings of this study reveal that several PROPER companies show signs of manipulating their revenue figures to create a smoother financial picture. Most companies that obtained a blue rating on PROPER indicated income smoothing whereas the green rating, not many companies indicated income smoothing. Conversely, no company with a gold PROPER rating indicates income smoothing. It can be concluded that the higher the PROPER rating obtained by a company, the lower the possibility of companies performing income smoothing. This research implies a conflict of interest and information asymmetry between the agent and the principal which motivates management to perform income smoothing. Therefore, with this theory, an equal distribution of interests between management and stakeholders will be obtained. The novelty of this research is the use of quantitative descriptive analysis for a more in-depth analysis of income smoothing by PROPER companies as compared to previous studies. Hence, this study showed empirical evidence on the difference between PROPER companies that carry out and do not carry out income smoothing.
Keywords
income smoothing, Index Eckel, PROPER companies, smoothing practices
Author information & Contribution
Baiq Sarah Fitria Febriani. Student, Department of Accounting, Faculty of Economics and Business, Mataram University
Muhammad Ali Fikri. Lecturer, Department of Accounting, Faculty of Economics and Business, Mataram University
Nurabiah. Corresponding author. Lecture, Department of Accounting, Faculty of Economics and Business, Mataram University
Disclosure statement
Funding
Institutional Review Board Statement
AI Declaration
Notes
Acknowledgement
References
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Cite this article:
Baiq Sarah Fitria Febriani, Muhammad Ali Fikri & Nurabiah (2023). Analysis of income smoothing practices in PROPER companies. International Journal of Academe and Industry Research, 4 (3), 1-19. DOI: https://doi.org/10.53378/352999
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