REAKSI PASAR TERHADAP HUBUNGAN ANTARA PRAKTEK PERATAAN LABA DENGAN KUALITAS AUDITOR, UKURAN DEWAN DIREKSI, KEPEMILIKAN INSTITUSIONAL DAN MANAJERIAL, DAN KOMPENSASI

Suranta, Eddy and Midiastuty, Pratana Puspa and Ilyas, Fitrawati (2014) REAKSI PASAR TERHADAP HUBUNGAN ANTARA PRAKTEK PERATAAN LABA DENGAN KUALITAS AUDITOR, UKURAN DEWAN DIREKSI, KEPEMILIKAN INSTITUSIONAL DAN MANAJERIAL, DAN KOMPENSASI. In: Corporate Governance Issues In Asia-Pacific Region, 24-25 November 2006, Universitas Trisakti Jakarta Indonesia.

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Abstract

The aim of the study was to examine the impact of auditor quality, board size, institutional and managerial ownership and level of compensation on the relationship income smoothing and market reaction in the periode of financial statement publication in 2001-2004. The study motivated by the controversy of previous studies about market reaction to the income smoothing in Indonesia (especially Sandra and Kusuma research, 2004). The sample of this research was the non financial companies listed at Jakarta Stock Exchange. The data was collected using purposive sampling method. The number of the samples of the company was 36 companies and using pooled data the number of observation was 129 observations. The income smoothing measured using Eckel Index in the observation periode 1998-2004. The market reaction was measured using cumulative abnormal return, short windows five days before the date of the publication of financial statement, at the day of publication of the financial statement and in five days after the date of publication of financial statement. The auditor quality was measured using auditor reputation whose affiliated with the big four. Board size was measured using the number of board of director in the companies. Institutional and managerial ownership was measured using percentage of the stock holding by the institution and management of the companies. Level of compensation was measured using total compensation pay to board of director and board of commissioner. The results with ordinary least square regression analysis with the moderating variable show that board size, institutional ownership and level of compensation was the moderating variable between income smoothing and market reaction. The results show that managerial ownership was moderating variable of the relationship between income smoothing and market reaction but the relationship are negatively. Implication of negatively relationship showed market didn’t like the action of income smoothing by the companies with the high managerial ownership. This results support Sandra and Kusuma conclusion that managerial ownership had more space to smooth income whisch was intentionally smoothing in nature. The final results showed that auditor quality wasn’t the moderating variable between the income smoothing and market reaction. The results support Sandra and Kusuma and Ardiati finding which the argument that financial statement was not to detect the occurrence of earnings management but to the increase the credibility of the financial statement.

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