The Effect of Changes in Operating Profit Margin, Managerial Ownership and Company Size on Evaluation of Income Practices

Abstract

he practice of income smoothing is one of earnings management which is defined as a reduction in profit fluctuations from year to year by moving income from high-income years to unfavourable periods. This study aims to obtain empirical data and re-examine whether
changes in operating profit margin, managerial ownership and firm size could be affected to income smoothing practice. The research uses purposive sampling method. Sample of the research were 270 companies listed on The Indonesia Stock Exchange during the study period of 3 years. The technique of analysis research uses logistic regression. The difference of this research and the previous research is on the samples, the previous research used manufacturing companies listed on the Indonesia Stock Exchange while on this research, researchers used all of companies listed on the Indonesia Stock Exchange as a sample. The results showed that the variable of Operating Profit Margin Changes and variable of Company Size have no effect on Income Smoothing Practice, while Managerial Ownership variable have a positive effect on The Practice of Income Smoothing