| Summary: |
The investor's attention on net income numbers without regard to the procedures used to generate them, has encourage management to carry out earnings manangement. Includes within earnings management is income smoothing. Income smoothing can be viewed in term of the reduction in earnings variability over a numbers of periods, or within a single period, as the movement toward unexpected level of reported earning.
Objective of this study to examine the market reaction on earnings announcement due to the income smoothing This study examine ninetu nin companies which listed in Jakarta Stock Exchange at least since 1990. Market raction is measured as cummulative abnormal return five days surrounding the companies' earnings announcement date.
Overall, the result of this study indicate that there is signifiacnt market raction surrounding the companies' earnings announcement date and these market raction significantly difference between smoother companies and non-smoother companies.
this study is hopes to give countribution to the literature that income smoothingpractice can regard as a signal to better prediction of future earnings by investors and a mean to decrease market reaction on companies' earnings anouncement.
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