THE COMPARISON OF INCOME THE COMPARISON OF INCOME SMOOTHING AND MARKET SMOOTHING AND MARKET REACTION BEFORE AND AFTER REACTION BEFORE AND AFTER IFRS ADOPTION IFRS ADOPTION (Empirical Study On Consumer (Empirical Study On Consumer Goods Industry Company) Goods Industry Company) Name : Luthfi Yuliana NPM : 24211180 Major : Accounting Advisor : Dr. Dra. Peni Sawitri, MM
Introduction Background Background • IFRS is expected to increase the quality of accounting IFRS is expected to increase the quality of accounting information. information. • If the quality of accounting information increases, then If the quality of accounting information increases, then the level of asymmetry will decreased and the market the level of asymmetry will decreased and the market also reacted. also reacted. • If the level of asymmetry decreased, then the income If the level of asymmetry decreased, then the income smoothing practices also decreased. smoothing practices also decreased. • This research examined the comparison of income This research examined the comparison of income smoothing and market reaction before and after IFRS smoothing and market reaction before and after IFRS adoption. adoption.
Problem Formulation Problem Formulation • Are there differences in income smoothing before and after the Are there differences in income smoothing before and after the IFRS adoption? IFRS adoption? • Are there any differences in market reaction at the company of Are there any differences in market reaction at the company of income smoothing before and after the IFRS adoption? income smoothing before and after the IFRS adoption? Research Objectives Research Objectives • Examine and analyze whether there are differences of income Examine and analyze whether there are differences of income smoothing before and after the IFRS adoption. smoothing before and after the IFRS adoption. • Examine and analyze whether there are differences in market Examine and analyze whether there are differences in market reaction at the company of income smoothing before and after reaction at the company of income smoothing before and after the IFRS adoption. the IFRS adoption.
Research Hypothesis H1 : There are differences income smoothing before and after the IFRS adoption. H2 : There are differences in market reaction at the company of income smoothing before and after the IFRS adoption.
Research Method • Type and Source data: Secondary data in form the Type and Source data: Secondary data in form the financial statements is obtained from official website of financial statements is obtained from official website of IDX. IDX. • Sample: 21 Consumer goods industry companies Sample: 21 Consumer goods industry companies • Operational variable: • Operational variable: - Status variable before and after IFRS adoption - Status variable before and after IFRS adoption - Income smoothing - Income smoothing - Market reaction (abnormal return) - Market reaction (abnormal return) • Analysis Method: Wilcoxon test and paired sample t- Analysis Method: Wilcoxon test and paired sample t- test test
Result and Discussion Normality Test Variable Normality Result Analysis Tool Income Smoothing Not Normal Wilcoxon Test Market Reaction Market Reaction Normal Normal Paired Sample t-test Paired Sample t-test
Hypothesis Test Result • Income Smoothing (H1)
Hypothesis Test Result • Abnormal Return (H2)
Discussion • Hypothesis I Hypothesis I There is difference in income smoothing in period There is difference in income smoothing in period before and after IFRS adoption, and income smoothing is before and after IFRS adoption, and income smoothing is mostly done after IFRS adoption because: mostly done after IFRS adoption because: 1. If viewed from the characteristic of IFRS is principle- 1. If viewed from the characteristic of IFRS is principle- based and fair value. based and fair value. 2. Different characteristics of the company or state of 2. Different characteristics of the company or state of each. each. 3. The application of IFRS that have not been fully applied. 3. The application of IFRS that have not been fully applied.
Discussion • Hypothesis II Hypothesis II There is no difference in market reaction at the There is no difference in market reaction at the company of income smoothing in period before and company of income smoothing in period before and after IFRS adoption, can caused by: after IFRS adoption, can caused by: 1. Stable earnings 1. Stable earnings 2. More predictable 2. More predictable
Conclussion and Suggestion Conclussion Conclussion - There are differences in the number of companies - There are differences in the number of companies who doing income smoothing before and after IFRS who doing income smoothing before and after IFRS adoption, so the hypothesis I is accepted. adoption, so the hypothesis I is accepted. - While, the market reaction at the company of income - While, the market reaction at the company of income smoothing that there are no differences before and smoothing that there are no differences before and after IFRS adoption, so the hypothesis II is rejected. after IFRS adoption, so the hypothesis II is rejected.
Suggestion Suggestion (For Next Research) (For Next Research) - Expanding the sample by adding other sectors. - Expanding the sample by adding other sectors. - Adding to the period of the research both before and - Adding to the period of the research both before and after the IFRS adoption. after the IFRS adoption. - Consider other factors, which may affect the practice - Consider other factors, which may affect the practice of income smoothing. of income smoothing. - See further instruments in the financial statements - See further instruments in the financial statements that may be used by management for income that may be used by management for income smoothing. smoothing.
(For Investors) (For Investors) - Carefully in understanding the information contained - Carefully in understanding the information contained in the financial statements, especially with regard to in the financial statements, especially with regard to income smoothing. income smoothing. - More attention to the various events that can affect - More attention to the various events that can affect the rise and fall of stock prices in IDX. the rise and fall of stock prices in IDX.
THANK YOU THANK YOU
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