The Hidden Link Between Cash Holding, Profitability, Firm Value, and Income Smoothing Practices

Ati  Suharti; Sovi Ismawati  Rahayu

doi:10.64463/n8t2xp56

Authors

Ati Suharti Faculty of Economics and Business, YARSI University, Jakarta Author
Sovi Ismawati Rahayu Faculty of Economics and Business, YARSI University, Jakarta Author

DOI:

https://doi.org/10.64463/n8t2xp56

Keywords:

Cash Holding, Profitability, Firm Value, Income Smoothing

Abstract

This study aims to examine the effect of Cash Holding, Profitability, and Firm Value on Income Smoothing. Cash Holding in this study is measured by the ratio of cash and cash equivalents to total assets, Profitability is measured using Return on Assets (ROA), Firm Value is measured using Price Book to Value (PBV) and Income Smoothing is measured using the Eckel Index. The research procedure used is quantitative. This study uses a sample of manufacturing companies in the consumer goods industry sector listed on the Indonesia Stock Exchange (IDX) during the period 2013-2017. This study uses secondary data, namely company financial reports obtained from the official IDX website and Yahoo Finance. The analysis method used is multiple linear regression. The results of the study indicate that the variables of cash holding, profitability, and firm value have a significant effect on income smoothing. Managerial Implications The results of this study provide important implications for the management of manufacturing companies, especially in the consumer goods sector, that the management of cash holding, profitability, and firm value must be carried out carefully because they have been proven to have a significant effect on income smoothing practices.

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