Factors Affecting Income Smoothing in Food and Beverage Companies

This study aims to obtain empirical evidence on the effect of firm size, dividend payout ratio, cash holding, and board size on income smoothing practices in food and beverage companies listed on the Indonesia Stock Exchange during the 2018–2023 period. Income smoothing, as a common earnings management practice, is often carried out by managers to reduce fluctuations in reported earnings and present a more stable financial performance to stakeholders. The sample in this study was determined using a purposive sampling method based on specific criteria, resulting in 70 firm-year observations. The research utilized secondary data obtained from annual financial statements published on the official IDX website. Data were analyzed using logistic regression with the assistance of SPSS 25.0 to test both simultaneous and partial effects of the independent variables on income smoothing behavior. The results reveal that simultaneously, firm size, dividend payout ratio, cash holding, and board size significantly influence income smoothing practices. Partially, the dividend payout ratio shows a significant positive effect, indicating that companies with higher dividend distributions are more likely to engage in income smoothing to maintain investor trust and dividend stability. Conversely, board size has a significant negative effect, suggesting that larger boards may strengthen oversight and reduce managerial discretion in earnings management. On the other hand, firm size and cash holding do not exhibit significant effects on income smoothing, implying that these factors are not the primary determinants of such practices in the food and beverage sector. Overall, these findings highlight the importance of dividend policy and corporate governance structures in shaping financial reporting behavior. The study contributes to the literature on earnings management by providing new evidence from an emerging market context and offers practical implications for investors, regulators, and corporate boards in assessing the credibility of reported earnings.