INCOME SMOOTHING THROUGH R&D MANAGEMENT AND EARNINGS INFORMATIVENESS

We examine whether income smoothing via R&D management is associated with more informative earnings. While the literature finds earnings smoothing through accruals improves earnings informativeness, it is unclear whether smoothing through R&D management is used to inform investors because R&D management is relatively more difficult to detect and curb. We find that R&D management, which represents a subset of real activities management, is associated with more informative earnings but the association is weaker, relative to smoothing through accruals. We also document that R&D-based smoothing is associated with more accurate and less disperse analyst forecasts of earnings but the association is weaker, relative to smoothing through accruals. Overall, we provide novel evidence suggesting that managers use R&D management to smooth temporary shocks to earnings and inform investors.

APAKAH AGRESIVITAS PAJAK MENURUNKAN TINGKAT KEINFORMATIFAN LABA PERUSAHAAN?

Abstract— This research aims to examine the association between tax aggressiveness and the level of earnings informativeness. This study examines whether tax aggressiveness is being responded to by the market. This study's methodology is a quantitative approach with multiple linear regression models and panel data. The sample employed in this study is trading sector companies listed on the Indonesia Stock Exchange (IDX). The type of data used in this study is secondary data sourced from financial statements, stock price information, and annual reports from 2017 to 2019. The sample selection using a purposive sampling method with the number of samples amounted to 48 firm-year. This study suggests that tax aggressiveness is negatively associated with the level of earnings informativeness. The complexity of the company's tax aggressiveness activities makes it more difficult for investors to understand the quality of earnings reported by the company. Keywords: Tax Aggressiveness; Tax Avoidance; Earnings Informativeness; ERC; Market Responsiveness