Stakeholder Response to Information on Social Responsibility and Income Smoothing

Ardhya Yudistira Adi Nanggala

doi:10.36766/ijag.v7i2.365

Stakeholder Response to Information on Social Responsibility and Income Smoothing

Ardhya Yudistira Adi Nanggala

Abstract

This study aims to examine the response of stakeholder and shareholder to the information submitted by the company. In the discussion of signaling theory, information is a signal and is expected to be responded to by shareholder and stakeholder. The research population is manufacturing companies from 2018 to 2021 in Indonesia, with a purposive sample of 64 companies-years of observation. There are five hypotheses tested using partial least squares. Three hypotheses were successfully accepted and rejected the others. The test results prove that stakeholder respond to CSR as a positive signal for the company but fail to demonstrate the role of income smoothing. Different things are shown that income smoothing is a signal that is responded to by shareholder but is not responded to by stakeholder. The firm value becomes the guideline for the value that stakeholder provides to the company. Testing the mediating role shows that firm value is not an intervening variable because it does not have a direct relationship with growth. Income smoothing affects firm value, and then firm value affects growth. In the development of science, these findings can be used to develop accounting theory. Evidence of stakeholder reactions to signals given by shareholder and management can lead to a process of generalizing and falsifying theories to strengthen financial accounting theory.

Full Text:

PDF

References

N. Jan, A. L. Karn, Z. Li, and X. Liu, “The relationship between corporate social responsibility reporting and firm performance and the moderating role of firm life cycle stages: Evidence from China,” Sustain., vol. 13, no. 18, 2021, doi: 10.3390/su131810038.

I. Nazaruddin, S. B. Rezki, and Y. Rahmanda, “Love of money, gender, religiosity: The impact on ethical perceptions of future professional accountants,” Bus. Econ. Horizons, vol. 14, no. 2, pp. 424–436, 2018, doi: 10.15208/beh.2018.31.

W. Sui, C. Yang, and H. Zhang, “Is corporate social responsibility used to mask corporate speculation? Evidence from emerging China,” Sustain., vol. 11, no. 12, 2019, doi: 10.3390/SU11123375.

N. Dong, “Ownership structure and real earnings management: Evidence from China,” J. Account. Public Policy, vol. 39, no. 3, 2020, doi: 10.1016/j.jaccpubpol.2020.106733.

A. West, “Professional judgement in accounting and Aristotelian practical wisdom,” Accounting, Audit. Account. J., 2022, doi: 10.1108/AAAJ-09-2020-4949.

F. Wang, S. Xu, J. Sun, and C. P. Cullinan, “Corporate Tax Avoidance: a Literature Review and Research Agenda,” J. Econ. Surv., vol. 34, no. 4, pp. 793–811, Sep. 2020, doi: 10.1111/joes.12347.

E. D. Satria, “Pengaruh Corporate Social Responsibility (Csr) Terhadap Kinerja Keuangan Perusahaan (Studi Empiris Pada Perusahaan Manufaktur Yang Terdaftar Di Bursa Efek Indonesia Tahun 2011),” Diponegoro J. Account., vol. 3, no. 1, pp. 65–79, 2014.

B. Jitmaneeroj, “A latent variable analysis of corporate social responsibility and firm value,” Manag. Financ., vol. 44, no. 4, pp. 478–494, 2018, doi: 10.1108/MF-08-2017-0303.

L. Moratis, “Signaling responsibility? Applying signaling theory to the ISO 26000 standard for social responsibility,” Sustain., vol. 10, no. 11, pp. 1–20, 2018, doi: 10.3390/su10114172.

S. S. Jang, H. Ko, Y. Chung, and C. Woo, “CSR, social ties and firm performance,” Corp. Gov., vol. 19, no. 6, pp. 1310–1323, 2019, doi: 10.1108/CG-02-2019-0068.

S. Kim, G. Lee, and H. G. Kang, “Risk management and corporate social responsibility,” Strateg. Manag. J., vol. 42, no. 1, pp. 202–230, 2021, doi: 10.1002/smj.3224.

A. S. L. Lindawati, O. The, J. Tanuwijaya, and S. Saputri, “The Effect of CSR Disclosure, Company Sizes and Sales Growth on Profitability of Customer Good Industry Registered in Indonesia Stock Exchange Period 2016-2018,” ACM International Conference Proceeding Series. pp. 185–192, 2021, doi: 10.1145/3457640.3457644.

M. H. Zadeh, M. Magnan, D. Cormier, and A. Hammami, “Environmental and social transparency and investment efficiency: The mediating effect of analysts’ monitoring,” J. Clean. Prod., vol. 322, 2021, doi: 10.1016/j.jclepro.2021.128991.

B. H. Bao and D. H. Bao, “Income smoothing, earnings quality and firm valuation,” J. Bus. Financ. Account., vol. 31, no. 9–10, pp. 1525–1557, Nov. 2004, doi: 10.1111/j.0306-686X.2004.00583.x.

R. Hejazi, Z. Ansari, M. Sarikhani, and F. Ebrahimi, “The Impact Of Earnings Quality And Income Smoothing On The Performance Of Companies Listed In Tehran Stock Exchange,” Int. J. Bus. Soc. Sci., vol. 2, no. 17, pp. 193–197, 2011, [Online]. Available: http://search.proquest.com/docview/904522920?accountid=12528%5Cnhttp://monash-dc05.hosted.exlibrisgroup.com/openurl/MUA/MUL_SERVICES_PAGE?url_ver=Z39.88-2004&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&genre=article&sid=ProQ:ProQ:abiglobal&atitle=The+Impact+.

C.-Y. Yang, B. L. Tan, and X. Ding, “Corporate governance and income smoothing in China,” J. Financ. Report. Account., vol. 10, no. 2, pp. 120–139, 2017.

A. Yahya, “Pengaruh Income Smoothing Atau Perataan Laba Terhadap Return Saham Perusahaan Yang Terdaftar Di Indeks JII Periode 2010-2013,” Jurnal Pelita Ilmu. 2018.

I. Faradilah, “Pengaruh perataan laba, persistensi laba, leverage terhadap earning response coefficient dengan kualitas audit sebagai variabel moderasi,” SKRIPSI-2019, 2019, [Online]. Available: http://repository.trisakti.ac.id/usaktiana/index.php/home/detail/detail_koleksi/5/SKR/2008/00000000000000096802/0.

H. Monjed and S. Ibrahim, “Risk disclosure, income smoothing and firm risk,” J. Appl. Account. Res., vol. 21, no. 3, pp. 517–533, 2020, doi: 10.1108/JAAR-05-2019-0085.

N. A. Dwipayanti, Pengaruh Pengumuman Informasi Laba, Manajemen Laba, Perataan Laba, Kebijakan Dividen dan Inflasi Terhadap Reaksi Pasar Pada Perusahaan yang Terdaftar …. repository.stieykpn.ac.id, 2021.

M. A. McDevitt, R. M. Dunn, M. L. Spetch, and E. A. Ludvig, “When good news leads to bad choices,” J. Exp. Anal. Behav., vol. 105, no. 1, pp. 23–40, 2016, doi: 10.1002/jeab.192.

Aminah, Soewito, N. Erina, Khairudin, and T. Damayanti, “Financial performance and market share in Indonesia Islamic Banking: Stakeholder theory perspective,” International Journal of Scientific and Technology Research, vol. 8, no. 1. researchgate.net, pp. 14–18, 2019, [Online]. Available: https://www.researchgate.net/profile/Tri-Damayanti-5/publication/331972728_Financial_performance_and_market_share_in_Indonesia_Islamic_Banking_Stakeholder_theory_perspective/links/601e6921458515893984e99e/Financial-performance-and-market-share-in-Indonesi.

M. P. Kim, S. R. Pierce, and I. Yeung, “Why Firms Announce Good News Late: Earnings Management and Financial Reporting Timeliness*,” Contemp. Account. Res., vol. 38, no. 4, pp. 2691–2722, 2021, doi: 10.1111/1911-3846.12695.

C. Groening and V. K. Kanuri, “Investor Reactions to Concurrent Positive and Negative Stakeholder News,” J. Bus. Ethics, vol. 149, no. 4, pp. 833–856, 2018, doi: 10.1007/s10551-016-3065-2.

M. A. Harjoto, D. Kim, I. Laksmana, and R. C. Walton, “Corporate social responsibility and stock split,” Rev. Quant. Financ. Account., vol. 53, no. 2, pp. 575–600, 2019, doi: 10.1007/s11156-018-0759-9.

R. Effendi, “Membangun nilai perusahaan berbasis pemangku kepentingan (build value based of corporate stakeholder’s),” Goodwill J. Penelit. Akunt., vol. 1, no. 2, pp. 89–94, 2019, [Online]. Available: http://ojs.mputantular.ac.id/index.php/gw/article/view/342.

A. S. L. Lindawati and M. E. Puspita, “Corporate Social Responsibility: Implikasi Stakeholder dan Legitimacy Gap dalam Peningkatan Kinerja Perusahaan,” J. Akunt. Multiparadigma, pp. 157–174, 2015, doi: 10.18202/jamal.2015.04.6013.

E. Triyuwono, S. Ng, and F. E. Daromes, “Tata Kelola Perusahaan Sebagai Mekanisme Pengelolaan Risiko Untuk Meningkatkan Nilai Perusahaan,” Media Riset Akuntansi …. repository.dinus.ac.id, 2020, [Online]. Available: https://repository.dinus.ac.id/content/download/12/1423/64131/Temu_8_2020_Trisakti_CG_Resiko_Perusahaan.pdf.

S. Li and N. Richie, “Income smoothing and the cost of debt,” China Journal of Accounting Research, vol. 9, no. 3. Elsevier, pp. 175–190, 2016, doi: 10.1016/j.cjar.2016.03.001.

Z. Mahmood, R. Kouser, and M. A. K. Masud, “An emerging economy perspective on corporate sustainability reporting – main actors’ views on the current state of affairs in Pakistan,” Asian J. Sustain. Soc. Responsib., vol. 4, no. 1, 2019, doi: 10.1186/s41180-019-0027-5.

L. E. Hickman, “Information asymmetry in CSR reporting: publicly-traded versus privately-held firms,” Sustain. Accounting, Manag. Policy J., vol. 11, no. 1, pp. 207–232, 2020, doi: 10.1108/SAMPJ-12-2018-0333.

L. Lin, P. H. Hung, D. W. Chou, and C. W. Lai, “Financial performance and corporate social responsibility: Empirical evidence from Taiwan,” Asia Pacific Manag. Rev., vol. 24, no. 1, pp. 61–71, 2019, doi: 10.1016/j.apmrv.2018.07.001.

S. Yim, Y. H. Bae, H. Lim, and J. H. Kwon, “The role of marketing capability in linking CSR to corporate financial performance: When CSR gives positive signals to stakeholders,” Eur. J. Mark., vol. 53, no. 7, pp. 1333–1354, 2019, doi: 10.1108/EJM-08-2017-0526.

A. Assagaf and A. M. Tyas, “Pengaruh profitabilitas dan likuiditas terhadap earning response coefficient yang dimoderasi oleh accruals earnings management,” Econ. Sustain. Dev., vol. 6, no. 2, pp. 36–50, 2020, [Online]. Available: https://ejournal-unipra.com/index.php/ESD-UNIPRA/article/view/157.

D. S. Abbas and I. Hidayat, “Determinant signaling dan prudence accounting,” J. Akunt. Bisnis, vol. 15, no. 1, pp. 1–11, 2022, [Online]. Available: https://journal.ubm.ac.id/index.php/akuntansi-bisnis/article/view/2917.

K. Herbohn, R. Gao, and P. Clarkson, “Evidence on Whether Banks Consider Carbon Risk in Their Lending Decisions,” J. Bus. Ethics, vol. 158, no. 1, pp. 155–175, 2019, doi: 10.1007/s10551-017-3711-3.

A. M. Syed and I. A. Bajwa, “Earnings announcements, stock price reaction and market efficiency – the case of Saudi Arabia,” International Journal of Islamic and Middle Eastern Finance and Management, vol. 11, no. 3. emerald.com, pp. 416–431, 2018, doi: 10.1108/IMEFM-02-2017-0044.

F. Francisca, “Identifikasi pengaruh perataan laba terhadap risiko kejatuhan harga saham di bursa efek Indonesia.” repository.uph.edu, 2018, [Online]. Available: http://repository.uph.edu/27575/.

A. Palupi, “Relationship between income smoothing and earnings announcement,” International Symposia in Economic Theory and Econometrics, vol. 29A. pp. 185–193, 2021, doi: 10.1108/S1571-03862021000029A026.

M. Simanullang, Pengaruh perataan laba (income smoothing) terhadap harga saham. repository.uhn.ac.id, 2022.

M. M. Mesye Indah Damai Yanti, “pengaruh perataan laba, pengungkapan corporate social responsibility, rasio aktivitas terhadap reaksi pasar (Studi pada perusahaan sektor pertambangan yang Terdaftar di Bursa Efek Indonesia Periode 2013-2018),” eProceedings Manag., vol. 7, no. 2, pp. 3106–3116, 2020, [Online]. Available: https://openlibrarypublications.telkomuniversity.ac.id/index.php/management/article/view/13365.

R. Galih, Pengaruh Perataan Laba, CSR Disclosure, dan Kebijakan Dividen Terhadap Reaksi Pasar pada Perusahaan Manufaktur yang Terdaftar di Bursa Efek Indonesia …. eprints.perbanas.ac.id, 2021.

A. Kaul and J. Luo, “An economic case for CSR: The comparative efficiency of for-profit firms in meeting consumer demand for social goods,” Strateg. Manag. J., vol. 39, no. 6, pp. 1650–1677, 2018, doi: 10.1002/smj.2705.

T. Zhao and X. Xiao, “The impact of corporate social responsibility on financial constraints: Does the life cycle stage of a firm matter?,” Int. Rev. Econ. Financ., vol. 63, pp. 76–93, 2019, doi: 10.1016/j.iref.2018.08.010.

P. Xanthi, Z. Eleni, G. Grigoris, and S. Nikolaos, “The effect of corporate social responsibility performance on financial performance: the case of food industry,” Benchmarking An Int. J., vol. 27, no. 10, pp. 2701–2720, Jan. 2020, doi: 10.1108/BIJ-11-2019-0501.

C. Arena, S. Bozzolan, and G. Michelon, “Environmental Reporting: Transparency to Stakeholders or Stakeholder Manipulation? An Analysis of Disclosure Tone and the Role of the Board of Directors,” Corp. Soc. Responsib. Environ. Manag., vol. 22, no. 6, pp. 346–361, 2015, doi: 10.1002/csr.1350.

L. J. Cohen, A. J. Marcus, Z. Rezaee, and H. Tehranian, “Waiting for guidance: disclosure noise, verification delay, and the value-relevance of good-news versus bad-news management earnings forecasts,” Glob. Financ. J., 2018, [Online]. Available: https://www.sciencedirect.com/science/article/pii/S1044028318300711.

C. L. Yang, K. P. Huang, C. C. Chiu, and Y. C. Lee, “From evaluation to improvement: A close-loop csr system for manufacturing industry,” J. Sci. Ind. Res. (India)., vol. 77, no. 11, pp. 626–628, 2018, [Online]. Available: https://api.elsevier.com/content/abstract/scopus_id/85104170827.

A. S. Kustono, “The Theoritical Construction Income Smoothing Measurenment,” J. Econ. Bus. Account. Ventur., vol. 14, no. 1, pp. 59–78, 2011, [Online]. Available: https://journal.perbanas.ac.id/index.php/jebav/article/view/19/16.

A. S. Kustono, “Managing Market Pressure Using Sustainability Disclosure in the Banking Industry,” Acad. Account. Financ. Stud. J., vol. 25, no. 2, pp. 1–16, 2021.

F. Jouha, K. Albakay, I. Ghozali, and P. Harto, “Revisiting the Effect of Financial Elements on Stock Performance Using Corporate Social Responsibility Cost Growth,” J. Asian Financ. Econ. Bus., vol. 8, no. 1, pp. 767–780, 2021, doi: 10.13106/jafeb.2021.vol8.no1.767.

A. Nurjanah and F. Yulianti, “Motives for Implementing Corporate Social Responsibility (Case Study: CSR of PT. Holcim Indonesia Tbk. Cilacap Plant and CSR Delegation Europian Union to Malaysia),” CHANNEL J. Komun., vol. 6, no. 2, p. 139, 2018, doi: 10.12928/channel.v6i2.11575.

A. S. Kustono, “Corporate governance mechanism as income smoothing suppressor,” Accounting, vol. 7, pp. 1–10, 2021, doi: 10.5267/j.ac.2021.1.010.

DOI: https://doi.org/10.36766/ijag.v7i2.365