The effect of income smoothing and CSR disclosure on market performance

Purpose: The main aim of the study was to determine the effect of income smoothing and CSR disclosure whether it affects market performance which is divided into 3 aspects, namely market response (CAR), market risk (SD), market value (MVE) in manufacturing companies in Indonesia. This study uses a basic theory, namely agency and signals are used to explain how the income smoothing company that makes CSR disclosures affects market performance. Design/methodology/approach: This study uses secondary data, namely financial reports that was accessed through the Indonesian Stock Exchange page. The sample in this study was 37 manufacturing companies listed on the Indonesia Stock Exchange for the period 2014 - 2019. The research hypothesis was tested using multiple linear analysis with the SPSS test tool. Findings: This study found that companies that perform income smoothing have an effect on market response (CAR) and market risk (SD), while CSR disclosure has an effect on market performance, which is calculated through 3 aspects CAR, SD, and MVE. Research limitations/implications: One of the problems in this research is the calculation of the abnormal return value in only 30 days due to the limitations of the research. This research is for companies in order to reduce income smoothing actions because it has a negative correlation to market reactions and companies can increase CSR disclosure because it will have a positive value for the company. Originality/value: This study contributes to the theory of empirical testing regarding the effect of income smoothing practices and CSR disclosure on market performance. This study also adds new variables and extends the time span for calculating abnormal returns from related studies. Further studies can add variables that have a positive correlation to market performance and extend the range of calculating the abnormal return value.