THE EFFECT OF FINANCIAL DISTRESS AND CASH HOLDING ON INCOME SMOOTHING

Abstract

This study aims to analyze the influence of financial distress and cash holding on income smoothing in state-owned enterprises (BUMN) listed on the Indonesia Stock Exchange (BEI) during the period 2021–2023. The quantitative method used in this research is multiple linear regression. This study uses the purposive sampling technique to select 27 state-owned enterprises (BUMN) listed on the Indonesia Stock Exchange during the period 2021–2023. Data obtained from the annual and financial reports published by each company. The research results show that financial distress has a positive and significant impact on income smoothing, which means that businesses experiencing financial problems are more likely to smooth earnings to reduce fluctuations in financial reports. On the other hand, cash holding has a negative and significant impact on income smoothing, indicating that businesses with high liquidity levels are less likely to engage in income smoothing practices. This result has real consequences for businesses in terms of maintaining transparency in financial reporting and managing liquidity and financial risk.