The Effect of Earnings Aggressiveness, Income Smoothing, Earnings Transparency on Cost of Equity with Earnings Informativeness As Moderating For Companies Listed on Indonesia Stock Exchange During The Period 2011-2013

Abstract

This study aims to demonstrate empirically the
effect of earnings aggressiveness, income smoothing, and
earnings transparency on the cost of equity with earnings
informativeness as moderating. The purpose of this
research paper is to contribute an additional form of
building knowledge about the cost of equity to provide
empirical evidence that is more comprehensive in
association with earnings aggressiveness, income
smoothing, earnings transparency, and earnings
informativeness.
The test was conducted using secondary data from
financial statement data. The data sample was taken from
209 entities listed on the Indonesia Stock Exchange unless
the company was in addition to property and financial
sector for the period 2011 to 2013 and was processed using
multiple regression models.
The methodology of this research is quantitative
with the aim to see whether there are any relationships
between variables. The results show that earnings
aggressiveness and income smoothing have positive
influences on the cost of equity, while earning
transparency has a negative result against the same
variable. When earning informativeness, the moderating
variable, is added to the three relationships, it brings in
three different conclusions. First, the moderation weakens
the positive relationship between earning aggressiveness
and cost of equity. Second, the moderation strengthens the
negative relationship between earnings transparency and
cost of equity. And at last, the moderation does not have
significance towards income smoothing and cost of equity.