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The Political Roots of Income Smoothing: The Moderating Influence of Institutional Investors

Authors

https://doi.org/10.22105/aaa.v3i4.114

Abstract

This study examines the effect of Political Connections (PCF) on income smoothing and investigates the moderating role of institutional investors in this relationship. The study aims to provide empirical evidence on how political ties and institutional investment jointly influence firms’ income-smoothing practices. This study employs a descriptive research design based on panel data from the period 2017–2023. Excel software was used for data collection, organization, and preparation, while EViews was employed to conduct the statistical analyses. The hypotheses were tested using panel data regression techniques. The results indicate that PCF have a significant effect on income smoothing. Furthermore, institutional investment significantly moderates the relationship between PCF and income smoothing, suggesting that the presence and influence of institutional investors can alter the extent to which PCF affect firms’ income-smoothing practices. This study contributes to the literature by examining the interaction between PCF, income smoothing, and institutional investment within an integrated framework. By highlighting the moderating role of institutional investors, the findings provide additional insight into how political ties and ownership structure may jointly shape corporate financial reporting behavior.

Keywords

Political connections Income smoothing Institutional investment

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Published 2026-10-24
Issue Vol. 3 No. 4 (2026): Accounting and Auditing with Applications (AAA)
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The Political Roots of Income Smoothing: The Moderating Influence of Institutional Investors. (2026). Accounting and Auditing With Applications , 3(4). https://doi.org/10.22105/aaa.v3i4.114

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