Relationship Between Firm Size and Profitability with Income Smoothing

Evidence from Food and Beverages (F&B) Firms in Jordan

This study examines whether firm size and profitability have an influence on the income smoothing practices of food and beverages (F&B) firms listed on the Amman Stock Exchange (ASE). All 8 F&B firms listed on the ASE are used as the study sample. Eckel model is used in determining whether a firm is smoother or non-smoother. The natural logarithm of total assetsis used as an indicator for firm size, and return on equity is used as an indicator for profitability. Financial leverage is used as a control variable and measured using debt ratio. Data covering the period 2010–2019, of the firms is used in the analysis and hypotheses testing. Descriptive statistics are used in data analysis, and the logistic and multiple regression methods are used in hypotheses testing. All hypotheses are tested under a 95 percent level of confidence, which is equivalent to 0.05, a predetermined coefficient of significance. The study shows that firm size has a positive significant influence on income smoothing, while profitability does not have. Moreover, the study reveals that there is a collective significant impact of both firm size and profitability, when taken together, on income smoothing.