THE EFFECT OF OPERATING LEVERAGE AND OPERATING PROFIT MARGIN TOWARDS INCOME SMOOTHING PRACTICES (AN EMPIRICAL STUDY ON MANUFACTURING COMPANIES LISTED ON INDONESIA STOCK EXCHANGE YEAR 2014-2016)

The purpose of this research is to examine the influence of operating leverage and operating profit margin toward the practice of income smoothing. The sample used in this study at 79 manufacturing companies listed on the Indonesian Stock Exchange beginning in 2014 to 2016 were obtained by purposive sampling method. The data type used is secondary data obtained from the financial statements ended on 31 December, published by the capital market references center at the Indonesia Stock Exchange. Independent variable that examined in this research are operating leverage and operating profit margin. Eckel index was used to determine firms who practice the income smoothing and who do not practice the income smoothing. Logistic regression analysis provided by SPSS 24.0 is also employed to test the hypothesis constructed within this research.The result of this research are (1) operating leverage and operating profit margin simultaneously have influence toward income smoothing, (2) operating leverage has positive and significant influence toward income smoothing, (3) operating profit margin has positive and significant influence toward income smoothing.Keywords: income smoothing, operating leverage, operating profit margin.