The Moderating Role of Political Connection in The Impact of Cash Holding and Political Cost on Income Smoothing

The objective of this research is to examine the moderating role of political connection in moderating the influence of cash holding and political cost on income smoothing. The mining businesses listed on the Indonesia Stock Exchange (IDX) between 2019 and 2023 were the subject of this quantitative analysis. Using the purposive sampling technique, a total of 65 businesses were chosen as samples. To test the research hypothesis, Moderated Regression Analysis (MRA) was used to analyze the data with the help of IBM SPSS Statistics 21 software. The research results show that cash holding does not affect income smoothing, political cost has a significant positive effect on income smoothing, political connection cannot moderate the relationship between cash holding and income smoothing, but political connection strengthens the relationship between political cost and income smoothing. The implications of these research results can be used by investors to make more informed investment decisions, taking into account aspects that can affect the quality of the company's financial statements. This research also has important implications for auditors in designing more efficient audit procedures to detect earnings management practices. Additionally, this research contributes to agency theory in understanding how political connections strengthen the relationship between political cost and income smoothing.