| Income smoothing is the effort made by management to stabilize reported earnings to match the desired target either artificially or in real terms. Income smoothing by managers is also seen as a controversial practice in accounting, both by policy makers and regulators, as well as by investors from companies seeking transparency in the accountability of managers for the company's financial performance. This study aims to analyze factors that affecting the income smoothing action, which are firm size, profitability, financial leverage, and bonus plans (management’s incentive) on a banking companies listed on the Indonesia Stock Exchange (BEI). The population of this study amounted to 93 companies. The sample of this study amounted to 25 companies with a sub sample of 66 financial statements. The number of samples was obtained through the method of purposive judgment sampling. Observations made during the three years from 2008 to 2010. Eckel index is used to to classify which company smooth their income and not smooth income. The calculations of Eckel Index show that as many as 10 companies indicated income smoothing action. Based on the results of multiple regression analysis of factors of company size, profitability, and bonus plans (management’s incentive) had no effect on earnings income smoothing action. Meanwhile, financial leverage factors affect income smoothing action. |