Income Smoothing

Based on data from 1,281 observations on Vietnam's stock market in the period 2009-2015, the article clarified two fundamental issues by identifying the existence of earnings management of listed companies and analyzing the factors influencing earnings management such as business sectors, auditing firms, and debt-to-equity ratio. The findings of the article contributed to the limited research on earnings management on Vietnam's stock market in particular as well as on the disclosure of earnings information of Vietnam's enterprises in general.

Understanding how income smoothing influences shareholder wealth is critical in the evolving dynamics of Nigeria's financial sector. This study examines the relationship between income smoothing and shareholder wealth creation in Zenith Bank Plc, a leading financial institution in Nigeria, over the period 2002 to 2024. The aim is to evaluate how Return On Equity (ROE), Dividend Per Share (DPS), and Return On Assets (ROA) Affect Earnings Per Share (EPS), a key proxy for shareholder wealth. An ex-post facto research design was employed, using secondary data sourced from Zenith Bank's financial reports. Analytical techniques included trend analysis, SWOT, PESTEL, and regression analysis, carried out with the EViews software. The regression results revealed that ROA and ROE had positive coefficients, while DPS had a negative coefficient; however, none of the independent variables were statistically significant (ROA: p=0.2852, ROE: p = 0.9225, DPS: p = 0.5613). The overall model was not significant (p = 0.149), indicating that income smoothing did not have a statistically confirmed impact on shareholder wealth during the period under review. The study is limited by its focus on a single institution, which may affect the generalizability of the findings. Future research should consider a comparative analysis across multiple banks or financial institutions, both locally and internationally. In conclusion, while income smoothing did not significantly influence shareholder wealth statistically, the strategic management of income trends, asset utilization, and dividend policy remains essential for long-term value creation in the banking sector.

Öz: Çalışmada Borsa İstanbul (BIST) gıda ve içecek endeksinde işlem gören işletmelerin kar düzleştirmeleri üzerinde ertelenmiş vergi varlığı, vergi planlaması ve finansal performans düzeyinin etkisinin tespit edilmesi amaçlanmıştır. Bu doğrultuda gıda ve içecek endeksinde işlem gören işletmelerin 2013 ve 2022 yıllarına ilişkin kar/zarar tablosu ve finansal durum tablolarına ilişkin veriler kullanılmıştır. İşletmelerin kar düzleştirme yapıp yapmadığına karar verebilmek için Eckel (1981) endeksinden elde edilen skorlar kullanılmıştır. İşletmelerin ertelenmiş vergi varlığı kalemindeki değişimin bir dönem önceki ertelenmiş vergi varlığına bölünmesi suretiyle ertelenmiş vergi varlığı değişkeni hesaplanmıştır. Vergi planlaması değişkeni dönem net karının, aynı dönemdeki vergi öncesi kar kalemine bölünmesiyle belirlenmiştir. Finansal performans boyutunda ise vergi öncesi karın aktif toplamına bölünmesiyle hesaplanan aktif karlılığı formülasyonu kullanılmıştır. Lojistik regresyon yönteminin kullanıldığı çalışmadan elde edilen sonuçlara göre ertelenmiş vergi varlığı ve aktif karlılığı bağımsız değişkelerinin kar düzleştirme üzerinde etkisi olmadığı gözlemlenmiştir. Fakat vergi planlaması bağımsız değişkeninin kar düzleştirme bağımlı değişkeni üzerinde negatif ve anlamlı bir etkisi olduğu tespit edilmiştir.

PurposeThe purpose of this paper is to examine whether managers deliberately use accruals to convey information regarding firm future profitability.Design/methodology/approachThe paper uses contemporaneous earnings and dividend increase announcements in New Zealand as the research setting. This setting reduces the possibility of opportunistic income smoothing by managers and, hence, increases the validity of the inference on the accrual signaling hypothesis. The paper employs a refined accrual model that controls the performance effects in estimating the part of accruals subject to managerial discretion.FindingsThe paper finds evidence consistent with managers using both accruals and changes in dividends to communicate private information regarding firm future profitability to the market. In particular, dividend‐increasing firms are observed to report positive accruals that are correlated with the positive market reaction to dividend increase announcements and future profitability. ...

O objetivo deste trabalho e investigar se existe uma relacao de Outros Resultados Abrangentes (ORA) com a suavizacao de resultado das empresas de capital aberto listadas na B3. Foi utilizada uma amostra com 268 empresas, no periodo de 2012 a 2016. Para categorizacao das empresas em suavizadoras e nao suavizadoras foi empregada a metrica de Eckel (1981). Realizou-se uma regressao logistica com dados em painel para verificar a existencia de relacao entre a suavizacao de resultados e ORA. O resultado mostrou significância para as variaveis Fluxo de Caixa Operacional (FCO) e Retorno sobre os Ativos (ROA), sugerindo assim, que essas variaveis se relacionam com a suavizacao de resultados. As Dummy setoriais de Energia e Siderurgia tambem se mostraram significativas. Nas variaveis ORA, ORA modulo e Dummy ORA, os resultados apresentaram significância para a variavel HighORA, sugerindo evidencia de suavizacao de resultados nas empresas com valores de ORA mais altos. As demais variaveis nao a...

his study aims to test and analyze the relationship between Inflation moderation between Return On Asset (ROA), Current Ratio (CR) and Debt To Equity Ratio (DER) to stock returns in financial sector companies on the IDX.The type of research used is a quantitative approach, the population in this study is the banking subsector listed on the Indonesia Stock Exchange (IDX) for the 2021 -2023 period as many as 47, the sampling technique uses the purposive judgement sampling method with a sample of 39 companies, the number of data units analyzed is 132.Hypothesis testing uses panel data regression analysis and MRA. The results of the analysis provide evidence that ROA has a significant positive effect on Stock Returns, CR has a positive effect on Stock Returns, DER has a significant negative effect on Stock Returns, Inflation has a significant negative effect on Stock Returns, Inflation is proven to weaken the relationship between ROA and Stock Returns, Inflation cannot moderate the relationship between CR and Stock Returns, Inflation is proven to strengthen the relationship between DER and Stock Returns

UW FM Working Paper Series are written by researchers employed at the Faculty of Management of UW and by other economists, and are published by the Faculty. DISCLAIMER: An objective of the series is to get the research results out quickly, even if their presentations are not fully polished. The findings, interpretations, and conclusions expressed in this Working Paper are those of their author(s) and do not necessarily the views of the Faculty of Management of UW.

This paper develops a static model of earnings manipulation as illicit activity conducted by top executives of a firm, such as a firm’s chief financial officer or chief executive officer. In the model, the utility-maximizing executive decides upon an allocation of time, a costly resource, to the commission of licit and illicit accounting activity based on the expected benefits and costs of these actions. Illicit accounting practices may benefit the firm’s profitability and possibly the executive’s compensation but also incur risks of detection and subsequent sanctions, including jail time; the expected cost of the illicit activity potentially acts as a deterrence to such practices. We investigate comparative-static relationships that formalize how the individual’s illegal activity might increase or decrease given variation in key exogenous factors, some of which may reflect official policy or procedure. Our study provides a more concrete conceptual foundation for empirical analysis ...

Businesses play a vital role in society, and it is crucial that they prioritize creating value over engaging in unethical practices during economic crises in Nigeria. This study delves into the importance of ethical decision-making, emphasizing the significance of effective cash flow management; inventory stock downsizing, focusing on core competencies, concentrating resources on results, and utilizing a balanced scorecard. Conducted through a survey research design, this study gathered insights from SMEs in Kano, Lagos, Anambra, and River States in Nigeria. The findings highlighted the potential of ethical practices such as cash flow management, inventory stock downsizing, and focusing on core competencies to help SMEs navigate difficult times. However, it also shed light on how unfavorable government policies can lead to unethical behavior such as production deviance and deceptive communication. In light of these findings, it is imperative for businesses in Nigeria to embrace ethical decision-making as a means to drive positive change within their operations. By doing so, they can contribute to the betterment of the system and society, rather than resorting to immoral conduct for short-term gains.

The rapid digitization of assets has given rise to an alarming surge in corporate risk. The looming threat of data breaches and financial losses due to cyber theft has reached unprecedented levels. Cybersecurity has also evolved from being merely an IT issue to becoming a significant business concern that should be integrated into the auditing processes of organizations. Yet, the critical role of cybersecurity audits in bolstering performance is underestimated. This study delved into the impact of cybersecurity audits on protecting sensitive data, enhancing productivity, building customer trust, preventing financial losses, and ensuring business continuity. The study collected firsthand data from the management of 15 selected Deposit Money Banks in Lagos and Kano States, Nigeria, using a comprehensive survey research design. The analysis, conducted using variance analysis, compellingly revealed that cybersecurity audits not only promote the protection of sensitive data but also significantly boost productivity, enhance customer trust, prevent financial losses, and ensure business continuity. The study strongly recommended that members of both the Auditing and IT departments acquire the necessary skills and tools to conduct cybersecurity audits and effectively respond to cyber incidents.

Income smoothing is deliberate actions of management to prevent sharp decreases and increases in an income figure. Smooth income streams indicate strength and stability, therefore in order to appear strong and stable, firms try to have smooth income figures. In the income smoothing literature, we see many examples of incentives of income smoothing. Some of them are; (1) to have better relations with company owners, investors, creditors, suppliers, and workers, (2) to have higher security prices and lower cost of capital, (3) to benefit from bonus compensation, (4) to benefit from tax advantage, and (5) to create more stable capital markets. The main objective of this study is “to detect income smoothing behaviours of Turkish listed companies through empirical tests using discretionary accounting changes”. Discretionary accounting changes (DACs) were accepted as income smoothing instruments because they can have big impacts on the reported earnings and cannot be done without manageme...

In this research, first, profit smoothing of the companies listed on Tehran stock exchange is measured. For this measurement negative correlation between discretional and non-discretional accruals, and changes in anticipated profit were used. The main objective of this study is to find out whether or not the companies listed on Tehran stock exchange market smooth their profit to influence their market share price. Therefore, in the primary hypothesis, the effects of profit smoothing on the market share price of the company were identified and studied. Then the factors affecting profit smoothing behaviour of the companies were discussed. Therefore, independent variables, in the secondary hypothesis, were cash ratio (current ratio), liability ratio (interest cover), and profitability (return on equity [ROE]), whereas profit smoothing was dependent variable. In this research, 182 companies (statistical population) were studied in a period of five years (1385-1389). The result of the re...

This paper aims to find out what is the impact of bank capital ratios on loan supply in the EU and what factors explain potential diversity of this impact. Applying Blundell and Bond (1998) two step GMM estimator, we show that, in the EU context, the role of capital ratio for loan growth is stronger than previous literature has found for other countries. Our study sheds some light on whether procyclicality of loan loss provisions and income smoothing with loan loss provisions contribute to procyclical impact of capital ratio on loan growth. We document that loan growth of banks that have more procyclical loan loss provisions and that engage less in income smoothing is more sensitive to capital ratios. This sensitivity is slightly increased in this sample of banks during contractions. Moreover, more restrictive regulations and more stringent official supervision reduce the magnitude of effect of capital ratio on bank lending. Taken together, our results suggest that capital ratios ar...

This paper aims to find out what the impact is of bank capital ratios on loan supply in the EU and what factors explain the potential diversity of this impact. Applying the Blundell and Bond (1998) two step GMM estimator, we show that, in the EU context, the role of capital ratio for loan growth is stronger than previous literature has found for other countries. Our study sheds some light on whether procyclicality of loan loss provisions and income smoothing with loan loss provisions contribute to procyclical impact of capital ratio on loan growth. We document that loan growth of banks that have more procyclical loan loss provisions and that engage less in income smoothing is more sensitive to capital ratios. This sensitivity is slightly increased in this sample of banks during contractions. Moreover, more restrictive regulations and more stringent official supervision reduce the magnitude of the effect of capital ratio on bank lending. Taken together, our results suggest that capit...

In this paper, using a large sample covering the 10 years from 1998 to 2009, we examine the role of audit quality in earnings quality (discretionary accruals and income smoothing) and cost of equity capital of Indian firms. We find evidence that firms employing high quality auditors experience higher earnings quality and lower cost of equity capital. We find that firms belonging to business groups have higher earnings quality and lower cost of equity capital than their non-business group counterparts. The results do not change after utilising alternative proxies for audit quality, earnings quality and cost of equity. Our findings contribute significantly to the literature on the role of audit quality as an effective monitoring mechanism as reflected in firm level earnings quality and cost of equity capital of listed firms in India which has distinct institutional features in relation to ownership structures and operations.

A number of studies investigated how financial information affected investment decisions. The study extended this line of research by examining the effect of risk, proxied by price per share, number of shareholders, number of dealers, trading volume, accounting risk and market risk measures on the bid ask spread. Further, the research tried to test the relationship between bid ask spread and cost of equity capital. The samples of this research were the manufacturing companies listed at Indonesian Stock Exchange which shared the dividend for 3 years; there were 40 companies. Data analysis technique used multiple regression analysis. The results of regression provided evidence of statistically significant effect of price per share, market value, asset size and price variability on bid ask spread. At last, there was a positive relationship between bid ask spread and cost of equity capital

This research was designed to examine the income smoothing in Indonesia. Income smoothing can be defined as a means used by management to diminish the variability of stream of reported incomenumbers relative to some perceived target stream by the manipulation of artificial (accounting) and real (transactional) variables (Koch, 1981). The examined factors were Debt to Equity Ratio (DER), Dividend Payout Ratio (DPR), Return On Investment (ROI). The study involved 24 companies listed in Jakarta Stock Exchange, with a period between 2005-2006. The first hypothesis was used to investigate the influence of Debt to Equity Ratio (DER) to income smoothing.The second hypothesis was used to examine the influence of Dividend Payout Ratio (DPR) to income smoothing. The third hypothesis was used to examine the influence of Return On Investment (ROI) to income smoothing. The fourth hypothesis was used to examine the influence of Debt to Equity Ratio (DER), Dividend Payout Ratio (DPR), and Return O...

Income smoothing refers to the use of accounting techniques to level out net income fluctuations from one period to the next. Companies indulge in this practice to manipulate the earnings over the period in order to lower the level of uncertainty. The companies with constant earnings attract more investors as they are willing to pay more prices for company's stock. This study examine the presence of artificial income smoothing in 64 Shari'ah compliant companies listed in the financial market of Pakistan for the period 2008-2015. The study also takes into consideration the concept of income smoothing from an Islamic perspective. To achieve the study's objectives, Eckel's index model is used. The study found that 34 percent of the companies are non-smoothers and 66 percent of the companies are smoothers in pooled sample. Among high market capitalized 32 companies, 37.5 percent of the companies are non-smoothers and 62.5 percent are smoothing companies. In 32 low market capitalized companies, 31 percent companies are non-smoothing and 69 percent companies are practicing income smoothing.

Income smoothing refers to the use of accounting techniques to level out net income fluctuations from one period to the next. Companies indulge in this practice to manipulate the earnings over the period in order to lower the level of uncertainty. The companies with constant earnings attract more investors as they are willing to pay more prices for company's stock. This study examine the presence of artificial income smoothing in 64 Shari'ah compliant companies listed in the financial market of Pakistan for the period 2008-2015. The study also takes into consideration the concept of income smoothing from an Islamic perspective. To achieve the study's objectives, Eckel's index model is used. The study found that 34 percent of the companies are non-smoothers and 66 percent of the companies are smoothers in pooled sample. Among high market capitalized 32 companies, 37.5 percent of the companies are non-smoothers and 62.5 percent are smoothing companies. In 32 low market capitalized companies, 31 percent companies are non-smoothing and 69 percent companies are practicing income smoothing.

Questions about the future of the Social Security system continue to surface. As a result, interest in employer-sponsored retirement plans and other retirement investment options increases. But the restrictions and rules associated with various defined benefit plans such as 401(k), 403 (b), and 457 plans can be confusing, and these plans have risks of their own. The authors explore these plans and explain the need to view retirement savings as only one part of a portfolio.

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Spanish banks had to set aside a countercyclical loan loss provision during the period 2000-2004. The amount of such provision as well as the allowance accumulated had to be disclosed by banks. The former creates a natural experiment to test whether banks smooth earnings to mislead investors and other interested parties, or, by contrast, income smoothing is used to avoid the existence of market frictions. Using panel data econometric techniques, we find evidence of income smoothing through loan loss provisions during the period previous to the implementation of the countercyclical provision (1988)(1989)(1990)(1991)(1992)(1993)(1994)(1995)(1996)(1997)(1998)(1999). However, during 2000-2004, banks relied only on the newly created countercyclical provision to smooth income. This change in behaviour suggests that there may be efficiency gains in reducing the volatility of accounting earnings over time.

Nigeria is a foremost oil producer in Africa, and thus faces substantial environmental issues like pollution and climate change. Therefore, since green taxation and green innovation emphasize inventing new technologies, mitigating environmental damage, and stimulating sustainability, understanding and encouraging green taxation and green innovation might aid in reducing these environmental challenges and protect natural resources. This study therefore explored the influence of board structure on the link between green taxation, green innovation, and cosmetic accounting practices of firms. This study adopted auxiliary data from the World Bank, OECD, and Nigerian corporations’ annual reports. The analysis included 792 firm-year observations from 2014 to 2021. A logistic regression analysis was performed. This study documented that firms costume their income to avoid paying environmental taxes or to generate a more constructive image of their green practices. Similarly, it was found that green innovations attract firms to engage in cosmetic accounting practice in Nigeria. However, firms’ effective board mechanisms have been found to prevent the likelihood of cosmetic accounting practices. Finally, it was established that green taxes and green innovations could prevent firms from engaging in cosmetic accounting practices in companies with effective board mechanisms. This study is the first to explore the influence of governance structure on the nexus between green taxation and cosmetic accounting practices of firms. The findings of this study provide valuable information to regulatory authorities, policymakers, and companies seeking to promote sustainable growth and green protection.

The study explores the advancing approach of commercial banks of Pakistan and Bahrain influenced by different factors that include loan loss provision, profitability, financial risks, and capital requirement. Hypotheses tested using exploratory analysis and GMM panel regression applied to the data obtained from 26 commercial banks of two countries for the period FY2008 to FY2017. The results reveal a significant connection between advancing approach and loan loss provisions for banks of both countries. Further, the advancing approach establishes a meaningful adverse relationship with profitability and credit risk for banks in Pakistan and with CAR for banks in Bahrain. Overall, the study discovers loan loss provision, profitability, credit risk, and CAR as critical factors having a direct and indirect influence on banks’ advancing approaches, which is an addition to the body of knowledge. Interestingly, it observed that the banks are more inclined towards risky assets such as consum...

In this paper we use data from a panel of Dutch households to investigate the behavior of savings. As in Campbell (1987), we examine whether the pattern of savings is consistent with the predictions of the rational expectations-permanent income model We consider one important prediction of the model: whether savings anticipate future income changes. We test the predictions of the permanent income model in several ways. First we propose some informal tests that exploit directly the information on expected future income changes available in the data. We then perform a test of the model by setting up a vector autoregression (VAR) in terms of savings and incotne changes and by using Euler equations expressed in terms of savings. The empirical evidence shows that in all the specifications used in this paper, the permanent income model is rejected. Contrary to the evidence from U.S. macro data, we do not find that the 'excess sensitivity' of consumption to income is responsible for the rejection of the model.

يهدف هذا البحث إلى دراسة أثر تمهيد الدخل في المحتوى المعلوماتي للتقارير المالية، وقد تم تطبيق الدراسة على مجتمع مكون من جميع الشركات المدرجة في سوق دمشق للأوراق المالية البالغ عددها (24) شركة، في حين بلغ عدد شركات عينة الدراسة (13) شركة موزعة على عدد من القطاعات الاقتصادية (صناعي، مصارف تقليدية، مصارف إسلامية- تأمين)، وذلك عن الفترة الممتدة بين عامي (2015- 2017)، ولغرض تحقيق أهداف الدراسة اعتمد الباحثان على مؤشر نسبة الانحراف المعياري لصافي الدخل التشغيلي على الانحراف المعياري للتدفقات النقدية التشغيلية لقياس تمهيد الدخل، كما قامت الدراسة بقياس المحتوى المعلوماتي للتقارير المالية من خلال قياس العوائد غير العادية خلال أربع فترات زمنية محيطة بتاريخ نشر التقارير المالية وهي ( 4 أسابيع سابقة لتاريخ لنشر التقارير المالية- أسبوع النشر- أربعة أسابيع لاحقة لتاريخ نشر التقارير المالية- الفترة المحيطة بتاريخ نشر التقارير المالية ضمن نافذة حدث 9 أسابيع)، ومن ثم استخدمت الدراسة أسلوب تحليل الانحدار لاختبار أثر ممارسة الشركات لتمهيد الدخل في المحتوى المعلوماتي للتقارير المالية في تلك الفترات، وقد توصل البحث إلى عدد من النتائج أهمها: 1- مارست الشركات المدرجة في سوق دمشق للأوراق المالية تمهيد الدخل خلال الفترة الممتدة بين عامي (2015-2017)، حيث بلغت نسبة الممارسة 84.62%. 2- توصل البحث إلى وجود أثر سلبي لتمهيد الدخل في المحتوى المعلوماتي للتقارير المالية مع اقتصار ذلك الأثر على الفترة السابقة لنشر التقارير المالية، إلا أن هذا الأثر كان محدوداً، ويعزو الباحثان ذلك إلى قلة اعتماد المستثمرين على التقارير المالية لاتخاذ قراراتهم، الأمر الذي يشير ضمناً إلى عدم كفاءة الأسواق المالية. 3- توصل البحث إلى وجود أثر إيجابي لحجم الشركة كمتغير ضابط في المحتوى المعلوماتي للتقارير المالية مع اقتصار ذلك الأثر على الفترة السابقة لنشر التقارير المالية. 4- توصل البحث إلى عدم وجود أثر لنوع القطاع كمتغير ضابط في المحتوى المعلوماتي للتقارير المالية في جميع الفترات المحيطة بتاريخ نشر التقارير المالية. وقد خلصت الدراسة إلى عدد من التوصيات أهمها ضرورة توعية المستثمرين بممارسات تمهيد الدخل وآثارها في محتوى التقارير المالية، مع ضرورة إجراء المزيد من البحوث والدراسات لتطوير مقاييس ملائمة يمكن الاعتماد عليها للتمييز بين تمهيد الدخل الانتهازي والمعلوماتي واختبار آثارهما في المحتوى المعلوماتي للتقارير المالية. الكلمات المفتاحية: تمهيد الدخل، المحتوى المعلوماتي للتقارير المالية، العوائد غير العادية. The aim of this research is to study the impact of Income smoothing in Information Content of Fi-nancial Reports. The study is applied to a com-munity consists of all the companies in the Da-mascus Stock Market (DSM); the number of these companies are (24), whereas, the number of the companies sample are (13) spreading to many economic sectors( Industrial, traditional Banks, Islamic Banks, Insurance) for the period (2015-2017), In order to achieve this objective, the two researchers have used Index depend on division standard deviation of operation income on stand-ard deviation of operation cash flow to measure Income smoothing, this study has also studied In-formation Content of Financial Reports by ab-normal return in 4 period surrounding of Re-ports announcement; that is ( Four weeks before announcing the financial reports, the week of an-nouncing, Four weeks after announcing the finan-cial reports, the period around the date of an-nouncing the financial reports). After that, the study has used regression analysis method to test the impact of Income smoothing in Information Content of Financial Reports. The main results of application can be stated as follows: 1- The Companies listed on DSM practiced the Income Smoothing during the period (2015-2017), at which the percentage of practices attains 84,62%. 2- The research comes out with the result that there is a negative Impact of Income smoothing as a control variable in Infor-mation Content of Financial Reports with limited that effect on the previous period to Announcement of the financial reports, but that impact was weak, the two re-searchers suggest that the reason of this is the lack of investors dependence on the financial reports to make their decisions, which implies the inefficiency of (DSM). 3- The research comes out with the result that there is a positive Impact of com-pany size as a control variable in In-formation Content of Financial Re-ports with limited that effect on the previous period to Announcement of the financial reports. 4- The research comes out with the result that there is no Impact of sector type as a control variable in Information Content of Financial Reports in all the surrounding period of Announcement the financial reports. This study concluded a number of recommendations, the most important of which are: the necessity to Investor Awareness of income smoothing practice and impacts in Information Content of Financial Reports, with the necessity of doing more researches and studies to develop Relevance metrics which can be dependent on to different between the Opportunistic and Informative in-come smoothing to test the impact in Information Content of Financial Reports. Key Words: Income smoothing, Information Content of Financial Reports, abnormal return.

This article tests an income-smoothing hypothesis for a sample of 106 large bank holding companies for the period 1976 to 1984. Our focus is on the behavior of the provision for loan losses as a function of bank income and alternative measures of business conditions likely to affect loan portfolio risk-taking or quality. Using an econometric model with pooled time-series, cross-sectional data, we find evidence of income-smoothing behavior over our test period. Our dummy-variable models indicate that regional banking companies tend to engage in income smoothing more than money-center banks. Alternative motivations for income-smoothing behavior, which include bank regulatory policy, risk management, agency theory, and compensation policy, are explored and their policy implications considered.

What are the cyclical properties of U.S. state and local government fiscal policy? The budget surplus of local and, in particular, state governments is procyclical, smoothing disposable income and consumption of state residents. This happens over both short-and medium-term horizons. Procyclical surpluses are the result of strongly procyclical revenues, and weakly procyclical expenditures. The budgets of trust funds and utilities are procyclical. Federal grants are procyclical, exacerbating the cyclical amplitude of state level income movements; although they smooth the idiosyncratic component of shocks to state output. State and local budget surpluses are affected by balanced budget rules at the short-but not at the medium-term horizon. Further, budgets are less procyclical in conservative states.

We document that international home bias in debt and equity holdings declined during the period 1993-2003 at the same time as international risk sharing increased. Using panel data regressions for OECD-countries, we demonstrate that less home bias is associated with more international risk sharing. More generally, we show that more financial integration is associated with more risk sharing when we measure financial integration as the ratio of foreign assets to Gross Domestic Product. Our results indicate that risk sharing and international financial integration are closely related empirical phenomena.

This paper develops a static model of earnings manipulation as illicit activity conducted by top executives of a firm, such as a firm’s chief financial officer or chief executive officer. In the model, the utility-maximizing executive decides upon an allocation of time, a costly resource, to the commission of licit and illicit accounting activity based on the expected benefits and costs of these actions. Illicit accounting practices may benefit the firm’s profitability and possibly the executive’s compensation but also incur risks of detection and subsequent sanctions, including jail time; the expected cost of the illicit activity potentially acts as a deterrence to such practices. We investigate comparative-static relationships that formalize how the individual’s illegal activity might increase or decrease given variation in key exogenous factors, some of which may reflect official policy or procedure. Our study provides a more concrete conceptual foundation for empirical analysis ...

The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. The Research Department (RES) publishes the Latin American Economic Policies Newsletter, as well as working papers and books, on diverse economic issues.

Several studies have characterized the relation between discretionary accruals and earnings before-taxes to test for the existence of earnings smoothing behaviors. In this paper, we argue that the characteristic response of accruals to earnings is not linear, as the literature has shown. Instead, it is likely to be driven by non-linear patterns since both the incentives to manipulate earnings and the practical way to do so depend, in part, on the relative size of earnings. Using a sample of 9,442 US banks in the period 1999-2008, this paper shows that bank managers tend to use provisions as a smoothing devise when earnings are substantial ("cookie-jar" strategies), engage in earningsdecreasing strategies when losses are relatively large ("big-bath" accounting) and, most of the time, use provisions as an earnings-increasing tool. Hence, it is shown that nonlinear specifications are more informative with regard to the different strategies employed to manipulate earnings.

This study investigates the market valuation of income smoothing by a long run analysis of the relation income smoothing vs. return and risk in the Spanish stock market. Using several methodological approaches to estimate and test abnormal returns, the results suggest some pattern of behaviour in the returns in function of the smoothing degree. The empirical evidence obtained supports that

Recent theory argues that concern about job security creates an incentive for managers to smooth earnings in consideration of both current and future relative performance. We find support for this theory. Our evidence suggests that when current earnings are 'poor' and expected future earnings are 'good', managers 'borrow' earnings from the future for use in the current period. Conversely, when current earnings are 'good' and expected future earnings are 'poor' managers 'save' current earnings for possible use in the future. However, sensitivity analysis indicates that we cannot rule out selection bias as a potential alternative explanation for our findings.

Penelitian ini bertujuan untuk menguji pengaruh karakteristik perusahaan yang mempengaruhi praktik perataan laba. Penelitian ini melibatkan 23 perusahaan yang terdaftar pada Bursa Efek Indonesia dengan mengambil 3 tahun penelitian mulai dari tahun 2008-2010. Faktor-faktor yang diuji adalah jenis usaha, ukuran perusahaan, profitabilitas, net profit margin, financial leverage, dan return on asset. Hasil pengujian univariate untuk jenis usaha, ukuran perusahaan, profitabilitas, net profit margin, dan return on asset menunjukkan bahwa tidak ada perbedaan signifikan antara perusahaan yang tergolong dalam perata laba dan bukan perata laba, sedangkan untuk financial leverage, terdapat perbedaan yang signifikan antara perusahaan yang tergolong perata laba dan bukan perata laba. Hasil pengujian univariate tersebut tidak didukung oleh hasil pengujian multivariate pada jenis usaha, ukuran perusahaan, profitabilitas, net profit margin, financial leverage, dan return on asset tidak berpengaruh terhadap perataan laba.

This report is the end of project submission for the Understanding Debt project undertaken by NIESR for the DWP and DTI. The report focuses upon undertaking a rigorous analysis of private sector indebtedness, and unsecured debt in particular. Key objectives include: • to explore the interactions between saving and unsecured indebtedness that are derived from an articulated and carefully calibrated rational agent model of the household, • to consider the extent to which the current accumulation of debt can be explained as the product of rational responses to the prevailing economic environment, • to explore the determinants and prevalence of over-indebtedness when individuals make sensible financial decisions, Key findings of the current report are: • rational households take on unsecured debt when they expect incomes to rise in the future — in this context debt is a positive mechanism allowing income smoothing over the lifecycle. • the rational agent model substantially under-states...

O objetivo da pesquisa consistiu em analisar se há evidências de que gestores de firmas operando no Brasil adotaram medidas prudenciais no reconhecimento contábil antecipado de efeitos esperados devido à eclosão de crise econômico-financeira. Para tanto, foi analisado o conservadorismo incondicional e o conservadorismo condicional adotado na divulgação de lucros em amostra composta por 459 sociedades por ação de capital aberto listadas na BM&FBovespa durante o período de 2003 a 2012. Na análise da existência do conservadorismo incondicional foi utilizado o teste de diferenças de média de Mann-Whitney na medida preço/patrimônio liquido, enquanto no teste da presença de conservadorismo condicional utilizou-se análise de regressão estimada por meio de efeitos aleatórios, baseada no Modelo de Basu (1997). A hipótese de pesquisa, de adoção de conservadorismo, não pôde ser aceita; contudo, constataram-se sinais significantes de adoção de conservadorismo incondicional, pela relação market-to-book no período posterior à crise, indicando que tais decisões de reconhecimento de perdas esperadas não se condicionam a más notícias específicas, ou a um momento que caracterize o início ou ápice da crise.

Este é um artigo de acesso aberto, licenciado por Creative Commons Atribuição 4.0 Internacional (CC BY 4.0), sendo permitidas reprodução, adaptação e distribuição desde que o autor e a fonte originais sejam creditados. RESUMO O objetivo da pesquisa é o de analisar se houve um aumento no nível de gerenciamento de resultados (GR) pelo método income smoothing nas companhias do subsetor de energia elétrica listadas na B3 com a adoção das normas contábeis do IASB. A referida proposta é oportuna, uma vez que, em razão da maior flexibilidade das normas, há possibilidade de maior GR. Por outro lado, trata-se de subsetor fortemente regulamentado, instigando, por seu turno, se esse fator poderia inibir tais práticas. Foram analisadas as demonstrações financeiras de 2003 a 2007 como pré-convergência e de 2010 a 2014 como pós-convergência. Como proxy de GR, foi considerada a variância dos resíduos da equação proposta por Chen et al. (2010) e Barth et al. (2008), com adaptações, em que uma menor variabilidade no lucro líquido é vista como prática de maior suavização de resultados e maior GR. Os achados da pesquisa evidenciam uma redução no nível de income smoothing a partir da adoção das IFRS (International Financial Reporting Standards). Com efeito, as conclusões permitem inferir que a adoção dessas normas nas empresas do referido subsetor pode melhorar a qualidade da informação contábil e, por conseguinte, reduzir os níveis de gerenciamento de resultados, principalmente pela exigência de maior evidenciação e qualidade dos relatórios contábeis, o que corrobora os resultados das pesquisas de Barth et al. (2008), Iatridis (2010) e Chen et al. (2010).

The flexibility in accounting standards and principles, lead to incentives for managers to show a good picture of the companies. It is logical and rational for managers to attempt to smooth income by using certain accounting devices to reduce the companies' income fluctuation over time to improve relations with creditors, investors, and employees. Income smoothing enables companies to stabilize earnings and thereby increase earnings predictability. For detecting income smoothing through examining the financial statements Eckel's (1981) approach (income variability approach) has been the most popular and most used one. In this research study, we use a selection criterion between smoothers and non-smoothers hotel companies based on the income smoothing. This study aims to classify Serbian hotel companies during the period 2016-2019 as smoothing and non-smoothing hotel companies. The method used to determine the presence or absence of income smoothing and the company value results is based on the coefficient of variation model proposed by Eckel (1981). According to the coefficient of variation method, the more the income smoothing (IS) index tends to zero, the more smoothed out the company's earnings are. This study examines the presence of artificial income smoothing in 22 Serbian hotel companies. A binomial test is used to test the hypothesis. As a result of research, there are no significant statistical indicators of income smoothing practices in Serbian hotel companies during the period 2016-2019.

The flexibility in accounting standards and principles, lead to incentives for managers to show a good picture of the companies. It is logical and rational for managers to attempt to smooth income by using certain accounting devices to reduce the companies’ income fluctuation over time to improve relations with creditors, investors, and employees. Income smoothing enables companies to stabilize earnings and thereby increase earnings predictability. For detecting income smoothing through examining the financial statements Eckel’s (1981) approach (income variability approach) has been the most popular and most used one. In this research study, we use a selection criterion between smoothers and non-smoothers hotel companies based on the income smoothing. This study aims to classify Serbian hotel companies during the period 2016-2019 as smoothing and non-smoothing hotel companies. The method used to determine the presence or absence of income smoothing and the company value results is b...

RESUMO O artigo objetiva analisar as Taxas de Retorno sobre o Ativo (ROA) sobre as diferentes formas de apresentação do lucro das empresas listadas no nível 1 de governança corporativa da Bovespa. A metodologia da pesquisa caracteriza-se como descritiva, do tipo levantamento, com abordagem quantitativa e de corte seccional. A população compreende as 36 companhias abertas participantes do nível 1 de governança corporativa da Bovespa. Nos Demonstrativos Contábeis de 2005, buscou-se calcular as Taxas de Retorno sobre o Ativo (ROA) sobre o Lucro Operacional Contábil (LOC), sobre o Lucro Abrangente (LA) e sobre o Lucro conforme a Lei n° 6.404/76 (LLEI) das empresas e classificá-las de acordo com seus retornos. Os resultados da classificação das empresas pela média geométrica e pela análise discriminante apresentam semelhanças entre si. Apenas as empresas Klabin S.A., Cia. Fiação e Tecidos Cedro e Cachoeira e Aracruz Celulose S.A. divergem nas suas classificações nos grupos na aplicação dos métodos. Conclui-se que a análise discriminante classifica, no Grupo 1 (Retorno Baixo), empresas que apresentaram taxas entre 0,95% e 5,38%, no Grupo 2 (Retorno Médio), empresas entre 5,55% e 9,59%, e que o menor grupo, que compreende 9 empresas, no Grupo 3 (Retorno Alto), as taxas variam entre 11,61% e 23,49%. Palavras-chave: análise do ROA, apresentação do lucro, governança corporativa.

Este artigo analisa se as empresas listadas nos segmentos de governança corporativa da BM&FBovespa estão menos propensas a alisar os seus resultados do que as empresas não listadas nestes segmentos. Neste sentido, foi analisado se as empresas listadas nos segmentos de governança corporativa da BM&FBovespa alisam resultados em proporção e intensidade inferiores às empresas não pertencentes a estes segmentos. A amostra final foi composta por 249 empresas, o que totalizou 1.245 observações para o período de 2009 a 2013, cujos dados foram coletados da base de dados do software Economática. A identificação das empresas alisadoras foi baseada no Indicador de Eckel (1981) e, o grau de alisamento, na métrica nº 1 de Leuz, Nanda e Wysocki (2003). Os resultados indicam que as empresas pertencentes e não pertencentes aos níveis de governança corporativa alisam resultados em proporção e intensidade iguais a um nível de confiabilidade de 95%, o que não confirma a teoria que envolve a governança ...

The objective of this research is to identify the factors which have influence on income smoothing at Miscellaneous Industry companies listed on Indonesian Stock Exchange period 2009-2013. Independent variables of this research include Return on Asset (ROA), Company Size, Dividend Payout Ratio (DPR), Debt to Equity Ratio (DER), and Financial Leverage while the dependent variable is income smoothing. The sample used in this study is 29 Miscellaneous Industry companies listed on the Indonesian Stock Exchange within a period of five years beginning in 2009 until 2013 with the selection method of purposive sampling. To identify the companies doing income smoothing, the Eckel Index was used. Statistical analysis used in this study uses descriptive statistics, multiple linear regressions and discriminant analysis. The results show that partially only company size and dividend payout ratio have significant impact on income smoothing meanwhile Return on Assets, Debt to Equity Ratio, Financi...

Este artigo é uma pesquisa sobre as publicações a respeito da Teoria dos Ajustamentos Contábeis do Lucro (TACL), publicados nos principais periódicos da área contábil, que estão disponíveis no banco de dados da CAPES, tendo em vista que o conhecimento gerado pelas produções científicas acrescenta um inigualável valor a diferentes áreas. Quanto ao método, trata-se de uma pesquisa descritiva, pois visa identificar e analisar os trabalhos do tema citado, sem fazer inferências. Com relação aos procedimentos, a pesquisa é bibliográfica, por se tratar de estudos já publicados. Nos resultados, percebeu-se que todos os artigos defendem, de uma forma geral, a ideia de que as informações contábeis baseadas somente no custo histórico não revelam a real situação dos patrimônios das empresas, indicando ainda que a interpretação das demonstrações contábeis, desconsiderando os efeitos da variação no nível dos preços, pode causar limitações de comunicação que implicarão uma redução em sua utilidade. Palavras-Chave: Teoria dos Ajustamentos Contábeis do Lucro. Estudo Bibliométrico. Periódicos. Analysis of the profiles of the articles on the theory of accounting adjustments of profit managed by CAPES

The main purpose of this study is to study the influence of the cash flow sensitivity to the institutional ownership on the level of cash holding among listed companies in Tehran Stock Exchange. Accordingly, to test the research hypotheses, financial data of 69 companies which published their financial statements during a five years period 2008-2012, were selected by using the systematic classified sampling. The variation of cash in the current year to the previous year was used as cash flow and level of the cash holding upon the past study of Bao et al. (2012). The selected approach was based on the mixing of the modulated data and the regression method of the merged least squares. The results from the research hypothesis test shows that the sensitivity of the cash flow to the institutional ownership has a reverse effect on the variations of the level of cash holding.

O lucro descrito nas demonstrações contábeis constitui um indicador relevante para o processo de avaliação das empresas. Com a flexibilização das normas após a adoção da IFRS existe um debate na literatura sobre as possibilidades de gerenciamento desse resultado e suas conseqüências para o mercado. Este estudo busca analisar se empresas brasileiras listadas no Ibovespa praticam esse gerenciamento na forma de alisamento de lucros e se isso gera reflexos no risco das respectivas ações. Assim, apresentam-se testes baseados na mensuração dos accruals que reforçam a hipótese de que essas companhias podem estar manipulando os lucros, objetivando reduzir sua variabilidade ao longo do tempo. No entanto, verifica-se que o efeito do alisamento não é percebido na mensuração do risco, reafirmando a posições de estudos anteriores no mercado brasileiro quando inseridas variáveis de mercado.

This paper is a review of the literature on accounts manipulations in the U.S., but also in several other countries, including Canada, UK, and France. Although we tried to follow a comprehensive approach of this topic, we might have forgotten some references. We make our apologies to the authors who have not been cited. We wish to thank participants of the 2000 EAA Annual Meeting (Munich). Hervé Stolowy would like to acknowledge the financial support of the Research Center of the HEC School of Management and thanks Etienne Lacam for his research assistance.