Abstract
Corporate income smoothing has been the focus of much attention, yet relatively little is known about the key characteristics of income-smoothing firms. To address this issue, the current study uses quarterly data with Census X-12 analysis in a novel way to identify firms where the degree of random variability in earnings is less than the degree of random variability in sales (EVAR. <. SVAR). Prior research views such firms as effective smoothers, since most firms have scale-free variability profiles in the opposite direction (EVAR. >. SVAR). Large-sample US results identify these exceptions throughout a broad cross section of firms, but smaller and less profitable firms tended to have a higher incidence rate. Results also indicate that effective smoothers exhibited higher earnings persistence.
Original language | English (US) |
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Pages (from-to) | 106-115 |
Number of pages | 10 |
Journal | Advances in Accounting |
Volume | 30 |
Issue number | 1 |
DOIs | |
State | Published - Jun 2014 |
Keywords
- Earnings persistence
- Earnings variability
- Income smoothing
- X-12-ARIMA
ASJC Scopus subject areas
- Accounting
- Finance