Research Article | OPEN ACCESS
The Incremental Information Content of Income Smoothing in Firm Listed in Tehran Stock Exchange (TSE)
1Ali Jamshidi, 2Keyhan Rahmani and 3Zahra Askari
1Nourabad Mamasani Branch, Islamic Azad University, Nourabad Mamasani, Iran
2Department of Accounting, University of Marvdasht, Marvdasht Street, Iran
3Department of Accounting, Marvdasht Branch, Islamic Azad University, Marvdasht, Iran
Research Journal of Applied Sciences, Engineering and Technology 2013 21:5122-5127
Received: November 24, 2012 | Accepted: December 17, 2012 | Published: May 20, 2013
Abstract
This study aims at achieving the following objectives: examining the explanatory power of the income smoothing of future profitability, introducing evidence about the information content of income smoothing from the Iranian market and enriching the literature on income smoothing relationships in the capital market research. The study sample consists of (46) industrial companies listed in the Tehran Stock Exchange, during the period (2004-2011). Regression analysis is employed to examine the study's hypotheses (Four Models). Wald test and Adjusted-R2 was used to indicate the incremental information content for the study variables. The study found the following: 1. Current profitability predicts future profitability. 2. Income smoothing hasn’t incremental information relative to current profitability when predicting future profitability. 3. Past profitability doesn’t provide incremental information related to current profitability when predicting the future profitability. 4. Income smoothing hasn’t incremental information content with respect to current and past profitability when predicting future profitability. These results mean that the lagged earnings is a good predictor to the future earnings and Iranian companies' managers can manipulate profitability trend in the future to achieve a target level in earnings by using income smoothing tools.
Keywords:
Information content, income smoothing, profitability,
Competing interests
The authors have no competing interests.
Open Access Policy
This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
Copyright
The authors have no competing interests.
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ISSN (Online): 2040-7467
ISSN (Print): 2040-7459 |
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