Analysis and Diagnosis of Income Smoothing in Spain

Posted: 11 Oct 2003

See all articles by Belen Gill-de-Albornoz

Belen Gill-de-Albornoz

Jaume I University - Department of Finance and Accounting

J.J. Alcarria

Jaume I University - Department of Finance and Accounting

Abstract

This paper examines income smoothing behaviour for a sample of Spanish listed companies over the period 1991-1997. Discretionary accruals are used as a measure of managers' accounting discretion. Our results strongly support the income smoothing hypothesis which predicts aggressive (conservative) accounting policies when firm's current pre-managed performance undershoots (exceeds) target earnings, as proxied by median earnings for the firm's industry. Consistent with DeFond and Park (1997), we also provide some evidence supporting the anticipatory income smoothing hypothesis, whereby current period smoothing behaviour is partly conditioned on expected future performance.

Keywords: earnings management, income smoothing, discretionary accruals

JEL Classification: M41, M43, M47

Suggested Citation

Gill de Albornoz Noguer, Belen and Alcarria, J.J., Analysis and Diagnosis of Income Smoothing in Spain. Available at SSRN: https://ssrn.com/abstract=433161

Belen Gill de Albornoz Noguer (Contact Author)

Jaume I University - Department of Finance and Accounting ( email )

Campus del Riu Sec
12081 Castello de la Plana
Spain

HOME PAGE: http://www.uji.es

J.J. Alcarria

Jaume I University - Department of Finance and Accounting ( email )

Campus del Riu Sec
12081 Castello de la Plana
Spain

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