The information content of accounting income smoothing

Ng, Shane Alex. (2000). The information content of accounting income smoothing Honours Thesis, School of Business, University of Queensland.

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Author Ng, Shane Alex.
Thesis Title The information content of accounting income smoothing
School, Centre or Institute School of Business
Institution University of Queensland
Publication date 2000
Thesis type Honours Thesis
Total pages 40
Language eng
Subjects 14 Economics
Formatted abstract
This thesis proposes that the practice of income smoothing signals management's private knowledge regarding future performance and therefore should be valued. The thesis addresses the question, "does income smoothing possess informational value?" by empirically examining the market reaction to smooth income streams.

A positive market response is observed to smooth income streams and this is interpreted as income smoothing enhancing the value relevance of earnings. Additionally, a negative association is found to exist between firm risk and income smoothing, which is also consistent with the concept of information signalling.

The major implication of this thesis is that income smoothing can be used as a communication mechanism to reduce information asymmetry between managers and investors. The provision of accounting discretion therefore need not result in opportunistic behaviour.

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Created: Thu, 21 Oct 2010, 08:51:25 EST by Ning Jing on behalf of The University of Queensland Library