• International Area Studies Review
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• v.15 no.3
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• pp.191-213
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• 2011

This study empirically examines whether income smoothing effectively contributes to consumption smoothing. Since international factor movement plays an important role for income smoothing across countries, net factor income across countries deserves more attention in considering income smoothing than attention having been paid by previous studies in the literature. Most of previous studies assume that net factor income has the same degree of effects on consumption as GDP. For the case of 12 EU countries during the period from 1999 to 2010, our empirical investigation observes that the response of consumption with respect to net factor income is severely lower than the response of consumption with respect to GDP, and further net factor income has ignorable effects on the consumption. This evidence implies that the income smoothing via international factor movement is less significant in contributing to the consumption smoothing. In the sequel, our finding suggests that legal and institutional process for transferring net factor income across countries should be eased further to improve contribution of income smoothing to consumption smoothing.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.2
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• pp.821-832
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• 2021

Earnings management is very important for companies that aim for decision-making. The research was conducted to analyze the quality of earnings and income smoothing motives in manufacturing companies in Indonesia. The research approach is carried out with a quantitative approach. The sampling method using purposive sampling was associated with several criteria so that a sample of 130 was determined, which was analyzed during the 4 years of the study. The partial least square method was used for data analysis. The results of the study state that institutional ownership has no effect on earnings quality, institutional ownership has a negative effect on income smoothing, leverage has a negative effect on income smoothing, independent commissioners have a positive effect on earnings quality as well as independent commissioners have a positive effect on income smoothing. We assume that the tendency of income smoothing can affect the quality of efficient earnings. Meanwhile, income smoothing affects the quality of company earnings. Management that performs income smoothing is more aimed at conveying the company's prospects for generating profits rather than opportunistic motives.

• Asian Journal of Business Environment
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• v.11 no.2
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• pp.27-38
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• 2021

Purpose: The study mainly investigates bankruptcy risk and income smoothing tendency of Non-Banking Financial Institutions (NBFIs) in Bangladesh. External parties of NBFIs take investment decisions based on financial reports. Stable and predictable income is one of their preference. On the other hand, poor income is one of the signs of NBFIs having bankruptcy risk. Hence the study tries to find whether the NBFIs having bankruptcy are involved in income smoothing or not. Research design, data and methodology: Data were collected from the annual report of twenty-two listed NBFIs in Bangladesh. Data from 2013 to 2017 were used. Altman's Z score and Eckel's model are used to detecting bankruptcy risk and income smoothing respectively. Results: Result implies that most of the NBFIs which have bankruptcy risk are not involved in income smoothing. Therefore, NBFIs which has bankruptcy risk are involved less with income smoothing. Conclusions: The present study revealed that most of the listed NBFIs in Bangladesh are facing bankruptcy risk. They didn't use any fraudulent technique to show smooth income. The findings will help the investor to take an investment decision on NBFIs in Bangladesh. It will convey signals to the stock market in Bangladesh.

• Journal of Digital Convergence
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• v.18 no.6
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• pp.157-166
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• 2020

Firms perform various actions that affect management performance measurement by managing the volatility and capital cost of reported income through income smoothing. This study attempted to analyze with a focus on the relationship between managerial competence and income smoothing. Therefore, this study attempted to analyze and focus on the relationship between managerial competency and profit softening using a measure of managerial competency presented in Demerjian et al. (2012). The results of the analysis are as follows. It was confirmed that there was a significant positive relationship between manager ability and income smoothing at the 1% level. When managers make income, it can be interpreted that managers with superior ability can make profits better by accurately predicting the future. It is the same result as the expectation of this study that managers with excellent ability have high incentives to soften profits by reducing profit volatility through more accurate forecasting. Therefore, this study empirically analyzed that managers with excellent abilities are more effective in implementing income smoothing strategies.

• Korean Business Review
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• v.11
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• pp.255-276
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• 1998

This study investigates whether listed companies change accounting methods primarily to smooth reported earnings and income taxes, and how the informations of accounting changes affect stock prices. The information of accounting changes includes tax savings, income smoothing, and tax smoothing. The results show that accounting changes are used as an income or tax smoothing instrument(device) in the listed companies which changed their accounting methods from 1991 to 1996. Also, those have a tendency to smooth income and tax simultaneously by accounting changes. Tax savings, income smoothing, and tax smoothing variables by accounting changes are irrelevant to stock prices. Income smoothing variable has a positive association with stock returns in the periods that the abnormal returns cumulated over four months. But tax smoothing variable has a negative association with stock returns in the same periods. More studies on the firms' accounting changes are needed to get a definitive conclusion.

• Journal of Korea Trade
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• v.23 no.6
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• pp.66-92
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• 2019

Purpose - Foreign Exchange Rates (FER) have been one of the most significant factors for both Korean exporters and the economy of Korea. The purpose of this study is to evaluate whether exporters with a high level of Exchange Rate Elasticity of Sales (ERES) make the use of earnings management for Income Smoothing (IS). Design/methodology - Income smoothing was obtained using the methodology suggested by Leuz, Nanda and Wysocki (2003). Accruals-based Earnings Management (AEM) was estimated using Discretionary Accruals (DA) calculated by the operant Jones Model developed by Dechow, Sloan and Sweeney (1995). Real Earnings Management (REM) was obtained using the methodologies suggested by Roychowdhury (2006) and Cohen and Zarowin (2010). Data were 2,402 firm years of public listed companies on the KRX, which were not in the financial industry and had a settlement of accounts in December for the period from 2013 to 2017. Findings - Results of the evaluation are as follows. First, companies with higher levels of ERES have relatively lower levels of smoothing of reported income. This might be because a fluctuation in sales caused by an exchange rate fluctuation has a direct impact on the volatility of the reported income. Second, companies with high levels of both ERES and IS have a positive correlation with both AEM and REM. This might be because companies with high levels of IS engage in earnings management to smooth reported income. Specifically, it is possible to assume that for smoothing the reported income, not only AEM but also REM is practiced. Third, companies with high levels of ERES but low levels of IS have a negative correlation with both AEM and REM. This could be interpreted as companies exhibiting low levels of IS due to higher levels of ERES tend to control IS. In addition, such results were supported by firms relying highly on exporting, and are consequently sensitive to exchange rate fluctuation. Therefore, it may conclude that companies with high levels of ERES make the use of earnings management as a means of IS. Originality/value - This study can find its significance from the fact that it is the first study, empirically verifying that companies of Korea, where exportation is a large part, use both AEM and REM as a means for smoothing reported income upon facing exchange rate fluctuations. In addition, it is highly expected that the results of this study could be useful for participants of financial markets when making IS-related decisions.

• Journal of Digital Convergence
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• v.19 no.12
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• pp.321-329
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• 2021

A measure of managerial ability was derived using DEA, a measure of management efficiency, and the correlation coefficient between discretionary accrual and non-discretionary accrual, net income and operating cash flow standard deviation was used as a proxy for income smoothing. verified. In addition, the manager's compensation was used by taking the natural logarithm of the cash compensation per manager. The analysis results are summarized as follows. The analysis period for hypothesis testing is from 2004 to 2017, as a result of the hypothesis analysis of the correlation with the level of manager's compensation, it was suggested that the income smoothing behavior decreased the performance-based compensation and increased the performance-controlled compensation. This can be said to be the result of indirectly confirming that additional compensation is differentially paid for income smoothing. This study has a contribution to the study by empirically analyzing whether income smoothing affects the relationship between managerial ability and managerial compensation. However, although a number of previous studies empirically analyzed that there are upper and lower bounds for manager compensation, there is limitations that could not be analyzed for asymmetric compensation due to income smoothing is expected to expand.

• Journal of Labour Economics
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• v.37 no.1
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• pp.29-57
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• 2014

Using unemployment insurance and income-contingent loan (ICL) that conditions repayment by debtors upon their incomes this paper characterizes an efficient income support system for the unemployed, which maximizes their lifetime utilities by effectively enhancing inter-state and inter-temporal consumption-smoothing subject to incentive constraints on the part of the beneficiaries. This paper also emphasizes the generality of the argument for a mix of ICL and subsidy that may be applied potentially to many types of government welfare program.

• Journal of Digital Convergence
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• v.16 no.11
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• pp.267-274
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• 2018

This study examines the effect of managerial ability on managers' opportunistic reporting discretion in recognizing the goodwill impairment losses after the adoption of K-IFRS. Cross-sectional regression results show that goodwill impairment losses are not recognized timely at the time of the goodwill impairment symptom, but rather managers make bad use of goodwill impairment losses as tools of income smoothing and big-bath. Managerial ability is not directly related to the recognition of goodwill impairment losses, but firms with more able managers recognize timely goodwill impairment losses when the symptom of goodwill impairment exists, and they use less income smoothing when the firms' expected pre-impairment earnings are abnormally high. This study is the first research to consider the relationship between managerial ability and manager' earnings management in goodwill impairment accounting.

• Journal of Applied Reliability
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• v.16 no.2
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• pp.78-89
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• 2016

Purpose: In this paper, we investigate whether the endeavors for Six Sigma quality management by a firm have positive effects on its financial performance and the length of Six Sigma implemented period affects its financial status. We find a relationship between Six Sigma implemented period and several financial performance index using a smoothing spline function. Methods: A smoothing spline function is used in order to analyze the relationship between efforts for quality management and financial performance. Specifically, the return on assets, return on equity, sales cost and business fee are investigated as dependent variables and the efforts for quality management as independent variable. Results: As a result of the analysis, the indication is that companies that put effects into the Six Sigma quality management have a positive result in its financial status. In detail, the efforts for Six Sigma quality management have positive effects on total asset turnover ratio and Six Sigma implemented period on net income to net sales ratio. Additionally, companies with longer (shorter) period of Six Sigma program have more (less) improvement in its financial status. Conclusion: It can be concluded that the company's efforts for quality management positively influence financial performance.