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Extraordinary items and income smoothing:a positive accounting approach

Beattie, Vivien and Brown, Stephen and Ewers, David and John, Brian and Manson, Stuart and Thomas, Dylan and Turner, Michael (1994) Extraordinary items and income smoothing:a positive accounting approach. Journal of Business Finance and Accounting, 21 (6). pp. 791-811. ISSN 0306-686X

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Abstract

This is an empirical study of single-period income smoothing which uses an incentives-based model to explain classificatory choices. An index is constructed to measure the smoothing effect of these choices. Weighted least squares regression results indicate that classificatory choices consistent with smoothing are more likely to be observed in firms with high earnings variability, high dividend payout, substantial managerial holdings of share options and diffuse share ownership. The existence of material scope for smoothing strengthens these findings. The model as a whole is statistically significant and, although the proportion of variability in smoothing explained is modest, it compares very favourably with other accounting choice studies. The relationship between smoothing and alternative earnings management strategies, including big bath accounting, is explored.

Item Type: Article
Journal or Publication Title: Journal of Business Finance and Accounting
Subjects:
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 66468
Deposited By: ep_importer_pure
Deposited On: 17 Sep 2013 09:11
Refereed?: Yes
Published?: Published
Last Modified: 21 Oct 2017 03:11
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/66468

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