Revising the Amount of Relationship Between Income Smoothing and Stockholders Wealth (Share Valuses in Stock Exchange Market)

Subject Areas : Futurology

H. Vakili ¹ , F. Allameh Haery ²

1 - ندارد
2 - ندارد

Received: 2015-03-03 Accepted : 2015-03-03 Published : 2001-05-22

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Abstract :

Income smoothing has been defined as a deliberate and voluntary act of management for dampening of fluctuation about some level of earning which is considered to be normal for the firm. Thus, income smoothing is a teachinque by which management can change the income items through using alternative accounting in generally accepted accounting principles framework. This research is following three majar objectives. First objective is to identify firms which has been income smoother. Income smoothing considered by two dimensions (real and artificial). Real income smoothing represent management actions undertaken to control underlying economic events and artificial smoothing means accounting manipulation are done by managers to smooth income. These manipulations typically for not affect cash floes, For classifying companies as being income smoother or non- smoother, all firms which have been accepted by Tehran stock exchange market in the year of 1368 are used as statistical population and for generalization purpose, research examination is done based on three kinds of income (gross income, operating income and net income). In order to identify income smoother firm by (real dimension), the mean of the absolute percentage deviations of the actual changes in a income from its trend, Least Square, regression and mean / standard deviation model is used. The second objective of this research is revising the effect of income smoothing on the stock value in Tehran stock exchange market (major hypothesis). The logit model is used for testing hypothesis thesis which has been accepted by more than 95% probability value. The third objective is considering the effective key factors which can make more motivation for income smoothing. These factors are: firm size (total assets) rate of profitability and size (total assets) and kind of industries: core industries sector (those firms that comprise the muscle of economy and have greater size and stronger financial resources) and peripheral industries sector (those firms which have small or medium size and do not have considerable financial resources). In relation to effect of rate of profitability on income smoothing, test result confirms significant correlation between rate of profitability and income smoothing. But, the result shows no signi ficant correlation between size and kind of industries to income smoothing.