Title

The Relationship Between The Smoothing Of Reported Income And Risk-Adjusted Returns

Abstract

This paper uses risk-adjusted returns for the firms in the S&P 500 to test whether the stock market response to accounting performance measures is related to the smoothness of companies' reported earnings. Three income models, increasing in their measure of smoothness, test the hypotheses using cumulative average abnormal returns. The results indicate that companies that report smooth income have significantly higher cumulative average abnormal returns than firms that do not. When size is considered, market returns are higher for small companies than for large companies. There is also a significant relationship between the type of industry and income smoothing.

Publication Date

1-1-2000

Publication Title

Journal of Economics and Finance

Volume

24

Issue

2

Number of Pages

141-159

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1007/BF02752709

Socpus ID

34547835880 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/34547835880

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