Income smoothing and comparability of financial reports: evidence from public companies in the Brazilian market
DOI:
https://doi.org/10.11606/issn.1982-6486.rco.2020.164488Keywords:
comparability, quality of accounting information, compensation reserves, intentional income smoothingAbstract
The aim of this study is to analyze the influence of the intentional income smoothing on the comparability of financial reports. Our sample is composed by 87 companies, considering quarterly periods from 2013 to 2017. For the measure of comparability, we opted the method of similarity of the accounting function presented by DeFranco, Kothari and Verdi (2011) and for the intentional income smoothing, we used two measures that capture different dimensions of income smoothing presented by Lang, Lins and Maffett, (2012). The data were analyzed using quantile regression. Our results indicate that intentional smoothing in fact impairs comparability. However, when we analyzed the intentional smoothing of results by accruals, we found evidence of a reflex on comparability only in the quantile that comprises the observations with the lowest comparability levels. For most companies analyzed, accrual smoothing is less detrimental to comparability than more general smoothing, which also includes operational smoothing. This aspect was observed by Sohn (2016) and may be related to the problem of operational management being more profound and persistent than management by accruals.
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