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Analysis and diagnosis of income smoothing in Spain

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  • B. Gill de Albornoz
  • Jose Alcarria

Abstract

This paper examines income smoothing behaviour for a sample of Spanish listed companies over the period 1991-97. Discretionary accruals are used as a measure of managers' accounting discretion. Our results strongly support the income smoothing hypothesis which predicts aggressive (conservative) accounting policies when a firm's current pre-managed performance undershoots (exceeds) target earnings, as proxied by median earnings for the firm's industry. Consistent with DeFond and Park (1997), we also provide some evidence supporting the anticipatory income smoothing hypothesis, whereby current period smoothing behaviour is partly conditioned on expected future performance.

Suggested Citation

  • B. Gill de Albornoz & Jose Alcarria, 2003. "Analysis and diagnosis of income smoothing in Spain," European Accounting Review, Taylor & Francis Journals, vol. 12(3), pages 443-463.
    • Handle: RePEc:taf:euract:v:12:y:2003:i:3:p:443-463
    DOI: 10.1080/0963818022000001154
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    Cited by:

    1. Begoña Giner & Francisca Pardo, 2015. "How Ethical are Managers’ Goodwill Impairment Decisions in Spanish-Listed Firms?," Journal of Business Ethics, Springer, vol. 132(1), pages 21-40, November.
    2. Laura Arnedo & Fermín Lizarraga & Santiago Sánchez, 2012. "The role of accounting accruals for the prediction of future cash flows: evidence from Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 3(4), pages 499-520, December.
    3. Reguera Alvarado, Nuria & Laffarga Briones, Joaquina & de Fuentes Ruiz, Pilar, 2015. "Modelos de gestión de resultados: un estudio transnacional," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 18(1), pages 11-19.
    4. Arnedo, Laura & Lizarraga, Fermin & Sanchez, Santiago, 2007. "Does public/private status affect the level of earnings management in code-law contexts outside the United States? A study based on the Spanish case," The International Journal of Accounting, Elsevier, vol. 42(3), pages 305-328.
    5. Ramzi Benkraiem, 2006. "Performance sectorielle relative et gestion du résultat comptable," Post-Print halshs-00558248, HAL.
    6. Sylvain Durocher & Anne Fortin, 2014. "New Canadian Accounting Standards for Private Enterprises and the Adoption Timing Decision," Australian Accounting Review, CPA Australia, vol. 24(3), pages 218-236, September.

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