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Long-run abnormal returns and income smoothing in the Spanish stock market


  • Raul Iniguez
  • Francisco Poveda


This study investigates the market valuation of income smoothing via a long-run analysis of the relationship between income smoothing and return and risk in the Spanish stock market. The results suggest that firms that smooth income appear to yield higher stock returns than firms that do not; they also appear to carry a lower risk associated with size and book-to-market factors. The study concludes that the Spanish market is not efficient in this question because it overvalues firms that artificially smooth income, and because it is possible to reduce the stock's risk by manipulating accounting profits.

Suggested Citation

  • Raul Iniguez & Francisco Poveda, 2004. "Long-run abnormal returns and income smoothing in the Spanish stock market," European Accounting Review, Taylor & Francis Journals, vol. 13(1), pages 105-130.
  • Handle: RePEc:taf:euract:v:13:y:2004:i:1:p:105-130 DOI: 10.1080/0963818032000138224

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    References listed on IDEAS

    1. Hall, C. & Hamao, Y. & Harris, T.S., 1992. "A Comparison of relations Between Security Market Prices, Returns and Accounting Measures in Japan and the Unites States," Papers 92-36, Columbia - Graduate School of Business.
    2. repec:bla:joares:v:31:y:1993:i::p:183-223 is not listed on IDEAS
    3. repec:bla:joares:v:38:y:2000:i:1:p:1-21 is not listed on IDEAS
    4. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 1998. "Relative valuation roles of equity book value and net income as a function of financial health," Journal of Accounting and Economics, Elsevier, vol. 25(1), pages 1-34, February.
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    Cited by:

    1. Josep Ma. Argiles (UB) & Josep Garcia Bladon (IQS) & Teresa Monllau (UPF), 2009. "Fair value versus historic cost Valuation for Biological assets: Implications for the quality of financial information," Working Papers in Economics 215, Universitat de Barcelona. Espai de Recerca en Economia.
    2. repec:hur:ijaraf:v:7:y:2017:i:2:p:1-13 is not listed on IDEAS

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