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Ownership Differences and Firms' Income Smoothing Behavior

Ownership Differences and Firms' Income Smoothing Behavior This paper examines the association between differences in ownership structure and income smoothing behavior in firms. The underlying constructs affecting this association include agency relationships, managerial incentives, information asymmetry, and firm profitability. A logistic regression model is used to test the association between income smoothing and variables related to inside ownership, institutional holdings, leverage, managerial compensation, profitability, and firm size. The evidence suggests that ownership differences, managers' incentive structures, and firm profitability are important in explaining income smoothing behavior in firms. By separating inside ownership and levels of debt into different levels, we are able to show the existence of a non‐monotonic relationship between ownership differences and firms' income smoothing behavior. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Finance & Accounting Wiley

Ownership Differences and Firms' Income Smoothing Behavior

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Publisher
Wiley
Copyright
Copyright © 1997 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0306-686X
eISSN
1468-5957
DOI
10.1111/1468-5957.00101
Publisher site
See Article on Publisher Site

Abstract

This paper examines the association between differences in ownership structure and income smoothing behavior in firms. The underlying constructs affecting this association include agency relationships, managerial incentives, information asymmetry, and firm profitability. A logistic regression model is used to test the association between income smoothing and variables related to inside ownership, institutional holdings, leverage, managerial compensation, profitability, and firm size. The evidence suggests that ownership differences, managers' incentive structures, and firm profitability are important in explaining income smoothing behavior in firms. By separating inside ownership and levels of debt into different levels, we are able to show the existence of a non‐monotonic relationship between ownership differences and firms' income smoothing behavior.

Journal

Journal of Business Finance & AccountingWiley

Published: Mar 1, 1997

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