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Earnings smoothing information as signaling or garbling: a literature review

Shabani, Nor Afifah and Sofian, Saudah (2018) Earnings smoothing information as signaling or garbling: a literature review. Asian Journal of Finance & Accounting, 10 (1). pp. 131-141. ISSN 1946-052X

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Official URL: http://dx.doi.org/10.5296/ajfa.v10i1.12768


Earnings smoothing, which refers to the action of managers managing earnings to reduce fluctuations of reported earnings, is a special type of earnings management because while earnings smoothing may be used to distort shareholders and creditors’ view of corporate actual performance, it may also serve as a tool to communicate corporate private information of future earnings to the aforementioned stakeholders. Hence, it comes to no surprise when prior literatures reveal that the studies on the role of earnings smoothing are divided into two streams: as information signaling and information garbling. This paper aims to review prior literatures, specifically on the role of earnings smoothing either as information signaling or garbling based on four themes: firm value, financing need, compensation contract and outsiders’ intervention. This paper reviews journal articles gathered from Web of Science database. Based on the shortcomings of prior literatures, this paper highlights avenue for future research.

Item Type:Article
Uncontrolled Keywords:earnings smoothing, information garbling, information signaling
Subjects:H Social Sciences > HF Commerce > HF5601 Accounting
ID Code:86810
Deposited By: Yanti Mohd Shah
Deposited On:30 Sep 2020 17:08
Last Modified:30 Sep 2020 17:08

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