Managerial Equity Holdings and Income Smoothing Incentives

2015 ◽  
Author(s):  
Qing (Sydney) Shu ◽  
Wayne B. Thomas
Keyword(s):  
Income Smoothing ◽  
Equity Holdings

Managerial Equity Holdings and Income Smoothing Incentives

2017 ◽  
Vol 31 (1) ◽  
pp. 195-218 ◽  
Author(s):  
Sydney Qing Shu ◽  
Wayne B. Thomas
Keyword(s):  
Risk Taking ◽  
Agency Problems ◽  
Discretionary Accruals ◽  
Stock Option ◽  
Income Smoothing ◽  
Future Earnings ◽  
Future Performance ◽  
Excessive Risk Taking ◽  
Excessive Risk ◽  
Equity Holdings

ABSTRACT We explore how managerial stock holdings and option holdings affect CEOs' income smoothing incentives. Given the different roles of stock holdings and option holdings in solving agency problems, managers may smooth past earnings using discretionary accruals for the purpose of revealing information to help investors better predict future earnings or for the purpose of hiding volatility of past earnings. We find the association between past smoothing and predictability of future earnings is increasing (decreasing) in CEO stock (option) holdings. Results are consistent with stock holdings aligning the interests of managers and shareholders, and managers using discretionary accruals to smooth past earnings to reveal information to investors about future performance. In contrast, option holdings have been linked with excessive risk taking by managers, and managers use discretionary accruals to mask volatility of less predictable earnings. We demonstrate that income smoothing can be informative or opportunistic, depending on the incentives of CEOs.

Privatization of Public Enterprises and Income Smoothing

2013 ◽  
Vol 27 (4) ◽  
pp. 419-446
Author(s):  
Mi-Hee Park ◽  
KukhyunChoe
Keyword(s):  
Income Smoothing ◽  
Public Enterprises
Sign in / Sign up

Export Citation Format

Share Document