Foreign equity ownership and income smoothing
- Authors
- Jung, Boochun; Lee, Dongyoung; Shin, Ilhang; Yuen, C. Y. Desmond
- Issue Date
- Mar-2020
- Publisher
- American Accounting Association
- Keywords
- Earnings informativeness; Earnings management; Foreign investors; Income smoothing; Institutional investors
- Citation
- Journal of International Accounting Research, v.19, no.2, pp.141 - 162
- Journal Title
- Journal of International Accounting Research
- Volume
- 19
- Number
- 2
- Start Page
- 141
- End Page
- 162
- URI
- https://scholarworks.bwise.kr/gachon/handle/2020.sw.gachon/78728
- DOI
- 10.2308/jiar-19-514
- ISSN
- 1542-6297
- Abstract
- We examine whether foreign investors influence a local firm’s income smoothing, using a sample of Korean firms from 2000 to 2013. We hypothesize that given innate informational difficulties of overseas investments, foreign investors demand less noisy and more sustainable earnings, and to satisfy this demand, managers have strong incentives to smooth earnings. We find that foreign investors’ ownership is positively related to the level of earnings smoothing. We also find that earnings smoothing improves earnings informativeness in the presence of high foreign investor ownership, consistent with the notion that foreign investors play an important role in local firms’ information environments. © 2020, American Accounting Association. All rights reserved.
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