Global Financial Crisis, Institutional Ownership, and the Earnings Informativeness of Income Smoothing. (January 2020)

• Record Type: Journal Article
• Authors: Chen, Ching-Lung; Weng, Pei-Yu; Lin, Yu-Chih
• Is Part Of: Journal of accounting, auditing & finance. Volume 35:Number 1(2020)
• Page Start: 53
• Page End: 78
• Publication Date: 2020-01
• Subjects: income smoothing -- institutional ownership -- earnings informativeness -- opportunism hypothesis; Accounting -- Periodicals; Auditing -- Periodicals; Finance -- Periodicals; 657
• DOI: 10.1177/0148558X17696759
• Languages: English
• ISSNs: 0148-558X

Abstract

This study uses unbalanced panel data to construct the empirical regressions, and examines the role of the global financial crisis and institutional ownership on the earnings informativeness of firm with income smoothing. The result reveals that the earnings informativeness of income smoothing decreased after the occurrence of the crisis. High institutional ownership also reduces the informativeness of earnings for firms with income smoothing and supports the institutional investors' opportunism hypothesis. Yet, this result is prominent when the institutional ownership is held by the qualified foreign rather than local institutional investors. This study implements several diagnostic checks and demonstrates that the results are robust to various specifications.