The Analysis of the Relationship between Corporate Governance, Income Smoothing and Quality of Financial Reporting

• Main Authors: daryush damoori, narges mahdiabadi
• Format: Article
• Language: fas
• Published: Alzahra University 2015-12-01
• Series: راهبرد مدیریت مالی
• Subjects: Corporate Governance; Income Smoothing; Tucker and Zarwin method (TZ); Albert and Richardson method (AR); Financial Reporting Quality
• Online Access: http://jfm.alzahra.ac.ir/article_2344_19a5e962cb128207d8c536098d03585d.pdf
• ISSN: 2345-3214; 2538-1962

The present research deals with the analysis of the relationship between corporate governance, income smoothing and financial reporting quality in the listed companies in Tehran Stock Exchange during the years 2008-2012. The sample includes 114 companies. In order to compute income smoothing degree, the two indexes of Tucker and Zarwin (TZ) (2006), and Albert and Richardson (AR) (1990) have been used. The index of financial reporting quality and informing in this research is the relationship between the profit of current period and subsequent cash flows. Data analysis has been performed by using multiple linear regression by compositional data. The results of the present research determine the weak relationship between corporate governance and income smoothing degree because among all corporate governance mechanisms, only quality and disclosure score and total stockholders' percentage had positive significant relationship with the level of income smoothing. In the level of "net income", income smoothing could not cause increasing the relationship between the profit of current period and subsequent cash flows positively in any of the two methods of AR and TZ, which shows that income smoothing has not caused informing in this level.