The Accounting Review Vol. 95 No. 5 2020
Income Smoothing as Rational Equilibrium Behavior? A Second Look
Abstract
In this paper I revisit the issue of real income smoothing in the setting used by Lambert (1984). I demonstrate that the particular effect identified in his paper is actually an error: under his assumptions, there is no input-driven equilibrium income smoothing of the type he suggests. There are, however, several other drivers of equilibrium behavior ignored in that paper. In this paper, I identify those and, for the particular model structure, show that when all effects are considered together, there is little support for the suggestion that second-best earnings generally are being smoothed through the equilibrium behavior.
- DOI
- 10.2308/tar-2017-0132
- Volume
- 95
- Issue
- 5
- Pages
- 211-226
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex