The Accounting Review Vol. 95 No. 5 2020
Income Smoothing as Rational Equilibrium Behavior? A Second Look: A Response
Abstract
This paper responds to Hemmer's (2020) critique of Lambert's (1984) paper on income smoothing. Lambert develops and analyzes a two-period agency model in which he shows income smoothing, defined as the second-period action being a decreasing function of the first-period outcome, is part of the equilibrium. Hemmer claims Lambert's analysis contains errors, and that income smoothing does not occur in the model for the reasons Lambert claims. Here, I confirm the Lambert results, show why Hemmer's results appear different than mine, and make clearer the economic forces behind why income smoothing occurs.
- DOI
- 10.2308/tar-2019-0671
- Volume
- 95
- Issue
- 5
- Pages
- 265-278
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref