Examining Managerial Overconfidence Effect on Earnings Smoothing in Companies Listed in Tehran Stock Exchange

Earnings smoothing is affected significantly by expectations about future earnings, and overconfidence affects such expectations. Overconfident managers by the belief that they possess special information (that the others do not) overestimate their information integrity and consequently their firms’...

Descripción completa

Guardado en:
Detalles Bibliográficos
Autores principales: Ghasem Blue, Masoud Hasani Alghar
Formato: article
Lenguaje:FA
Publicado: Shahid Bahonar University of Kerman 2015
Materias:
Acceso en línea:https://doaj.org/article/8228f7f1004b44cc9e2129f7e278f3e1
Etiquetas: Agregar Etiqueta
Sin Etiquetas, Sea el primero en etiquetar este registro!
Descripción
Sumario:Earnings smoothing is affected significantly by expectations about future earnings, and overconfidence affects such expectations. Overconfident managers by the belief that they possess special information (that the others do not) overestimate their information integrity and consequently their firms’ future earnings and cash flows, and usually have positive perspective on firm’s future risks and returns. This study investigates the impact of managerial overconfidence on earnings smoothing. The statistical population for this study consists of companies listed in the Tehran Stock Exchange between the years 2009 and 2013. To measure overconfidence, two criteria are defined that are based on investment decisions. Earnings smoothing is measured by the ratio of standard deviation of operating earnings to standard deviation of operating cash flow, both based on adjusted total assets. The results from research indicated a significant positive relationship between managerial overconfidence and earnings smoothing. Also, the results showed in the firms with higher systematic risk, the probability of earnings smoothing is more.