The Impact of Earnings Quality on Income Smoothing Before and After the Mandatory Adoption of Accounting Standards in Iran
Keywords:
Accounting Standards, Earnings Quality, Earnings Transparency, Income SmoothingAbstract
The present study was conducted with the aim of examining the effect of earnings quality on income smoothing before and after the mandatory implementation of accounting standards in companies listed on the Tehran Stock Exchange during the period 1992 to 2022. The statistical population included all listed companies, from which 61 firms were selected as the research sample using the systematic elimination sampling method. In terms of purpose, the research is basic, and with respect to its nature and data collection, it is descriptive–analytical. The required data were extracted from the official databases of the Tehran Stock Exchange and the Rahavard Novin financial software, and were analyzed using multivariate regression models and panel data techniques in EViews and Excel software. The results indicate that earnings quality increased significantly after the mandatory adoption of accounting standards, which in turn restricted aggressive income smoothing practices. Prior to the implementation of the standards, earnings quality exhibited a positive and statistically significant relationship with income smoothing, suggesting that firms engaged in smoothing behavior to reduce earnings volatility and present a stable image of financial performance. After the adoption of the standards, this relationship remained positive and significant, but its intensity declined, reflecting higher levels of transparency and reliability of financial information. A comparative analysis of the findings demonstrates that accounting standards have effectively enhanced earnings quality and guided income smoothing behavior toward compliance with professional principles and documented frameworks. Nevertheless, income smoothing persists as a resilient managerial behavior and has not been fully eliminated solely through the enforcement of standards. Furthermore, firm-specific and industry-specific characteristics play a determinant role in the extent to which accounting standards influence earnings quality and income smoothing behavior.
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Copyright (c) 2025 Mohsen Hajibagloo (Author); Habibollah Nakhaei; Mohammadreza Shoorvarzi, Zahra Noori Tupkanloo (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
