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The Impact of Smoothing on Firm Value - An Industry Analysis

Struck, Henriette and Fiehn, Sara (2011)
Department of Business Administration
Abstract
The purpose of this study is to analyze the impact of smoothing on firm value in the US Electricity, Oil & Gas Producers, Pharma & Biotechnology, Retail and Leisure & Tourism Industry. We find that investors value smooth earnings in the Oil & Gas, Electricity & Alternative Energy and Leisure & Tourism Industry. In the Pharma & Biotechnology and Retail industry we do not find smoothing activity to be value relevant. Over the majority of industries we observe time- specific effects. The findings of our empirical analysis show that benefits from smoothing cannot be generalized across industries. Instead the value relevance of smoothing income/earnings has three dimensions which need to be analyzed in order to find meaningful results. This is... (More)
The purpose of this study is to analyze the impact of smoothing on firm value in the US Electricity, Oil & Gas Producers, Pharma & Biotechnology, Retail and Leisure & Tourism Industry. We find that investors value smooth earnings in the Oil & Gas, Electricity & Alternative Energy and Leisure & Tourism Industry. In the Pharma & Biotechnology and Retail industry we do not find smoothing activity to be value relevant. Over the majority of industries we observe time- specific effects. The findings of our empirical analysis show that benefits from smoothing cannot be generalized across industries. Instead the value relevance of smoothing income/earnings has three dimensions which need to be analyzed in order to find meaningful results. This is the firm, industry and time dimension. (Less)
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author
Struck, Henriette and Fiehn, Sara
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Management of enterprises, industry analysis, value premium, income smoothing, earnings management, risk management, cash-flow smoothing, Företagsledning, management
language
Swedish
id
2058258
date added to LUP
2011-06-01
date last changed
2012-11-12 11:21:53
@misc{2058258,
  abstract     = {The purpose of this study is to analyze the impact of smoothing on firm value in the US Electricity, Oil & Gas Producers, Pharma & Biotechnology, Retail and Leisure & Tourism Industry. We find that investors value smooth earnings in the Oil & Gas, Electricity & Alternative Energy and Leisure & Tourism Industry. In the Pharma & Biotechnology and Retail industry we do not find smoothing activity to be value relevant. Over the majority of industries we observe time- specific effects. The findings of our empirical analysis show that benefits from smoothing cannot be generalized across industries. Instead the value relevance of smoothing income/earnings has three dimensions which need to be analyzed in order to find meaningful results. This is the firm, industry and time dimension.},
  author       = {Struck, Henriette and Fiehn, Sara},
  keyword      = {Management of enterprises,industry analysis,value premium,income smoothing,earnings management,risk management,cash-flow smoothing,Företagsledning,management},
  language     = {swe},
  note         = {Student Paper},
  title        = {The Impact of Smoothing on Firm Value - An Industry Analysis},
  year         = {2011},
}