Higher ERC or Higher Future ERC from Income Smoothness? - The Role of Information Environment

摘要: We examine the differential effects of income smoothness on value-relevance current future earnings (termed as response coefficient, ERC, and FERC, respectively) affected by different information environments. In theory, if reported are permanent, should explain concurrent returns fully. this case, FERC approach zero. However, a rich environment provides more that helps market better assess firm’s profitability. To extent permanent cannot fully predict realized earnings, we find positive in environment. Based premise smoothing brings closer to for firms with poor environment, improves ERC but not FERC. For superior also higher when less smoothed poorer Many recent studies have focused solely assessing informativeness earnings. remind researchers theoretically value-relevant do effectively improve an little or no other information.