Research On Income Smoothing Of Chinese Listed Companies Based On The Perspective Of Peers

Income smoothing is when enterprise management disclose financial information to the outside, smoothing different periods income to make enterprises showing a growth and stable development trend, so the outside holds an optimistic attitude towards operating status and prospects. Previous literature in the study of income smoothing, the enterprise management based on the characteristics of the enterprise itself to smoothing income independently.Starting from a brand new perspective, this paper studies the peer effects on income smoothing.The paper is divided into three levels to study the effect of peer firms on income smoothing:Firstly,describes an important factor in determining corporate income smoothing is influence of peer companies, the management is not independently according to the owned enterprises characteristics to smooth income, largely in response to the behavior of their peers. In order to eliminate the problems of endogenous in these studies inevitably, this paper selects idiosyncratic component of stock returns as instrumental variables to eliminate the phenomenon of mutual influence of peer companies. Secondly, because of different environment industry faces, this paper empirically test how the degree of competition in the industry affects peer effects, the results showed that the more intense competition in the industry peer companies to be more strongly influenced; and divide industry into groups according to the profitability, we found no significant difference between different the profitability of the industry peer effect. Finally, to further investigate whether the status of enterprises in the industry will affect the peer effects or not, this paper classified the company according to the scale and profitability index in the same industry as industry leaders and followers, and consistent with the information of the learning effect and reputation theory, we found smaller enterprises in the industry are more vulnerable to peer influence to smooth income compared to the leaders.This paper from the perspective of peer companies to study the relationship between income smoothing, breaking the fixed mode that income smoothing is the consequences of internal factors, expand the study of income smoothing factors; and discusses the influence of industry factors and the characteristics of enterprise on peer effects, analysis the peer effects comprehensively, provides new clues for corporate directors and outside investors distinguish enterprise real operating conditions and also find the new starting point and focus for regulatory authorities.