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Income Smoothing and the Cost of Debt and Credit Ratings

Author

Listed:
  • Abdolkarim Moghadam

    (Payame Noor University)

  • Mehdi Baharmoghadam

    (Shahid Bahonar University)

  • Mojtaba Mohammadzadeh

    (Islamic Azad University)

Abstract

The goal of this research is to examine the effect of income smoothing on the cost of debt and the credit rating. The statistic community is the accepted firms in Tehran’s stock exchange during 1385- 1389, that the statistic sample has chosen from them. Also in this research we used Jones’ modified model for measuring the discretionary accruals (measure of income smoothing). And we used regression analysis for testing the research hypothesis. The results of this research show that there is significant and negative relation between income smoothing and cost of debt. And also there is significant and direct relation between income smoothing and firm’s credit rating.

Suggested Citation

  • Abdolkarim Moghadam & Mehdi Baharmoghadam & Mojtaba Mohammadzadeh, 2013. "Income Smoothing and the Cost of Debt and Credit Ratings," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(3), pages 234-241, July.
    • Handle: RePEc:hur:ijaraf:v:3:y:2013:i:3:p:234-241
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    References listed on IDEAS

    as
    1. Huang, Pinghsun & Zhang, Yan & Deis, Donald R. & Moffitt, Jacquelyn S., 2009. "Do artificial income smoothing and real income smoothing contribute to firm value equivalently?," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 224-233, February.
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