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CEO inside debt, income smoothing, and stock price informativeness

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  • Sydney Qing Shu

Abstract

I examine whether the informativeness of income smoothing varies with the extent to which the CEO holds inside debt (i.e. pension benefits and deferred compensation). I document that for firms where the CEO holds less inside debt, income smoothing reduces stock price informativeness. This result suggests that CEOs with lower inside debt smooth earnings to conceal firms’ underlying economic performance. I also find that the negative effect of income smoothing on stock price informativeness for firms whose CEOs hold less inside debt is more pronounced when firms have higher debt financing, lower analyst coverage, or weaker corporate governance.

Suggested Citation

  • Sydney Qing Shu, 2021. "CEO inside debt, income smoothing, and stock price informativeness," Accounting and Business Research, Taylor & Francis Journals, vol. 51(1), pages 65-95, January.
    • Handle: RePEc:taf:acctbr:v:51:y:2021:i:1:p:65-95
    DOI: 10.1080/00014788.2020.1798735
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    Cited by:

    1. Lu Qiao & Emmanuel Adegbite & Tam Huy Nguyen, 2024. "CFO overconfidence and conditional accounting conservatism," Review of Quantitative Finance and Accounting, Springer, vol. 62(1), pages 1-37, January.
    2. Mostafa Monzur Hasan & Ashrafee T. Hossain & Takdir Hossain, 2022. "CEO inside debt holdings and trade credit," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3677-3709, September.
    3. Hasan, Mostafa Monzur & Hossain, Ashrafee & Hossain, Takdir, 2023. "CEO inside debt holdings and credit ratings," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(1).
    4. Tao Chen & Robert K. Larson & Han Mo, 2024. "Investor Herding and Price Informativeness in Global Markets: Evidence from Earnings Announcements," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 25(1), pages 92-110, January.

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