Accruals Approach in Income Smoothing and Permanent Earnings Hypothesis

Svetoslav Velinov Borisov ()
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Svetoslav Velinov Borisov: Department of Finance, University of Economics – Varna, Bulgaria

Business & Management Compass, 2018, issue 1, 31-45

Abstract: This study applies the Jones model (2005) modified by Kothari, Leone and Wasley (2005) in order to analyze and calculate the discretionary part of the accruals, as to accept or reject the Permanent Earnings Hypothesis for a sample of Bulgarian public companies. The study concludes that Bulgarian companies use discretionary accruals to smooth their incomes, thus offsetting the lower income from the current year with higher (unaccounted) from the previous year and vice versa.

Keywords: income smoothing; accruals; Permanent Earnings Hypothesis (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:vrn:journl:y:2018:i:1:p:31-45

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