New Perspectives of Profit Smoothing : Empirical Evidence From China

In a first approximation, profit may seem like a simple and intuitive concept, but the definition is not limited to a single conceptual category. Analysis of the definition and role of profit must be implemented with a study at the corporate level. This book discusses the phenomenon of profit smoothing, implemented by management, which aims to maintain a constant flow of profit over time. On an operational level, the phenomenon of profit smoothing analyses and determines the correlation existing between a shock to a variable at the corporate level and the relationship between this shock and profit. This book discusses the main reasons, at the strategic level, of the phenomenon of profit smoothing and summarizes this into three groups. Firstly, the functionality of this phenomenon for corporate management is to transmit to the external environment, and especially to external investors, a business reality devoid of crisis and imbalances. Secondly, this initial motivation engages basically the second. In fact, levelling the trend of profit from year to year, top management can reduce the risk perceived from the outsiders and as from the company’s insiders. Thirdly, this justification is related to the stability of the flow of dividends. Profit smoothing places great emphasis on the phenomenon of dividends. It should be note how in fact the profit smoothing is used to keep the expectations of shareholders profit from one period to another. This book is focused on the profit smoothing and, in particular, how this phenomenon is established in developing-economies like the Chinese one, and will be of interest to academics, researchers, and students of corporate finance. Front Matter ....Pages i-xvi Theory of Profit (Domitilla Magni)....Pages 1-42 Profit Impact in Business Vision (Domitilla Magni)....Pages 43-81 Smoothing and Earnings Management Policies (Domitilla Magni)....Pages 83-117 Toward a Definition of Profit Smoothing (Domitilla Magni)....Pages 119-160 Why China? (Domitilla Magni)....Pages 161-200 Empirical Analysis of Profit Smoothing (Domitilla Magni)....Pages 201-236 Management Behavior and Profit Smoothing: Implications of the Study (Domitilla Magni)....Pages 237-247 Back Matter ....Pages 249-250