The Relationship between Profit Smoothing and Information Asymmetry in the Life Cycle of Tehran Stock Exchange Companies

Some views indicate that income smoothing can predict future performance of companies and prepare useful information for interested group. The aim of this study is to test this view in companies listed in Tehran Stock Exchange. We have followed this target by focusing on earnings persistence and divided policy persistence as proxies for anticipating companies' future performance in companies that have smoothed their earnings. Financial information was collected from a sample of 66 firms for the period of 2008 to 2012. We have used multiple linear regressions and Logistic Regressions to test our hypothesis. The results show smoothed income has significant negative impact on earnings persistence and don’t have significant impact on dividend policy persistence. These results mean earnings smoothing in TSE companies is not done with the purpose of preparing useful information for anticipating future performance.