Goel, Anand Mohan; Thakor, Anjan V. - EconWPA - 2004
We explain why a firm may smooth reported earnings. Greater earnings volatility leads to a bigger informational … need to trade in the future for liquidity reasons, an increase in the volatility of reported earnings will magnify these … shareholders' trading losses. They will, therefore, want the manager to smooth reported earnings as much as possible. Empirical …