the different roles of stock holdings and option holdings in solving agency problems, managers may smooth past earnings … holdings aligning the interests of managers and shareholders, and managers using discretionary accruals to smooth past earnings … risk-taking by managers, and managers use discretionary accruals to mask volatility of less predictable earnings. Thus, we …

high ability managers incorporate more forward-looking information about cash flows into current earnings through smoothing …, thereby enhancing earnings informativeness. We also find that smoothing associated with high ability managers improves stock …