Note: This paper has been superseded by Gassen, LaFond, Skaife and Veenman: Illiquidity and Stock Price Synchronicity, lt;a href='http://ssrn.com/abstract=2405465'gt;http://ssrn.com/abstract=2405465lt;/agt;.Much of prior international accounting research implicitly assumes that stock prices...

We examine the relation between earnings smoothing, governance and liquidity for a sample of non-U.S. firms. We divide smoothing into innate and discretionary components, and find that discretionary smoothing is increasing in incentives to smooth (greater tax-book conformity, concentrated...