Date of Award
Spring 5-7-2011
Degree Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Accountancy
First Advisor
Dr. Lawrence D. Brown
Second Advisor
Dr. Mark Chen
Third Advisor
Dr. Ilia D. Dichev
Fourth Advisor
Dr. R. Lynn Hannan
Abstract
Existing research suggests that market misvaluations affect corporate investment, often leading to suboptimal investment. I examine whether earnings smoothness reduces the impact of market valuations on corporate investment and in turn enhances investment efficiency. I find that earnings smoothness has a strong negative effect on the sensitivity of corporate investment to stock prices. Further analyses indicate that this negative effect is driven by both innate and discretionary components of earnings smoothness and is more pronounced for firms operating in more volatile business environments. I complement these findings by demonstrating that firms with smoother earnings have lower over- (under-)investment and higher future operating performance. Collectively, the evidence suggests that earnings smoothness improves corporate investment efficiency by reducing the impact of market valuations on investment.
DOI
https://doi.org/10.57709/1960251
Recommended Citation
Huang, Xiaochuan, "Earnings Smoothness and Investment Sensitivity to Stock Prices." Dissertation, Georgia State University, 2011.
doi: https://doi.org/10.57709/1960251