Author

  • Lanouar Charfeddine

    • College of Administrative Sciences, Najran University, KSA
    • Saudi Arabia

  • Wided Bouaine

    • Higher Institute of Accounting and Firm Administration of Tunis, University of Manouba, Tunisia
    • Tunisia

Abstract

The purpose of this paper is to examine the link between income smoothing and CEO tenure on a sample of 271 U.S companies over the period 1993 to 2003. Moreover, in order to test the extent of income smoothing for job security and specifically for a lengthen tenure; we also have considered some CEOs characteristics such as age and tenure. Empirical results of Wilcoxon statistics and discriminating analysis show that when the current (future) performance is good, the CEOs find the sufficient margins to manage the earnings to leave in reserve for the future performance (or borrow for the current performance). In addition, the results of the multivariate model show that the CEO smooth the income by decreasing accruals, so they shift current earnings to future periods when current earnings is high and future earnings is low to lengthen their tenure.

Keywords

References

  • Ahmed, A., Lobo, G. & Zhou, J. (2001).Job security and income smoothing: An empirical test of the Model. Paper prepared for presentation at the annual meetings of American Accounting Association and the CAAA annual conference.
  • Boyer, M. M. & Molina, H. O. (2006). Career concerns of top executives, managerial ownership and CEO succession. Sauder School of Business working paper.
  • Brickley, J., Coles, J. & Linck, J. (1999).What happens to CEO after they retire? New evidence on career concerns. Horizon problem and CEO incentives. Working paper. University of Rochester. Simmon School of Business. Working paper FR98-10.
  • Chen, X. & Cheng, Q. (2002). Abnormal accruals based anomaly and managers motivations to record abnormal accruals. Working paper. Sauder School of business.
  • De-Angelo, L. (1988). Managerial competition. Information costs and corporate governance. Journal of Accounting and Economic , l (10), 3-36.
  • Dechow, P. & Sloan. R. (1991). Executive incentives and the horizon problem. Journal of Accounting and Economic, 14, 51-89.
  • Dechow, P., Sloan, R. & Sweeney, A. P. (1995). Detecting earning management. The Accounting Review, 70, 193-225.
  • Dechow, P., Richardson, S. &Tuna A. (2003). Why are earnings kinky? An examination of the earnings management explanation. Review of Accounting Studies , 8(2-3), 355-384.
  • Defond, M. L. & Park. C. W. (1997). Smoothing income in anticipation of future earning. Journal of Accounting and Economic , 1(23), 115-139.
  • Demers, E. & Wang. C. (2010). The Impact of CEO Career Concerns on Accruals Based and Real Earnings Management. Finance and Corporate Governance Conference 2011 Paper.
  • Elliot, J. & Shaw, W. (1988). Write offs as accounting procedures to manage perceptions. Journal of Accounting Research , 26, 91-119.
  • Fama, E .F. (1980). Agency problems and the theory of the firm. Journal of Political Economy , 88, 2883087.
  • Fudenberg, D. & Tirole, J. (1995). A theory of income and dividend smoothing based on incumbency rents. Journal of Political Economy , 103, 75-93.
  • Gibbons, R. & Murphy, K. J. (1990). Relative performance evaluations for chief executive office. Industrial and Labor Relations Review, 43(3), 30-51.
  • Gaver, J., Gaver, K. M. & Austin, J. R. (1995). Additional evidence on bonus plans and income management. Journal of Accounting and Economic , 19, 3-28.
  • Godfrey, J., Mather, P. & Ramsay, A. (2001).Earning and impression management in financial reports: The case of CEO change. ABACUS , 39, 95-123.
  • Goyal, W. K. & Park, C. W. (2001). Board leadership structure and CEO turnover. Journal of Corporate Finance , 8, 49-66.
  • Guay, W. R., Kothari, S. P. & Watts, R. L. (1996). A market-based evaluation of discretionary accrual models. Journal of Accounting Research , 34, 83-105.
  • Guenther, N., Gegenfurtner, B., Kaserer, C. & Achleitner, A. K. (2009). International Financial Reporting Standards and Earnings Quality: The Myth of Voluntary vs. Mandatory Adoption. Working Paper. Technische Universität München.
  • Hazarika. S., Karpoff, J. M. &Nahata. R. (2011). Internal corporate governance. CEO turnover. In addition, earnings management. Working papers. University of New York.
  • Healy, P. M. & Wahlen, J. M. (1998). A review of the earning management literature and its implication for standard setting. Journal of Accounting , 4, 1-34.
  • Jones, J. (1991). Earnings management during import relief investigations . Journal of Accounting Research, 29 , 193-228.
  • Koch, T. W. & Wall, L. D. (2000). The use of accruals to manage reported earning: Theory and evidence. Federal Reserve Bank of Atlanta working paper 2000-23.
  • Kothari, S. P., Leone, A. J. & Wasley, C. E. (2005). Performance matched discretionary accruals, Simon School of Business Working Paper No. FR 01-04; MIT Sloan Working Paper No. 4335-01.
  • Lambert, R. (1984). Income smoothing as rational equilibrium behaviour. The Accounting Review , LIX, 604-618.
  • Lee, C. (2007). What has happened over the past 10 years to the selection of retired CEOs as board members? Indiana University. CAEPR Working paper N°2007. 007.
  • Murphy, K. & Zimmerman, J. (1993). Financial performance surrounding C.E.O turnover. Journal of Accounting and Economic , 16, 273-316.
  • Pourciau, S. (1993). Earning management and non-routine executive change. Journal of Accounting and Economic , 16, 317–336.
  • Paquerot, M. (1996). L’enracinement des dirigeants et ses effets. Revue Française de Gestion, NOV/DEC, 212-225.
  • Schipper, K. (1989).Commentry on earning management. Accounting Horizons , 3(4), 91-102.
  • Song, F. & Thakor, A. V. (2006). Information Control. Career Concerns. In addition, Corporate Governance. Journal of Finance , Forthcoming , 61(4), 1845-96.
  • Weishback, M. (1988). Outside directors and CEO turnover. Journal of Financial Economic , 20, 431-460.
  • Ye, J. (2007). Accounting accruals and tests of earnings management, Document de travail, Social, Science Research Network.
  • Zhang, W. (2009). CEO Tenure and Earnings Quality. Working paper, School of Management, University of Texas at Dallas.

Downloads

No downloads have been recorded for this article yet. Figures appear here once readers begin downloading the full text.

How to Cite

Charfeddine, L., & Bouaine, W. (2026). Income Smoothing and CEO Job Security. Information Management and Business Review, 4(3), 95-106. https://doi.org/10.22610/imbr.v4i3.969

Share this article

License

Copyright (c) 2026 Lanouar Charfeddine, Wided Bouaine (Author)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of revised paper in the light of suggestions of the reviewers, the editorial team  edits and formats manuscripts to bring uniformity and standardization in published material.

This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.

Keywords

Section

Research Paper

Published in

Vol. 4 No. 3 (2012) Executive Compensation, Advertising & E-Payments View issue contents

Published

2026-08-12

Submissions

Have research to publish? Information Management and Business Review welcomes submissions.

Make a Submission