A Comparative Study of Income Smoothing in Europe

According to Nobes (1983) one of the discriminating features of accounting systems in certain countries such as Germany and France in comparison with the Netherlands and the United Kingdom is the degree of use of income smoothing. Explicitly, we will test the hypothesis that there is a difference in smoothing behaviour for German and French manufacturing companies versus their Dutch and UK counterparts. France and Germany can be regarded as major representatives of the macro-uniform government driven tax- dominated class of accounting systems and the Nether-lands and the United Kingdom as major representatives of the micro-fair-judgmental commercially-driven class of accounting systems. Our main findings are that listed manufacturing companies from France and Germany tend to smooth more than listed manufacturing companies from the Netherlands and the United Kingdom. Furthermore, the incidence of income smoothing is greater in large companies, in more profitable companies and in non-high-tech industries