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INCOME SMOOTHING AND CORPORATE GOVERNANCE
Income smoothing is a strategy aimed at altering accounting results in order to reduce fluctuations. In the other hand, by adopting corporate governance mechanisms it may be possible to reduce information asymmetry and, consequently, reduce the possibility of smoothing results. The general objective of the present study was to investigate the relationship between the adoption of corporate governance mechanisms and income smoothing. Financial data were selected from 211 Brazilian public companies between 2000 and 2015. The firms were separated according to whether or not they adhered to B3’s differentiated corporate governance segments. Income smoothing was measured using both the model by Eckel (1981) and a version of the model proposed by Leuz et al., (2003). The analysis was performed using non-parametric Wilcoxon rank sum tests and descriptive analyses. Based on the descriptive analysis, it was not possible to state that the group of firms adhering to the corporate governance levels had a smaller proportion of companies that smooth results; and the hypothesis that the degree of income smoothing is lower for such companies was not confirmed. The assumption that levels of corporate governance reduce the possibility of income smoothing was not validated based on non-parametric tests. Based on the descriptive analysis, it was concluded that both the proportion of companies that smooth results, and the degree of smoothing by organizations following the B3’s corporate governance levels are not lower than the ones shown by companies that do not follow the levels