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Artificial and real income smoothing around corporate governance reforms: further evidence from Egypt

Ibrahim, Awad Elsayed Awad; Abdelfattah, Tarek; Hussainey, Khaled


Awad Elsayed Awad Ibrahim

Khaled Hussainey


Purpose-We examine whether managers switch from artificial income smoothing using discretionary accruals to real income smoothing around corporate governance reform in Egypt. Design/methodology/approach-Our sample comprises 61 non-financial companies listed on the Egyptian Stock Exchange for the years 2004-2011. We use discretionary accruals as a proxy for artificial income smoothing and income/loss from asset sales as a proxy for real income smoothing. Findings-We add to the literature in three crucial respects. First, we show that corporate governance reform did not mitigate real income smoothing. Second, we show that managers did not smooth earnings using discretionary accruals during the period of corporate governance reform. Third, we show that real income smoothing and discretionary accruals are not substitutes. Originality/value-We offer a significant contribution to accounting literature by providing new empirical evidence on the trade-off between real smoothing technique (e.g., income/loss from asset sales) and discretionary accruals around governance reform in a developing country.


Ibrahim, A. E. A., Abdelfattah, T., & Hussainey, K. (2020). Artificial and real income smoothing around corporate governance reforms: further evidence from Egypt. Journal of Applied Accounting Research, 21(4), 701-720.

Journal Article Type Article
Acceptance Date May 11, 2020
Online Publication Date Jun 24, 2020
Publication Date Nov 13, 2020
Deposit Date Nov 14, 2022
Publicly Available Date Nov 23, 2022
Print ISSN 0967-5426
Publisher Emerald
Peer Reviewed Peer Reviewed
Volume 21
Issue 4
Pages 701-720
Keywords Governance Reform; Discretionary Accruals; Asset Sales; Income Smoothing; Egypt
Public URL
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