The Relationship between Income Smoothing and Income Tax and Profitability Ratios in Iran Stock Market

Abstract

The main goal of this study is to consider the relationship between income smoothing and tax income and profitability ratio, i.e. return on assets (ROA) and return on equity (ROE).Using the financial information of accepted companies in Iran stock exchange, the current researcher first made an attempt to distinguish between income smoother companies and non-income smoother companies based on Eckel index. After required modifications, a statistical population of 168 companies accepted in Iran stock exchange was obtained and their financial information was examined during 2001 to 2oo7. Independent variables included tax income and profitability ratio (ROA and ROE) and dependent variables was income smoothing variable. The findings illustrated the fact that a significant relationship exists between income smoothing and tax income and profitability ratio.