Profit smoothing in industrial companies listed on the Johannesburg Stock Exchange

Abstract

This study evaluated the extent to which profit smoothing is practised in the industrial sector of the Johannesburg Stock Exchange (JSE), identified the smoothing dimensions most likely to be used and evaluated the impact of ex ante profit patterns on the propensity to smooth profits. The results of a literature survey, Delphi study and experiment supported the conclusion that profit smoothing is practised in JSE listed industrial companies. It was also concluded that all smoothing dimensions are used by managements, that ex ante profit growth trends do not affect the propensity of companies to smooth profits and that the amplitude and frequency of ex ante profit deviations also do not affect the propensity to smooth profits.