The impact of cost stickiness on income smoothing: evidence from employment protection regulations
研究发现，成本粘性会促使管理者通过盈余平滑来抵消其导致的盈余波动，这种效应在劳动成本敏感度高或信息提供动机强的企业中更明显，且最终能提高盈余信息含量。
Prior literature suggests that cost stickiness increases the ex-ante volatility and reduces the predictability of earnings. We examine whether managers intentionally undo such consequences by dampening earnings volatility. Exploiting the staggered adoption of wrongful discharge laws as an exogenous instrument for cost stickiness, we document that cost stickiness increases managers’ income-smoothing activities. This response is more pronounced in firms whose earnings are more sensitive to labour costs than their industry peers are and in firms with stronger information-provision incentives. Additional analyses indicate that income smoothing improves sticky-cost firms’ earnings informativeness and that the identified impact of cost stickiness is primarily driven by labour costs. Our results suggest that labour regulations can influence managers’ financial reporting incentives via cost behaviour.