An Empirical Study of a Selected Sample of Iraqi Manufacturing Companies

Abstract

Using three accounting income concepts and six hypotheses, this study tries, first, to investigate the existence of an income smoothing phenomenon and, second, gives an explanation for such an existence. The statistical test of data relating to a sample consisting 35 industrial Iraqi companies registered on Baghdad Stock Exchange confirms the existence of income smoothing behavior for the three concepts of income when EKEL' index is employed (1- net income, 6 companies out of 30; 2- current operating income, 8 companies out of 30; 3- current activity income, 8 companies out of 30). As far as the interpretation of the phenomenon is concerned, five independent variables are employed. These are income taxes, a company's profitability, types of ownership (private or mixed sector), and size of the company and capital intensity. The statistical test confirms the relationship (statistical significance) between income smoothing behavior, and income taxes paid, a company's profitability and types of ownership as independent variables explaining the existence of the phenomenon. The other two variables, i.e. the size of a company and capital intensity, are found statistically insignificant.