The relationship between Income smoothing, Idiosyncratic risk and CEO turnover in companies listed in Tehran Stock Exchange

Corporate executive are motivated to reduce the fluctuation of profits by smoothing the profits and build on the confidence of investors and their expectations and thereby reducing concerns about their replacement. This research seeks to examine the relationship between profit smoothing, idiosyncratic risk and CEO turnover in companies admitted to Tehran Stock Exchange. In order to achieve the purpose of this research, 135 companies which has been accepted on the Tehran Stock Exchange, during 1388 to 1394 selected on the basis of systematic sampling-delecion method and in general, 945 firm-years observation are considered for analyzing. Three hypotheses were developed in this regard. To test the hypotheses, two Fama-French three-factor models were used to calculate idiosyncratic risk and the main model of research. In order to testing the research hypotheses, the logic regression and compound data is used. Considering the three measurement methods for the independent variable of income smoothing, the research findings indicate that there is no significant relationship between income smoothing and CEO's turnover as well as between idiosyncratic risk and CEO turnover variables. However, in examining the hypothesis of the effect of idiosyncratic risk on the relationship between CEO's turnover and income smoothing, there is a positive and significant relationship between earnings smoothing and the method of estimating profit by the method of the IQ and the method of the ratio of the profit - loss ratio to the deviation of the operating cash flow.