DOES INCOME SMOOTHING AFFECT STOCK MARKET PRICE VOLATILITY? AN EMPIRICAL STUDY

Ahmad N. Obaidat
Tafila Technical University

ABSTRACT

This study investigates the association between income smoothing and stock market price
volatility of non-financial firms listed on Amman Stock Exchange (ASE) for the period extending
from 2011 to 2017. Utilizing a sample of firms listed on the ASE and controlling for four variables
(firm sector, size, profitability, financial leverage, and trading volume), the results indicated that
there is no significant relationship between the firm’s income smoothing and stock market price
volatility. The results also indicated that firm size is the only variable with significant association
with volatility, where larger firms have less volatile stock price than smaller ones.

Keywords: Income smoothing, stock market price volatility, non-financial firms, ASE.