Can "Big Bath" and Earnings Smoothing Co-exist as Equilibrium Financial Reporting Strategies?

By Michael T. Kirschenheiter, Nahum D. Melumad. 2002

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Does Income Smoothing Improve Earnings Informativeness (2006, neutral): “In contrast, other studies view income smoothing as a vehicle for managers to reveal their private information about future earnings ( Kirschenheiter and Melumad 2002; Ronen and Sadan 1981; Sankar and Subramanyam 2001; Demski 1998).”
Ready, AIM, Acquire: Impression Offsetting and Acquisitions (2015, background): “Specifically, firmswill “under-report earnings by the maximum amount possible, preferring to take a big bath in the current period in order to report higher earnings in the future” (Kirschenheiter & Melumad, 2002: 762).”
Performance, Growth and Earnings Management (2006, background): “These study include Chaney and Lewis (1995), Fudenberg and Tirole (1995), Kirschenheiter and Melumad (2002), Ronen and Sadan (1985), Sankar and Subramanyam (2001), and Trueman and Titman (1988).”
Understanding Earnings Quality: A Review of the Proxies, Their Determinants and Their Consequences (2010, background): “28 See Lambert (1984), Demski (1998), and Kirschenheiter and Melumad (2002) for analytical models of smoothing behavior.”
Stock Option Compensation and Earnings Management Incentives (2003, background): “Also, see Kirschenheiter and Melumad (2002) for a discussion on how big bath behavior fits within an earnings smoothing model.”
Economic Effects of Tightening Accounting Standards to Restrict Earnings Management (2005, neutral): “(2002) and Kirschenheiter and Melumad (2002).”