Institutional Investors and Income Smoothing

This study examines the influence of the concentration of institutional investors on the chances of income smoothing in publicly traded Brazilian companies. Altogether, 118 companies listed on B3 were investigated during the period from 2010 to 2018, totaling 2,264 observations. The investor was considered institutional when acting with Assets Under Management. To calculate the income smoothing, the metrics EM1 and EM2 by Leuz, Nanda and Wysocki (2003) were used, as adapted by Kolozsvari and Macedo (2016). The results supported by logistic regression with a panel structure show that the concentration of institutional investors is not a significant predictor of income smoothing. The findings reveal that the financial sophistication linked to institutional investors may not be sufficient to create an external monitoring of corporate governance capable of mitigating the opportunistic practices of managers.