An Investigation of the Mediation Effect of Aspiration Attainment on the Relationship between Income Smoothing and Strategic Management: Behavioral Theory of the Firm and Performance Feedback Theory Perspective

Articles in Press

Document Type : Research Paper

Authors

1 PH, D Candidate in Accounting Faculty of Economics and Administrative Sciences, University of Mazandaran, Bablsar

2 Professor of Accounting, Faculty of Economics and Administrative Sciences,, University of Mazandaran, Bablsar

10.22103/jak.2025.24511.4127

Abstract

Abstract

Objective: The behavioral theory of the firm suggests that when a company's performance falls below its aspiration attainment, it initiates a search for solutions and strategic changes. However, this theory does not account for income smoothing as a tool to achieve aspiration attainment. This study aims to extend the behavioral theory framework by incorporating income smoothing and investigating its impact on aspiration attainment and strategic management decisions.

Method: A sample of 147 companies listed on the Tehran Stock Exchange from 2008 to 2022 was examined. The study follows an applied, regression-based approach. To address the potential endogeneity of the independent variable, the two-stage least squares (2SLS) method was employed using Stata software.

Results: The results indicate a significant positive effect of income smoothing on achieving aspiration attainment and a significant negative effect on future strategic changes. Additionally, aspiration attainment was found to partially mediate the relationship between income smoothing and future strategic changes, suggesting that companies achieving aspiration attainment through income smoothing become less motivated to change their strategies.

Conclusion: The findings suggest that firms engaging in income smoothing are less likely to pursue strategic changes. This tendency arises from their reliance on earning manipulation to achieve aspiration attainment, reducing the urgency for strategic adaptations. Such behavior reflects a shift from genuine performance improvement to managing reported performance to meet aspiration levels.

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Journal of Accounting Knowledge

Articles in Press, Accepted Manuscript
Available Online from 27 April 2025

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History

  • Receive Date: 15 December 2024
  • Revise Date: 18 March 2025
  • Accept Date: 27 April 2025

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