Unemployment insurance benefits and income smoothing

Author

Tee Yong Jeffrey NG, Singapore Management UniversityFollow
Tharindra RANASINGHE, Singapore Management UniversityFollow
Guifeng SHI
Holly I. YANG, Singapore Management UniversityFollow

Publication Type

Journal Article

Version

publishedVersion

Publication Date

1-2019

Abstract

Labor unemployment insurance reduces unemployment concerns. We argue that these benefits moderate incentives to smooth earnings to reduce employees’ concerns about unemployment risk. Using exogenous variations in unemployment insurance benefits, we find evidence consistent with this argument. We also find that that link between unemployment insurance benefits and income smoothing is stronger when there is higher unemployment risk and when the firm is likely to employ more low-wage workers, who find unemployment insurance benefits especially useful. Our paper contributes to the literature by showing that public policy decisions such as unemployment insurance have significant, albeit probably unintended, externalities on corporate financial reporting.

Keywords

Income smoothing, Unemployment insurance

Discipline

Accounting

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Accounting and Public Policy

Volume

38

Issue

1

First Page

15

Last Page

30

ISSN

0278-4254

Identifier

10.1016/j.jaccpubpol.2019.01.002

Publisher

Elsevier: 24 months

Citation

NG, Tee Yong Jeffrey; RANASINGHE, Tharindra; SHI, Guifeng; and YANG, Holly I.. Unemployment insurance benefits and income smoothing. (2019). Journal of Accounting and Public Policy. 38, (1), 15-30.
Available at: https://ink.library.smu.edu.sg/soa_research/1817

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Additional URL

https://doi.org/10.1016/j.jaccpubpol.2019.01.002