Leqaa Al-Othman

This study aims to determine the existence of practices of income smoothing in banks and insurance companies in Jordan. Also, it focuses the to determining the impact of the income smoothing on earning per share (EPS). The study covered all the companies in the study population, which are 38 companies – 15 banks and 23 insurance companies listed on the Amman Stock Exchange (ASE). The results show that income smoothing is practiced by Jordanian banks and insurance companies. The number (and percentage) of insurance companies that practiced income smoothing is greater than the number of banks: 34.8% of insurance companies and 20% of banks practiced income smoothing. The results also clearly indicate that financial institutions, which practice smoothing, have a higher EPS compared to those that do not practice income smoothing; this also indicates that the most important goal of using income smoothing is to maintain a positive earnings level.