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Investors, creditors and financial analysts are interested in having information on income smoothing in companies they are willing to invest in. Various local and international studies reveal that the investors in investment decisions prefer smooth and less fluctuating income. Managers attempt to report profit and its growth rate as smooth. Most researches show that financial statements and profit declaration has information content. This study is conducted for two aims, one investigating the impact of unexpected earnings on reaction of shareholders and another is impact of unexpected earnings on investors return. In present study earnings is taken as one of the most important variable in investors’ decision-making process, and seeks to see whether earnings have information content or not? If the earnings are the unexpected earnings arising from earnings smoothing incentives, by its declaration, does it lead to market response and achieving abnormal returns? The population of this paper consists of all companies listed on TSE. By filtering (systematic elimination) approach, 99 companies are selected during 2008 to 2012 as the research sample. For data analysis, regression panel data analysis is applied. The results of the study show that earnings can have information content and declaration of unexpected earnings that is done by earnings smoothing incentives by management causes that investors can interpret and understand the meaning of earnings information well. Thus, investors’ reliability to acquire declared earnings is increased and the increase of reliability of the investors leads to the increase of the impact of unexpected earnings on abnormal returns and stock price.

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The main purpose of this research is to consider the relationship between income smoothing and stock price performance (measured by return stock and abnormal returns stock) in financial crisis. Using Information in the financial statements of 71 the financial crisis companies and 71 the financial non-crisis companies during the period 2004 to 2014. Income smoothing was measured through correlation of a firm's change in discretionary accruals with earnings changes before in discretionary accruals. Criteria for the classification of financial crisis companies include: (1) three consecutive years of losses report, 2. dividend every year over the previous year more than 40% declined and 3. Article 141 of the Commercial Code. To test research hypothesis multivariate regression models is utilized. The result show that the financial non-crisis companies, there is significant negative relation between income smoothing with return stock and abnormal return stock, However, the financial crisis companies, there is significant positive relation between income smoothing and return stock, but there is no significant relation between income smoothing and abnormal return stock.