SUMMARY
Investors, in order to obtain suitable and logical decisions to invest, need reliable information. Erning is among the most important accounting information that investors and creditors consider. Investors tend to invest in companies whose profit experience less fluctuation. Therefore, managers, to illustrate the performance of company better, try to reduce earnings volatility to attract investors' trust. This research, in line with the importance of income smoothing, reviews its relationship with the information uncertainty and cost of capital of listed companies in Tehran Stock Exchange during the years 2008 to 2012. From among the 372 companies listed in the Tehran Stock Exchange, using systematic elimination method, some companies were removed, and a number of 101 firms were selected as sample. The data of the variables was extracted from audited financial statements. Using econometric software Eviewes 0.7 and Panel data, the relation of the research was tested from in three main hypotheses. In this study, to create the variable of information uncertainty, two variables of volatility of the stock and earnings forecast error were used. The variable of stock return volatility was calculated using GARCH (1,1); and the variable of earnings forecast error was calculated by Cheng and Firth (2000). The method of Ohlson and Juettner (2005) was used to calculate the variable of capital cost. Variables of firm size and sales growth were studied as control variables and their effect on the estimates of the variables was reviewed. The findings represent a significant and negative relationship between income smoothing, uncertainty and cost of capital.