This paper investigates a cross-country impact of individualism-collectivism on the extent to which the information about future prospects is efficiently communicated through income smoothing. It proposes that social connections among corporate insiders are less pronounced in individualist economies, and corporate monitory efficiency will be enhanced with strong individualist culture, hence agency problems are mitigated. Consistent with the predictions in this paper, the results show that the garbling effect of income smoothing is mitigated in individualist economies after controlling for legal institutions, financial market development and economic wealth. However the garbling effect is enhanced in collectivist economies. This study provides new insights into the functions of income smoothing by inspecting the linkage between cultural factors and functions of income smoothing.