Dividend smoothing and financial transparency

Tatiana Salikhova, Alexander Ugarov and Svetlana Orlova

Finance Research Letters, 2024, vol. 62, issue PA

Abstract: The study explores the effect of financial transparency on dividend smoothing behavior. We analytically show that dividend smoothing should increase when shareholders cannot observe cash flow realizations. Using exogenous variation in financial transparency created by the SOX, we find that less transparent firms as measured by higher dispersion of analyst forecasts and lower excess audit fees reduced dividend smoothing more after the legislative change, as compared to other dividend-paying firms in the sample. Our study complements recent studies considering the firm's dividend smoothing as an alternative corporate governance mechanism.

Keywords: Dividend smoothing; Transparency; Audit fees; Sarbanes–Oxley act; Corporate governance; Payout policy (search for similar items in EconPapers)
JEL-codes: D22 D82 G30 G35 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pa:s154461232400182x

DOI: 10.1016/j.frl.2024.105152

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