Dividend policy, earnings management and the moderating effect of corporate governance in the French context

Olfa Ben Salah and Anis Jarboui

Journal of Financial Economic Policy, 2021, vol. 14, issue 3, 356-380

Abstract: Purpose - The purpose of this paper is to examine the moderating effect of corporate governance on the impact of earnings management on dividend policy. Design/methodology/approach - In this paper, the authors selected French non-financial companies listed on the CAC All Tradable index during the 2008–2015 period. Feasible generalized least square regression method is used to estimate the econometric models. Findings - The empirical results allowed the authors to confirm and/or reject certain hypotheses. First, the ownership concentration seems to positively moderate the impact of earnings management on dividend policy. Another conclusion that the authors have been able to draw is that the effect of earnings management on dividend policy is more favorable in the case of firms with a small director’s board. Practical implications - Our results have shown that French firms run earnings to inform the market that they can distribute dividends. Therefore, we recommend that the various partners of the firm pay more attention to the governance mechanisms of these types of companies and, in particular, in countries where foreign investors suffer from weak legal protection (Easterbrook, 1984;Gomes, 2000;La Portaet al., 2000andAthariet al., 2016). In fact, standardization bodies, the Ministry of Finance, external auditors and stock exchange organizer must focus on sophisticated governance mechanisms to ensure better quality of financial reporting. Originality/value - To our knowledge, no other research has examined whether the impact of earnings management on dividend policy varies significantly with the moderating effect of certain governance mechanisms in France.

Keywords: Financing policy; Payout policy; Dividend policy; Earnings management; Corporate governance; Moderating effect (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfeppp:jfep-02-2021-0034

DOI: 10.1108/JFEP-02-2021-0034

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