The relationship between dividend policy and earnings management: a causality analysis

Olfa Ben Salah and Anis Jarboui

Journal of Economics, Finance and Administrative Science, 2024, vol. 29, issue 57, 166-185

Abstract: Purpose - The objective of this paper is to investigate the direction of the causal relationship between dividend policy (DP) and earnings management (EM). Design/methodology/approach - This research utilizes the panel data analysis to investigate the causal relationship between EM and DP. It provides empirical insights based on a sample of 280 French nonfinancial companies listed on the CAC All-Tradable index during the period of 2008–2015. The study initiates with a Granger causality examination on the unbalanced panel data and employs a dynamic panel approach with the generalized method of moments (GMM). It further estimates the empirical models simultaneously using the three-stage least squares (3SLS) method and the iterative triple least squares (iterative 3SLS) method. Findings - The estimation of our various empirical models confirms the presence of a bidirectional causal relationship between DP and EM. Practical implications - Our study highlights the prevalence of EM in the French context, particularly within DP. It underscores the need for regulatory bodies, the Ministry of Finance, external auditors and stock exchange organizers to prioritize governance mechanisms for improving the quality of financial information disclosed by companies. Originality/value - This research is, to the best of our knowledge, the first is to extensively investigate the reciprocal causal relationship between DP and EM in France. Previous studies have not placed a significant emphasis on exploring this bidirectional link between these two variables.

Keywords: DP; EM; Bidirectional causality; Granger causality; Simultaneous equation models (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jefasp:jefas-09-2021-0198

DOI: 10.1108/JEFAS-09-2021-0198

Access Statistics for this article

Journal of Economics, Finance and Administrative Science is currently edited by Nestor U. Salcedo

More articles in Journal of Economics, Finance and Administrative Science from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().