The Impact of Dividend and Tax Avoidance on Earning Management of Companies

Nazik Maqsood, Tanveer Ahmad Shahid and Abaid Ul Rehman
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Nazik Maqsood: Lecturer at National College of business administration and economics, Pakistan
Tanveer Ahmad Shahid: PhD Scholar, School of Commerce and Economics, Superior University, Lahore, Pakistan
Abaid Ul Rehman: MS Scholar, School of Accounting & Finance University of Wollongong, Australia Melbourne, Australia

Bulletin of Business and Economics (BBE), 2024, vol. 13, issue 1, 256-272

Abstract: Using a sample covering practically all dividend-paying oil and gas companies companies in Pakistan during 2011–2020, we document that earnings management in these companies is driven by two concurrent forces: the willingness to pay (tax-exempt) dividends and avoiding unnecessary company income tax. Moreover, we show that the need for income increasing earnings management enabling current dividend distribution is mitigated by the amount of retained earnings from prior years. This article adds to the existing literature by providing empirical evidence for dividend and tax-driven earnings management in private oil and gas companies facing neither political pressures nor capital market incentives for earnings disclosures.

Keywords: Earning management; Dividend payout; Oil and gas Companies (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:rfh:bbejor:v:13:y:2024:i:1:p:256-272

DOI: 10.61506/01.00201

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