Dividend policy and earnings management across countries

Wen He, Lilian Ng, Nataliya Zaiats and Bohui Zhang

Journal of Corporate Finance, 2017, vol. 42, issue C, 267-286

Abstract: This paper examines whether dividend policy is associated with earnings management and whether the relationship varies across countries with wide-ranging degrees of institutional strength and transparency. Based on a sample of 23,429 corporations from 29 countries, we show that dividend payers manage earnings less than dividend non-payers, and that this evidence is stronger in countries with weak investor protection and high opacity. Further, we find that dividend payers manage earnings less when they issue equity following dividend payments, and that this result is more pronounced in countries with weak institutions and low transparency. Overall, our evidence suggests that firms may employ dividend policies associated with less earnings manipulation to mitigate agency concerns and to establish credible reputation, thereby facilitating access to external funds.

Keywords: Dividends; Earnings management; Agency problems; Investor protection; Equity issuance (search for similar items in EconPapers)
JEL-codes: G15 G34 G35 G38 M41 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:42:y:2017:i:c:p:267-286

DOI: 10.1016/j.jcorpfin.2016.11.014

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