Dividends and tax avoidance as drivers of earnings management: Evidence from dividend-paying private SMEs in Finland

Jussi Karjalainen, Eero Kasanen, Juha Kinnunen and Jyrki Niskanen

Journal of Small Business Management, 2023, vol. 61, issue 2, 906-937

Abstract: Using a sample covering practically all dividend-paying small and medium-sized private companies in Finland during 2006–2010, 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 SMEs facing neither political pressures nor capital market incentives for earnings disclosures.

Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/00472778.2020.1824526 (text/html)
Access to full text is restricted to subscribers.

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:taf:ujbmxx:v:61:y:2023:i:2:p:906-937

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/ujbm20

DOI: 10.1080/00472778.2020.1824526

Access Statistics for this article

Journal of Small Business Management is currently edited by Eric Liguori

More articles in Journal of Small Business Management from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().