Year: 2022
Type: article
Abstract: Given the importance of historical dividend policy to firms, I investigate whether dividend payers manipulate earnings through real activities to smooth dividend levels and dividend payout ratios. Using Compustat?s Execucomp database, I find evidence that dividend policy impacts both upward and downward real earnings management. I find that payers manipulate earnings upward through real activities to mitigate the shortfall of pre-managed earnings relative to prior year dividends when pre-managed earnings are lower than dividends paid in the prior year, suggesting that dividend levels are an important earnings benchmark. I document a stronger relationship between changes in pre-managed earnings and real earnings management for payers than for non-payers, suggesting that dividend policies impact real earnings management. Consistent with the importance of dividend policy in real earnings management, I show that dividend payers that follow conservative dividend policies manipulate earnings to a greater extent than dividend payers that do not follow conservative dividend policies.
Source: Digital Archive @ GSU
DOI: 10.57709/2096729
Author: Liu, Nan
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2157823397