Download or read book Dividend Based Earnings Management written by Eero Kasanen and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In bank-dominated capital markets with blocked ownership firms are expected to pay out a smooth stream of dividends for the large institutional equity holders. This forces companies to report earnings high enough to pay out the dividends. On the other hand taxation may create an economic motive to report as low earnings as possible. Our empirical evidence gives support for the existence of dividend-based earnings management behavior in Finland. In particular we find that the reported earnings depend on the dividend-based target earnings even after controlling for the economic performance.

Download or read book Firm Performance and Earnings Management Around Dividend Change Announcements written by Reza Espahbodi and published by . This book was released on 2018 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a sample of dividend-paying firms, we show that much of the variation in accruals and real activities can be explained by firms' different performance trajectories. High (low) performance firms spend more (less) on SG&A and CAPEX and hold what appear to be abnormally low (high) levels of accruals, which is appropriate value-maximizing behavior given their superior (inferior) growth and profitability trajectories. Additionally, we find that standard measures of real activities earnings management have a stronger relation with changes in dividends than unexpected changes in firms' earnings; firms that appear to manage earnings to a greater extent change their dividends by larger amounts; and standard earnings management metrics are unimportant in explaining changes in firm value around dividend change announcements. These results are consistent with the notion that applying standard earnings management metrics without taking performance into account can result in researchers mistaking managers' efforts to increase firm value by reporting smoother streams of earnings and dividends over time with evidence of earnings manipulation.

Download or read book Firm Performance and Earnings Management Around Dividend Change Announcements written by Robert A. Weigand and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Studies that fail to fully consider how performance affects firms' earnings and dividend smoothing activities will identify deviations of discretionary accruals and real activities from sub industry averages as unusual or opportunistic too frequently. We show that much of the variation in accruals and real activities can be explained by firms' different performance trajectories. High (low) petformance dividend-paying firms spend more (less) on SG&A and CAPEX and hold what appear to be abnormally low (high) levels of accruals, which is appropriate value-maximizing behavior given their superior (inferior) growth and profitability trajectories. Additionally, we find that standard measures of real activities-based earnings management have a stronger relation with changes in dividends than unexpected changes in firms' earnings; firms that appear to manage earnings to a greater extent change their dividends by larger amounts; and standard earnings management metrics are unimportant in explaining changes in firm value around dividend change announcements. These results are consistent with the idea that applying standard earnings management metrics to dividend-paying firms without taking performance into account can result in researchers confounding managers' efforts to increase firm value by reporting smoother streams of earnings and dividends over time with evidence of earnings manipulation.

Download or read book Dividend based Earnings Management written by Eero Kasanen and published by . This book was released on 1992 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Real Earnings Management and Dividend Payout Signals written by Robert H. Edelstein and published by . This book was released on 2014 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: U.S. Real Estate Investment Trusts are required by federal law to distribute 90% of taxable income as dividends to common shareholders. We examine if firms subject to a binding dividend constraint, engage in real earnings management (REM) to reduce taxable income to meet dividend requirements. Since taxable income typically is not publicly reported by REIT's, we use dividend payout ratios based on FFO, a voluntary measure commonly used by the REIT industry, and net income, a measure required by GAAP, to serve as signals for the unobserved dividend-to-taxable income ratio. Using the dividend-to-FFO ratio to identify firms that may confront difficulties meeting dividend requirements, we find that these firms are more likely to participate in REM activities by reducing revenue and increasing expenses; both actions of which would reduce taxable income. We also provide evidence that firms generating less cash flow from operations and having fewer opportunities to obtain funding from the general capital markets are more likely to employ REM by selling fixed assets at a loss to generate the necessary cash flow for dividend payments, as well as to alter the dividend payment requirements. Overall, our findings suggest REM is a viable strategy that REIT managers utilize to meet regulatory dividend constraints. Managers are more likely to choose REM when there are limited alternative funding sources. We find that average returns in the three years following reduced income through REM are substantially positive, implying investors may not fully realize that current income reduction created by REM activities.

Download or read book Earnings Management and Expected Dividend Increases Around Seasoned Share Issues written by Juha Kinnunen and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper suggests that firms use their opportunities for earnings management to inform the capital market of the quality of their equity issues. We argue that firms issuing new shares with higher discounts, and hence with larger expected dividend increases, are likely to report larger earnings in excess of the benchmark defined by current dividends than firms issuing shares at lower discounts or not issuing shares at all. These excess earnings are useful to the issuing firms because they reinforce the buffer of retained earnings, thereby strengthening the good news of the expected dividend increase implied by the issue announcement. Our empirical results are consistent with this argument. The findings indicate (1) that by the year of a share issue, (cumulative abnormal) excess earnings are significantly larger in issuing than in non-issuing firms; (2) that there is a significant positive correlation between the abnormal excess earnings and the expected dividend increase of the issue announcement; and (3) that the (market-adjusted) stock return around the issue announcement has a significant positive correlation with the abnormal excess earnings and with the expected dividend increase, while there is also a significant interactive effect such that excess earnings corroborate the information conveyed by the expected dividend increase.

Download or read book Dividend Policy and Earnings Management Across Countries written by Wen He and published by . This book was released on 2017 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Dividend Policy and Earnings Management written by Ahmed Arif and published by . This book was released on 2015 with total page 10 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dividend policy is one of the widely addressed topics in financial management. It is an important duty of a financial manager to formulate the company's dividend policy that is in the best interest of the company. Many a time financial managers are involved in earnings management practices with the intention of adjusting dividends. The present study has been carried out to scrutinize the effect of earnings management on dividend policy. The researchers have taken the data of 86 listed companies for the year 2004 to 2009. The researchers have measured the dividend policy by using dividend payout ratio while Modified Cross Sectional Jones Model (1995) has been employed to measure the earnings management. The results of the common effect model show that there is not any significant relationship among earnings management and dividend policy. Moreover, smaller companies are paying more dividends as compared to larger companies. This study reveals that involvement of managers is not for dividend policy. There might be some other motives behind the earnings management.

Download or read book Corporate Dividend Payout and Earnings Management written by Edward Lee and published by . This book was released on 2015 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the market reaction to and earnings management choices around changes in the regulations requiring a higher minimum dividend payout in China. We exploit the unique Chinese setting that facilitates identification of the agency cost effect to shed new light on the determinants of dividend payout policy. First, we find that the market reaction is more positive for firms that paid less than the new required minimum payout than for those that paid more than the new required minimum. In addition, we show that low dividend payers exhibit a greater tendency to manage their earnings downwards to comply with the earnings-based threshold, and investors can “see through” such earnings management behaviors. Our findings support the view of DeAngelo, DeAngelo and Skinner (2009) that agency costs of free cash flow retention are an important part of the dividend payout story.

Download or read book Dividend Stickiness Debt Covenants and Earnings Management written by Jaewoo Kim and published by . This book was released on 2019 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Consistent with the notion that dividends are very sticky, Daniel, Denis, and Naveen (2008) report evidence that firms manage earnings upward when pre-managed earnings are expected to fall short of dividend payments. However, we find that this evidence is not robust when controlling for firms' tendency to manage earnings upward to avoid reporting earnings declines; only firms with high leverage exhibit a statistically weak tendency to manage earnings to close deficits of pre-managed earnings relative to dividends. We further report that the decision to cut dividends depends on whether reported earnings fall short of past dividends, but not on earnings management that eliminates a shortfall in pre-managed earnings relative to dividend payments. Overall, our evidence suggests that firms that face dividend constraints are more likely to cut dividends than to manage earnings to avoid dividend cuts.

Download or read book Tax Induced Earnings Management Within a Dividend Imputation System written by Balasingham Balachandran and published by . This book was released on 2013 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether, under a full dividend imputation system, companies defer income until tax changes beneficial to shareholders take effect. Using a sample of Australian listed companies, we find that companies manage earnings downwards via discretionary current accruals in the year preceding a reduction in personal income tax rates, and in the year preceding a change in the tax status of superannuation funds, which reverse the first year both changes operate in unison. We also examine whether such earnings management is a function of a company's ownership structure and dividend payout policy. We find a company's earnings management varies according to the proportion of shares held by superannuation funds, consistent with superannuation funds, as an investor-type, benefiting most from income deferral. We also find income deferral is more likely for dividend-paying firms, consistent with the deferral of dividends and the deferral of income being alternative ways to exploit shareholder-level tax changes to enhance shareholder wealth. Our results are informative of the likely behavior of companies should recent recommendations for reduced personal tax rates be implemented.

Download or read book Do Firms Manage Earnings to Meet Dividend Thresholds written by Naveen D. Daniel and published by . This book was released on 2014 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We find that firms are more likely to manage earnings upward when their earnings would otherwise fall short of expected dividend levels. This earnings management behavior appears to significantly impact the likelihood of a dividend cut. Firms whose discretionary accruals cause reported earnings to exceed expected dividend levels are significantly less likely to cut dividends than are firms whose reported earnings fall short of expected dividend levels. These findings are robust to controls for other determinants of discretionary accruals and other determinants of the likelihood of a dividend cut. Finally, we report that, in response to an earnings shortfall, earnings management is more aggressive prior to the passing of the Sarbanes-Oxley Act, subsequent to the 2003 dividend tax cut, in firms with high payout ratios, in firms whose CEOs receive higher dollar dividends, in firms whose CEOs have higher pay-performance sensitivities, and in firms that raise less outside equity. Collectively, these findings imply that managers treat expected dividend levels as an important earnings threshold.

Download or read book Dividend Policy and Earnings Management written by Norfhadzilahwati Rahim and published by . This book was released on 2010 with total page 85 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Introduction to Earnings Management written by Malek El Diri and published by Springer. This book was released on 2017-08-20 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides researchers and scholars with a comprehensive and up-to-date analysis of earnings management theory and literature. While it raises new questions for future research, the book can be also helpful to other parties who rely on financial reporting in making decisions like regulators, policy makers, shareholders, investors, and gatekeepers e.g., auditors and analysts. The book summarizes the existing literature and provides insight into new areas of research such as the differences between earnings management, fraud, earnings quality, impression management, and expectation management; the trade-off between earnings management activities; the special measures of earnings management; and the classification of earnings management motives based on a comprehensive theoretical framework.

Download or read book A Reexamination of the Dividend Threshold written by Ryan Peterson and published by . This book was released on 2014 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: Existing literature contends that earnings thresholds are important to firms because stakeholders use them to evaluate firm performance. Three prevalent thresholds that have been consistently supported in the literature are earnings around zero, prior year's earnings, and financial analysts' forecasts. More recently, Daniel, Denis, and Naveen (2008) examine earnings management around dividend thresholds and find that firms use discretionary accruals to cover the amount of expected dividends when earnings would otherwise fall short. The present study reexamines this phenomenon to determine whether it persists after controlling for the prior thresholds. The findings suggest that firms managing earnings toward the dividend threshold is largely driven by firms' desire make more money than the previous year. This result is fairly robust across different tests. This study contributes to the existing earnings management literature by providing evidence that the dividend threshold does not persist when compared to other thresholds previously shown to matter.

Download or read book Relative Dividend Yield written by Anthony E. Spare and published by . This book was released on 1992-02-27 with total page 312 pages. Available in PDF, EPUB and Kindle. Book excerpt: Every corporate manager knows earnings can be inaccurate and unreliable as a statement of company well-being. And every investor knows that quarterly earnings are volatile and unpredictable. Yet most investment strategies are based on earnings and P/E multiples. Thankfully there is a market-tested alternative with steadily growing billions behind it that you can put your trust in. The Relative Dividend Yield (RDY) buy-sell discipline set out in this volume enables you to base you or your institution's investment decisions on the much more stable and reliable principle of historic relative yields. For over 15 years, this approach has outperformed the market with less than market risk. Moreover, you'll find that RDY helps you... Analyze stocks so that you can buy only the ones that are at the upper end of their historical yield range, and sell those at the lower end. Lower turnover and save on transaction costs through RDY's more conservative, stable investment approach. Manage the largest portfolios with confidence because RDY works best with large, long-established companies where sound management and liquidity are assured. Avoid anxiety about market fluctuations because RDY's buy-sell mechanism doesn't have a short-term trading orientation. Steel yourself against the emotionalism that makes investors panic and sell at bottoms...and get swept up by euphoria and buy at tops. The best-kept secret in investing today, RDY is an intelligent, unique, and proven formula for superior returns with less risk.

Download or read book Dividend Behavior for the Aggregate Stock Market written by Terry A Marsh and published by Legare Street Press. This book was released on 2022-10-27 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work is in the "public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.