Hassan Farajzadeh Dehkordi; Leila Aghaei
Volume 12, Issue 45 , April 2015, , Pages 97-114
Abstract
This paper investigates the relation between fraudulent financialreporting and firms’ dividend policies. Specifically, this researchconcentrated on situations that it is possible to classify financialrestatement into fraudulent and non-fraudulent based on themanagement’s incentives for discretionary ...
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This paper investigates the relation between fraudulent financialreporting and firms’ dividend policies. Specifically, this researchconcentrated on situations that it is possible to classify financialrestatement into fraudulent and non-fraudulent based on themanagement’s incentives for discretionary accounting choices .The data is related to 247 firms (consisted of 2,238 firm-yearobservation) during 1381-1390. A Meet-or-beat model was used toclassify firms as making discretionary accounting choices foropportunistic meet-or-beat. Furthermore, a fixed effects logisticregression with panel data was used to test hypothesis. Results showthat dividend-paying firms have less likelihood to engage infraudulent financial reporting furthermore, the negative associationbetween dividend paying status and fraudulent financial reporting isstronger when the size of dividend payouts is larger .Overall, resultssuggest firm’s dividend policy is indicative of its earnings quality.Specifically, dividend policy unfolds the manager’s incentives forfinancial restatements.
Abstract
While perior studies faild to document a meaningful relationship between financial restatement, as a measure of earnings quality, and firms’ dividend paying policy, the purpose of the present study is to reinvestigate this relationship by classifying financial restatements into opportunistic and ...
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While perior studies faild to document a meaningful relationship between financial restatement, as a measure of earnings quality, and firms’ dividend paying policy, the purpose of the present study is to reinvestigate this relationship by classifying financial restatements into opportunistic and non-opportunistic based on management incentives in using discretionary accruals. The data is related to 247 firms (consisted of 2,238 firm-year observations) during 1381-1390. A Meet-or-beat model was applied to determine opportunistic financial reporting. Furthermore, a fixed effects logistic regression with panel data was used to test hypothesis. Results show that dividend-paying firms have less likelihood to engage in opportunistic financial reporting through fincial restatements. Furthermore, the negative association between dividend paying status and opportunistic financial reporting is stronger when the size of dividend payouts are larger. Overall, results suggest firm’s dividend policy is indicative of its earnings quality. Specifically, dividend policy unfolds the manager’s incentives behind the financial restatements.
