Document Type : Research Paper
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 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.
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