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Do firms manage earnings to meet dividend thresholds?
Journal article   Peer reviewed

Do firms manage earnings to meet dividend thresholds?

Naveen D. Daniel, David J. Denis and Lalitha Naveen
Journal of accounting & economics, v 45(1), pp 2-26
2008
DOI: https://doi.org/10.1016/j.jacceco.2007.11.002

Abstract

Accruals Dividend policy Dividend smoothing Earnings management
Dividend-paying firms tend to manage earnings upward when their earnings would otherwise fall short of expected dividend levels. This behavior is evident only in firms with positive debt and is more aggressive prior to the Sarbanes-Oxley Act, subsequent to the 2003 dividend tax cut, in high-payout firms, in firms whose CEOs receive higher dollar dividends and have higher pay-performance sensitivities, and in firms that raise less outside equity. Moreover, this earnings management behavior appears to significantly impact the likelihood of a dividend cut. Our findings imply that managers treat expected dividend levels as an important earnings threshold.

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115 citations in Web of Science
131 citations in Scopus

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Collaboration types
Domestic collaboration
Web of Science research areas
Business, Finance
Economics
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