Acceso usuarios
Nan Liu, Reza Espahbodi
This paper examines the earnings-smoothing behavior of dividend-paying firms. We show that dividend-paying firms engage in more earnings smoothing than nonpayers through both real activities and accrual choices. More specifically, dividendpaying firms with positive (negative) pre-managed earnings changes engage in more downward (upward) earnings management than non-payers. Additional tests suggest that the results are driven by dividend-related incentives and not the differences in the economic characteristics of dividend-paying firms, are robust to alternative measures of earnings management, and are not due to spurious correlation. We also show that earnings smoothing, in part, explains the higher earnings persistence of dividend-paying firms. These findings are consistent with a firm's dividend policy having an incremental impact on earnings-smoothing behavior.
