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Do banks engage in earnings management? The role of dividends and institutional factors

Author

Listed:
  • Haq, Mamiza
  • Ongena, Steven
  • Pu, Juying
  • Tan, Eric K.M.

Abstract

We investigate the impact of dividend policy on earnings quality and opportunistic earnings management for individual banks across 45 developed and developing countries between 1996 and 2019. Our estimates show that high dividend payments reduce earnings management, hence mitigate agency problems. This mitigation is especially prevalent among well-capitalised and non-listed banks. Greater investor protection and government regulation appear to strengthen the negative association between dividend policy and earnings management. Our results hold robustly across many different specifications.

Suggested Citation

  • Haq, Mamiza & Ongena, Steven & Pu, Juying & Tan, Eric K.M., 2024. "Do banks engage in earnings management? The role of dividends and institutional factors," Journal of Banking & Finance, Elsevier, vol. 168(C).
    • Handle: RePEc:eee:jbfina:v:168:y:2024:i:c:s0378426624002012
    DOI: 10.1016/j.jbankfin.2024.107287
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    Keywords

    Dividend payout; Opportunistic earnings management; Earnings quality; Bank capital; investor protection;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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