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Do discretionary accruals affect firms’ corporate dividend policy? Evidence from France

Author

Listed:
  • Anis Ben Amar
  • Olfa Ben Salah
  • Anis Jarboui

Abstract

Purpose - In financial literature, dividend payout decisions are determined by factors such as debt, liquidity, profitability, size and risk. The purpose of this paper is to identify the effect of earnings management measured by discretionary accruals based on Dechowet al.’s (1995) model on dividend policy. Design/methodology/approach - This research will use panel data analysis to test the effect of earnings management on dividend policy. The authors selected 280, French non-financial companies, listed on the CAC All Tradable index for the 2008-2015 period. Findings - Using a sample of 2108 firm-year observations, the authors find a positive impact of earnings management on dividend policies of firms. Besides, there is a positive/negative relationship between the size of the firm and the dividend policy. Moreover, this paper has dealt with some factors such as debt, the risk of the firm and liquidity which may affect the corporate dividend policy. The results are robust as the authors adopted an additional measure of dividend policy. Practical implications - The findings may have important implications for analysts, investors, regulators and academics. First, the study shows that earnings management is a common practice in the French context and constitutes a major objective of dividend policy. Better still, identifying the other variables that influence the dividend policy provides a clearer understanding of dividend policy for investors, analysts and academics alike. Second, the study provides ample evidence of agency problems between various partners in French capital markets, highlighting the necessity to establish new corporate governance mechanisms. This is highly relevant for policymakers in their quest for a better financial market. Originality/value - This study extends the literature on the impact of dividend thresholds on earnings management by showing that firms run earnings to inform the market that the company can distribute dividends.

Suggested Citation

  • Anis Ben Amar & Olfa Ben Salah & Anis Jarboui, 2018. "Do discretionary accruals affect firms’ corporate dividend policy? Evidence from France," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 16(2), pages 333-347, June.
    • Handle: RePEc:eme:jfrapp:jfra-03-2017-0020
    DOI: 10.1108/JFRA-03-2017-0020
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    Citations

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    Cited by:

    1. Sinan S. Abbadi & Murad Y. Abuaddous & Hanady T Bataineh & Abdulla E Muttairi, 2020. "The Impact of Earnings Management on Dividend Policy: Evidence From Kuwait," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 518-526, October.
    2. Adler Haymans Manurung & Nera Marinda Machdar & John Edward Harly Jacob FoEh & Jhonni Sinaga, 2024. "Dividend Policy as a Moderating of the Effect of Dividend Announcement on Stock Price in Indonesian Firms," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 96-105, July.

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