IDEAS home Printed from https://ideas.repec.org/a/ami/journl/v22y2023i3p408-427.html
   My bibliography  Save this article

Impact of Dividend Policy on Earnings Management and The Moderating Effect of The Board of Directors and The Audit Committees: The French Case

Author

Listed:
  • Olfa Ben Salah

    (Faculty of Economics and Management of Sfax, University of Sfax, Tunisia)

  • Anis Jarboui

    (Higher Institute Of Business Administration of Sfax, University of Sfax, Tunisia)

Abstract

Research Question- To what extent can governance mechanisms (audit committee and board of directors) affect the relationship between dividend policy and earnings management? Motivation- The majority of the literature has showed that dividend policy can influence earnings management. However, the empirical results did not lead to the same results. Our study seeks to fill this gap by examining whether this impact can vary by taking into account certain moderating variables such as: the size of the board of directors, the number of board meetings, the independence and expertise of the members of the audit committees. Idea- This study examines the moderating effect of certain variables related to the effectiveness of the board of directors and the audit committee on the impact of the dividend policy on earnings management. Data- The authors selected French non-financial companies listed on the CAC All Tradable index during the 2008-2015 period. Tools- To test study’s hypotheses, the authors applied linear regression with a panel data using the datastream database. Generalized least squares method is used to estimate the models. Findings- The results of this study show that the effect of the dividend policy on earnings management is more favorable in the case of companies where the board of directors is large. Contribution- This study shows that dividend policy constitutes an objective of earnings management especially in the companies with boards made up of a large number of directors. Investors and academics have an interest in better understanding the concepts: dividend policy and earnings management because the debates relating to these two variables have always been the subject of controversy. Thus, they can refer to corporate dividend policy as a mechanism for assessing the authenticity of corporate financial reports.

Suggested Citation

  • Olfa Ben Salah & Anis Jarboui, 2023. "Impact of Dividend Policy on Earnings Management and The Moderating Effect of The Board of Directors and The Audit Committees: The French Case," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 22(3), pages 408-427, September.
    • Handle: RePEc:ami:journl:v:22:y:2023:i:3:p:408-427
    as

    Download full text from publisher

    File URL: http://online-cig.ase.ro/RePEc/ami/articles/22_3_2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Souhir Neifar & Khamoussi Halioui & Fouad Ben Abdelaziz, 2016. "The motivations of earnings management and financial aggressiveness in American firms listed on the NASDAQ 100," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 17(4), pages 397-420, November.
    2. repec:eme:jaar00:jaar-05-2014-0051 is not listed on IDEAS
    3. Hwang, Lee-Seok & Kim, Hakkon & Park, Kwangwoo & Park, Rae Soo, 2013. "Corporate governance and payout policy: Evidence from Korean business groups," Pacific-Basin Finance Journal, Elsevier, vol. 24(C), pages 179-198.
    4. Sigit Handoyo & Inneke Tri Kusumaningrum, 2022. "Does Corporate Governance and other Factors Influence Earnings Management? A Study on Indonesia’s Banking Sector," Humanities and Social Sciences Letters, Conscientia Beam, vol. 10(1), pages 11-26.
    5. Veganzones, David & Séverin, Eric & Chlibi, Souhir, 2023. "Influence of earnings management on forecasting corporate failure," International Journal of Forecasting, Elsevier, vol. 39(1), pages 123-143.
    6. Anderson, Ronald C. & Mansi, Sattar A. & Reeb, David M., 2004. "Board characteristics, accounting report integrity, and the cost of debt," Journal of Accounting and Economics, Elsevier, vol. 37(3), pages 315-342, September.
    7. Rafael La Porta & Florencio Lopez‐de‐Silanes & Andrei Shleifer & Robert W. Vishny, 2000. "Agency Problems and Dividend Policies around the World," Journal of Finance, American Finance Association, vol. 55(1), pages 1-33, February.
    8. Richard A. Posner, 1974. "Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 335-358, Autumn.
    9. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    10. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    11. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    12. Bowen, Robert M. & DuCharme, Larry & Shores, D., 1995. "Stakeholders' implicit claims and accounting method choice," Journal of Accounting and Economics, Elsevier, vol. 20(3), pages 255-295, December.
    13. Zalata, Alaa Mansour & Tauringana, Venancio & Tingbani, Ishmael, 2018. "Audit committee financial expertise, gender, and earnings management: Does gender of the financial expert matter?," International Review of Financial Analysis, Elsevier, vol. 55(C), pages 170-183.
    14. Xie, Biao & Davidson, Wallace III & DaDalt, Peter J., 2003. "Earnings management and corporate governance: the role of the board and the audit committee," Journal of Corporate Finance, Elsevier, vol. 9(3), pages 295-316, June.
    15. repec:eme:jaar00:09675420910963360 is not listed on IDEAS
    16. Smith, Deborah Drummond & Pennathur, Anita K. & Marciniak, Marek R., 2017. "Why do CEOs agree to the discipline of dividends?," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 38-48.
    17. repec:eme:jaar00:jaar-07-2014-0079 is not listed on IDEAS
    18. He, Wen & Ng, Lilian & Zaiats, Nataliya & Zhang, Bohui, 2017. "Dividend policy and earnings management across countries," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 267-286.
    19. Othman, Hakim Ben & Zeghal, Daniel, 2006. "A study of earnings-management motives in the Anglo-American and Euro-Continental accounting models: The Canadian and French cases," The International Journal of Accounting, Elsevier, vol. 41(4), pages 406-435, 012.
    20. Smith, Clifford Jr. & Warner, Jerold B., 1979. "On financial contracting : An analysis of bond covenants," Journal of Financial Economics, Elsevier, vol. 7(2), pages 117-161, June.
    21. Cohen, Daniel A. & Zarowin, Paul, 2010. "Accrual-based and real earnings management activities around seasoned equity offerings," Journal of Accounting and Economics, Elsevier, vol. 50(1), pages 2-19, May.
    22. Mili Mehdi & Jean-Michel Sahut & Frédéric Teulon, 2017. "Do corporate governance and ownership structure impact dividend policy in emerging market during financial crisis?," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 18(3), pages 274-297, September.
    23. Basil Al‐Najjar & Khaled Hussainey, 2009. "The association between dividend payout and outside directorships," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 10(1), pages 4-19, May.
    24. repec:eme:mfppss:mf-09-2017-0331 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eman F. Attia & Tariq H. Ismail & Messaoud Mehafdi, 2022. "Impact of board of directors attributes on real-based earnings management: further evidence from Egypt," Future Business Journal, Springer, vol. 8(1), pages 1-22, December.
    2. Hidaya Lawati & Khaled Hussainey & Roza Sagitova, 2021. "Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?," Review of Quantitative Finance and Accounting, Springer, vol. 57(2), pages 557-594, August.
    3. Mujeeb Saif Mohsen Al-Absy & Ku Nor Izah Ku Ismail & Sitraselvi Chandren, 2019. "Corporate Governance Mechanisms, Whistle-Blowing Policy and Real Earnings Management," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(6), pages 265-282, October.
    4. Ahsan Habib & Md. Borhan Uddin Bhuiyan, 2016. "Problem directors on the audit committee and financial reporting quality," Accounting and Business Research, Taylor & Francis Journals, vol. 46(2), pages 121-144, February.
    5. Lin, Jing & An, Yunbi & Yang, Jun & Liang, Yinhe, 2019. "Price inversion and post lock-up period returns on private investments in public equity in China: An interest transfer perspective," Journal of Corporate Finance, Elsevier, vol. 54(C), pages 47-84.
    6. Adi Masli & Matthew G. Sherwood & Rajendra P. Srivastava, 2018. "Attributes and Structure of an Effective Board of Directors: A Theoretical Investigation," Abacus, Accounting Foundation, University of Sydney, vol. 54(4), pages 485-523, December.
    7. Sandvik, Jason, 2020. "Board monitoring, director connections, and credit quality☆," Journal of Corporate Finance, Elsevier, vol. 65(C).
    8. Sugato Chakravarty & Chiraphol N. Chiyachantana & Christine Jiang, 2011. "THE CHOICE OF TRADING VENUE AND RELATIVE PRICE IMPACT OF INSTITUTIONAL TRADING: ADRs VERSUS THE UNDERLYING SECURITIES IN THEIR LOCAL MARKETS," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 34(4), pages 537-567, December.
    9. Wu, Zhenyu & Chua, Jess H. & Chrisman, James J., 2007. "Effects of family ownership and management on small business equity financing," Journal of Business Venturing, Elsevier, vol. 22(6), pages 875-895, November.
    10. Elisabete F. Simões Vieira, 2016. "Earnings Management in Public Family Firms under Economic Adversity," Australian Accounting Review, CPA Australia, vol. 26(2), pages 190-207, June.
    11. Ormazabal, Gaizka, 2018. "The Role of Stakeholders in Corporate Governance: A View from Accounting Research," CEPR Discussion Papers 12775, C.E.P.R. Discussion Papers.
    12. Costello, Anna M., 2013. "Mitigating incentive conflicts in inter-firm relationships: Evidence from long-term supply contracts," Journal of Accounting and Economics, Elsevier, vol. 56(1), pages 19-39.
    13. Balachandran, Balasingham & Williams, Barry, 2018. "Effective governance, financial markets, financial institutions & crises," Pacific-Basin Finance Journal, Elsevier, vol. 50(C), pages 1-15.
    14. Elnahass, Marwa & Salama, Aly & Yusuf, Noora, 2022. "Earnings management and internal governance mechanisms: The role of religiosity," Research in International Business and Finance, Elsevier, vol. 59(C).
    15. Wen-Wen Chien & Roger W. Mayer & John T. Sennetti, 2010. "Audit Committee Effectiveness In The Largest Us Public Hospitals: An Empirical Study," Accounting & Taxation, The Institute for Business and Finance Research, vol. 2(1), pages 107-127.
    16. Sandeep Goel & Nimisha Kapoor, 2022. "Is earnings management related to board independence and gender diversity? Sector-wise evidence from India," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(4), pages 363-373, December.
    17. Nooraisah Katmon & Omar Al Farooque, 2017. "Exploring the Impact of Internal Corporate Governance on the Relation Between Disclosure Quality and Earnings Management in the UK Listed Companies," Journal of Business Ethics, Springer, vol. 142(2), pages 345-367, May.
    18. Tai, Vivian W. & Lai, Yi-Hsun & Yang, Tung-Hsiao, 2020. "The role of the board and the audit committee in corporate risk management," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    19. repec:csr:wpaper:1014 is not listed on IDEAS
    20. Flannery, Mark J. & Kwan, Simon H. & Nimalendran, M., 2004. "Market evidence on the opaqueness of banking firms' assets," Journal of Financial Economics, Elsevier, vol. 71(3), pages 419-460, March.
    21. Niamh Brennan, 2008. "Editor's Introduction. Corporate Governance and Financial Reporting," Open Access publications 10197/3855, Research Repository, University College Dublin.

    More about this item

    Keywords

    Earnings management; dividend policy; board of directors; audit committees; moderating effect;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ami:journl:v:22:y:2023:i:3:p:408-427. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Cristina Tartavulea (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.