Earnings management and expected dividend increases around seasoned share issues: evidence from Finland
This paper provides evidence that firms issuing new shares at higher discounts and hence with larger expected dividend increases, use their opportunities for earnings management in such a way that, by the year of a share issue, they report larger earnings in excess of current dividends than firms that issue shares at lower discounts or that do not issue shares at all. These excess earnings are useful to successful issuing firms in that they reinforce the buffer of retained earnings available for future dividend payments, thereby conveying credible information about the firm's ability to meet the expected dividend increase implied by the issue announcement. The empirical findings are consistent with this argument.
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Volume (Year): 16 (2000)
Issue (Month): 2 (June)
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