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Dividend Policy and Earnings Management: An Empirical Study of Pakistani Listed Companies

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  • Ahmed Arif
  • Afsheen Abrar
  • Mehwish Aziz Khan
  • Ferheen Kayani
  • Syed Zulfiqar Ali Shah

Abstract

Dividend policy is one of the widely addressed topics in financial management. It is an important duty of a financial manager to formulate the company's dividend policy that is in the best interest of the company. Many a time financial managers are involved in earnings management practices with the intention of adjusting dividends. The present study has been carried out to scrutinize the effect of earnings management on dividend policy. The researchers have taken the data of 86 listed companies for the year 2004 to 2009. The researchers have measured the dividend policy by using dividend payout ratio while Modified Cross Sectional Jones Model (1995) has been employed to measure the earnings management. The results of the common effect model show that there is not any significant relationship among earnings management and dividend policy. Moreover, smaller companies are paying more dividends as compared to larger companies. This study reveals that involvement of managers is not for dividend policy. There might be some other motives behind the earnings management.

Suggested Citation

  • Ahmed Arif & Afsheen Abrar & Mehwish Aziz Khan & Ferheen Kayani & Syed Zulfiqar Ali Shah, 2011. "Dividend Policy and Earnings Management: An Empirical Study of Pakistani Listed Companies," Information Management and Business Review, AMH International, vol. 3(2), pages 68-77, August.
    • Handle: RePEc:rnd:arimbr:v:3:y:2011:i:2:id:55
    DOI: 10.22610/imbr.v3i2.919
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