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Do Banks Engage in Earnings Management? The Role of Dividends and Institutional Factors

Author

Listed:
  • Mamiza Haq

    (University of Huddersfield)

  • Steven Ongena

    (University of Zurich; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))

  • Juying Pu

    (University of Queensland)

  • Eric K. M. Tan

    (University of Queensland)

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 to 2019. Our estimates show that high dividend payments reduce earnings management, hence mitigate agency problems. This mitigation is especially prevalent among well-capitalised or 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

  • Mamiza Haq & Steven Ongena & Juying Pu & Eric K. M. Tan, 2023. "Do Banks Engage in Earnings Management? The Role of Dividends and Institutional Factors," Swiss Finance Institute Research Paper Series 23-79, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2379
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    More about this item

    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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