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Meeting dividend thresholds through earnings management in Chinese listed high-tech industries: The role of discretionary accruals and Real earnings management,

yi-shu wang, Zhen-Jia Liu

Abstract


Dividend distribution influences corporate operating decisions. Several literatures showed that investors are more attracted towards dividend paying firms. As dividends are paid out of the net earnings of a firm, there could be ways to look at this matter. Earnings management is managers can adjust financial reports to mislead earnings. There are previous studies that link dividend payouts to earnings management, thus past dividends potentially serve as a useful heuristic proxy for an earnings threshold. With the rapid development of china’s high-tech industries, we provide an economic analysis and empirical evidence of previously unrecorded dividend-based earnings management in china capital market. The purpose of this study was to clarify perceptions regarding the manipulation of income toward a desired earnings goal (i.e., dividend threshold) in Chinalisted high-tech industries. Data from 2009 to 2015 were collected from the CSMAR and COMPUSTAT database. A regression model was adopted to analyze the data (including aircraft and spacecraft; electronic and telecommunication equipments; computers and office equipments; pharmaceuticals; and medical equipments and meters manufacturing firms and excluding banking firms). The empirical results show that managers of listed high-tech enterprises in Chinanot tend to meet or exceed dividend thresholds through earnings management (including discretionary accruals items and real earnings management). Such evidence implies that dividend policies associated with lower levels of earnings manipulation to achieve dividends thresholds may serve to mitigate agency concerns particularly of firms that may have fewer country-level alternative means to convey their commitment to shareholder interests (i.e., the Chinese government has mandated increasingly strict levels of minimum dividend payout as a proportion of reported earnings aimed at protecting shareholders).  


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