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Dividend payment and earnings quality: evidence from Indonesia

Dividend payment and earnings quality: evidence from Indonesia Purpose – This research aims to examine the relationship between dividend payment and earnings quality. Design/methodology/approach – The authors examine four dividend features: dividend‐paying status, dividend size, dividend changes, and dividend persistence. The samples consist of 90 firms from the manufacturing industry in the years 2005‐2009. Multiple regression is used for testing hypotheses. Findings – The results show that dividend‐paying status, dividend increase, and persistence in dividend payment have significant positive association with earnings quality. However, the authors do not find evidence that larger dividend size is an indicator of higher earnings quality. Overall, the results show that dividend‐paying status, increase in dividend size, and persistence in dividend payment are indicators or signals of higher earnings quality. Research limitations/implications – This study examines only the manufacturing firms listed on the Indonesia Stock Exchange. Further study based on different industries and/or different emerging markets is needed before generalizing results. Originality/value – Few studies have examined dividend payment in emerging markets. This study fills the void. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Accounting and Information Management Emerald Publishing

Dividend payment and earnings quality: evidence from Indonesia

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Publisher
Emerald Publishing
Copyright
Copyright © 2014 Emerald Group Publishing Limited. All rights reserved.
ISSN
1834-7649
DOI
10.1108/IJAIM-04-2013-0034
Publisher site
See Article on Publisher Site

Abstract

Purpose – This research aims to examine the relationship between dividend payment and earnings quality. Design/methodology/approach – The authors examine four dividend features: dividend‐paying status, dividend size, dividend changes, and dividend persistence. The samples consist of 90 firms from the manufacturing industry in the years 2005‐2009. Multiple regression is used for testing hypotheses. Findings – The results show that dividend‐paying status, dividend increase, and persistence in dividend payment have significant positive association with earnings quality. However, the authors do not find evidence that larger dividend size is an indicator of higher earnings quality. Overall, the results show that dividend‐paying status, increase in dividend size, and persistence in dividend payment are indicators or signals of higher earnings quality. Research limitations/implications – This study examines only the manufacturing firms listed on the Indonesia Stock Exchange. Further study based on different industries and/or different emerging markets is needed before generalizing results. Originality/value – Few studies have examined dividend payment in emerging markets. This study fills the void.

Journal

International Journal of Accounting and Information ManagementEmerald Publishing

Published: Apr 29, 2014

Keywords: Earnings quality; Dividend changes; Dividend persistence; Dividend size; Dividend‐paying status

References