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Earnings management and the market performance of stock dividend issuing firms: NZ evidence

Hardjo Koerniadi (Faculty of Finance, School of Business, Auckland University of Technology, Auckland, New Zealand)
Alireza Tourani‐Rad (Faculty of Finance, School of Business, Auckland University of Technology, Auckland, New Zealand)

Accounting Research Journal

ISSN: 1030-9616

Article publication date: 28 August 2008

1800

Abstract

Purpose

The purpose of this paper is to extend the literature on earnings management by examining whether stock dividends provide management with an incentive to manipulate earnings.

Design/methodology/approach

This paper employs a refined accrual model that controls the performance effects in estimating the part of accruals subject to managerial discretion.

Findings

Stock dividend issuing firms increase accruals substantially in the issue year followed by poor earnings and stock price performance in the subsequent year. More importantly, discretionary accruals of stock dividend issuing firms are negatively correlated with the declines in both future earnings and abnormal stock returns.

Originality/value

This paper examines the hypothesis that stock dividend firms engage in earnings management.

Keywords

Citation

Koerniadi, H. and Tourani‐Rad, A. (2008), "Earnings management and the market performance of stock dividend issuing firms: NZ evidence", Accounting Research Journal, Vol. 21 No. 1, pp. 4-15. https://doi.org/10.1108/10309610810891319

Publisher

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Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited

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