Agency Conflicts, Dividend Payout, and the Direct Benefits of Conservative Financial Reporting to Equity-Holders

• 成果类型: Article
• 署名作者: Louis, Henock; Urcan, Oktay
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; University of London; London Business School
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12085
• 发表日期: 2015
• 页码: 455-+
• 关键词: ACCOUNTING CONSERVATISM; asymmetric timeliness; POLICY; FIRMS; determinants; earnings

摘要

Dividend payments are generally costly to shareholders. One principal reason for such payments is that they force managers to raise funds in the external capital markets to finance new projects, which presumably reduces their incentives to engage in empire-building activities. We posit that, because accounting conservatism can also mitigate managers' incentives to engage in value-destroying projects, it could reduce the need for dividend payments and the associated costs. Accordingly, we find that dividend payments decrease with accounting conservatism. This effect holds even after we control for the underlying accounting factors that directly affect dividends, or limit the sample to firms that have no debt covenants pertaining to dividend payouts, indicating that the reason for the conservatism effect transcends the standard debt covenant restriction argument. More importantly, consistent with the agency cost explanation, the evidence also indicates that the conservatism effect increases with potential agency conflicts between managers and shareholders.