Impact of Earnings Management on Dividend Policy: Empirical Evidence from India

Abstract

In this paper we attempt to find whether earnings management affects dividend policy. We use discretionary accruals as a measure of earnings management. We first calculate total earnings by using the Sloan's model (1996) and non-discretionary accruals using Jones model. We then arrive at the discretionary accruals by taking the difference between the above two. We take the total dividend pay-outof our sample firms and then perform regression to find whether discretionary accruals are influencing the dividend policy. Our findings reveal that the discretionary accruals is an influencing factor in the dividend pay-out. We also find that, firm ownership, free cash flow and beta are also influencing variables.