The Effect of Dividends on the Earnings Quality and Earnings Response Coefficient(ERC)

서지정보

· 발행기관 : 한국상업경영학회
· 수록지 정보 : 상업경영연구 / 30권 / 4호 / 27 ~ 54페이지
· 저자명 : 유지연, 김금영, 박삼복

초록

The aim of this study is to examine whether dividend paying status is associated with the quality of earnings and earnings response coefficients(ERC).
Lintner(1956) reports that managers are reluctant to reduce dividends but increase dividends. However, if earnings are upward adjusted to pay dividends, firms is more likely to involve additional costs than other firm. As such, dividend paying firms are more likely to report earnings that are associated with reduced uncertainty over realization of expected cash flows and are less tainted by managerial opportunistic manipulation(MalKiel 2003; Glassman 2005). Therefore, firms that pay dividends should announce earnings closely related to actual performance of the firms and the reliability of earnings should be enhanced. As a result, investors get reliability to these firms. Therefore, firms that pay dividends are expected to have higher earnings response coefficients(ERC) compared to other firms. We measure earnings quality using Dechow et al.(1995) model as modified by the Jones’(1991) model and Dechow and Dichev’s(2002) model.
The results of empirical analysis, firms that are paying dividends show higher earnings quality compared to firms that are not paying dividends. Next, differences in ERC between different dividend paying status are analyzed and according to the results, firms that are paying dividends have significantly higher ERC values compared to firms that are not paying dividends. In addition, information effects related to firms' earnings are compared and analyzed between firms that pay dividends for five years continuously and other firms. The results indicate that both the earnings quality and ERC of firms that pay dividends continuously are higher. Our study is considered meaningful in that it verified the information effects of dividend paying status unlike prior research that analyzed information effects according to changes in dividends. Therefore, this is considered to be capable of helping managers that determine firms' policies and investors that invest in firms with their investment decisions.

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