Dividend Policy as a Core Determinant of Earning Management:  Evidence from Pakistan

Muhammad Danish Habib; Sania Shaheen; Lal Khan Almas

Muhammad Danish Habib Department of Business Administration, Air University, Aerospace and Aviation Campus, Kamra, Pakistan https://orcid.org/0000-0003-0376-0980
Sania Shaheen Paul Engler College of Agriculture and Natural Sciences, West Texas A&M University, USA and International Islamic University Islamabad. https://orcid.org/0000-0003-0376-0980
Lal Khan Almas Paul Engler College of Agriculture and Natural Sciences, West Texas A&M University, Canyon, Texas, USA.

Keywords: Dividend yield, earnings management, Karachi stock exchange, Random effect, Generalized Least Square.

Abstract

The current study estimated the impact of dividend policy on earnings management for the non-financial firms of Pakistan listed at the Karachi Stock Exchange. The data covering the period from 2005 to 2017 were estimated by using a random effect-generalized least square regression. The study findings report that dividend policy is a significant determinant of earning management and limits the probability of a firm’s earning management practices. This research gives us some empirical evidence regarding the role of key contributing factors in the scope of earnings management. Regulators can implement corporate governance rules and regulations based on empirical tracts in place of motivational debates on politics. This study results offer a compact platform for investors to eradicate ambiguity by recognizing the likelihoods of resourceful goals and improving their policymaking process. The research findings will help to give investors a clear idea about the various factors that play a contributing part for making financial reporting and misreporting of profits. These contributing factors allow investors to be careful about the ingenious purpose and effectiveness of management to obtain returns for their benefit.

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Author Biographies

Muhammad Danish Habib, Department of Business Administration, Air University, Aerospace and Aviation Campus, Kamra, Pakistan

Danish Habib is an assistant professor at the Department of Business Administration, Air University Islamabad, Aerospace and Aviation Campus Kamra. His core competencies are focused on research and course development in consumer behavior, customer relationship management, quantitative research techniques, and earnings management. He is also a master trainer and has delivered multiple training sessions with a focus on advanced research techniques and case study methods of teaching.

Sania Shaheen, Paul Engler College of Agriculture and Natural Sciences, West Texas A&M University, USA and International Islamic University Islamabad.

Sania Shaheen is a Ph.d scholar at International Islamic University, Islamabad, and currently working as a visiting research fellow at Paul Engler College of Agriculture and Natural Sciences, West Texas A&M University, USA. She got higher education commission, International Research Support Initiative Program (IRSIP) scholarship six months period in West Texas A&M University. She is working on Ph.d thesis dissertation. She has almost six research publications in high-impact factor journals. Her research interest is in the field of economic and finance.

Lal Khan Almas, Paul Engler College of Agriculture and Natural Sciences, West Texas A&M University, Canyon, Texas, USA.

Lal-Khan Almas is a Regents Professor of Agricultural Business and Economics, Paul Engler College of Agriculture and Natural Sciences, West Texas A&M University, Canyon, Texas, USA. His research interests include production agriculture, environmental and resource economics, agribusiness analysis, water management and planning, economic impact assessment and policy analysis, food security, international agriculture rural development, statistical methods, agricultural marketing, and trade.