Publication:
Dividend policy and earnings quality in Vietnam
Dividend policy and earnings quality in Vietnam
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Date
2019
Authors
Bùi Kim Phương
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Research Projects
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Abstract
Purpose – The purpose of this paper is to examine the relationship between dividend policy and earnings
quality of Vietnamese listed firms.
Design/methodology/approach – The sample includes firms listed on Vietnam stock exchange during the
period between 2010 and 2016. Two measures of earnings quality are the annual firm-specific absolute value
of residuals from Dechow and Dichev’s (2002) model and from Dechow and Dichev (2002) as modified by
McNichols’s (2002) model. The firms’ dividend policy is captured by dividend paying status. This is a dummy
variable that takes the value of 1 if the firm pays dividends and 0 otherwise. In addition, dividend yield and
dividend payout ratio, which are continuous variables, are also used in this paper as alternative proxies for
dividend policy.
Findings – Using panel data analysis, this paper documents that dividend payers have higher earnings
quality than dividend non-payers. Dividends are an indicator of earnings quality. These findings are
consistent with prior studies. After controlling for variables that may be related to earnings quality as well as
for the year and industry fixed effects, this relation remains unchanged. In addition, this result is also robust
after controlling for firm fixed effects.
Originality/value – This paper offers the empirical evidence on the relation between dividend policy and
earnings quality in Vietnam, which is a frontier market.
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Keywords
Earnings management,
Vietnam,
Earnings quality,
Dividend policy,
Frontier market