Empirical Evidence On The Synergic Relationship Of Earnings Management And Cash Dividend Management

Cash dividend management and earnings management are both important parts of corporate financial management,bringing about great attention from different social sectors.So far,the scholars at home and abroad have mostly focused on one of aspects,while little attention has been paid on their correlation.The development of China's stock market has a short history and has a special shareholder structure.These make our dividend policy show out the Chinese characteristics,such as no dividends,micro cash dividends and excess cash dividends.All of these are likely to be explained by earnings management.Therefore,there is a close relationship between cash dividend management and earnings management.According to previous literature,this relationship can be explained from the perspective of opportunistic manipulation and signal transmission.From the perspective of opportunistic manipulation,manipulator will manipulate the cash dividend policy to achieve their personal interests,while at the same time they will use the earnings management to match with the cash dividend management.This kind of synergic relationship may be part of manipulator's attempts to mislead investors,which has a negative influence.Alternatively,from the perspective of signal transmission,managers may use their reporting discretion and cash dividend management to signal their private information to the market.This kind of synergic relationship will reduce the degree of information asymmetry between managers and investors and contribute to increasing the company's stock price.So,it is doubted whether this synergic relationship has a positive or negative effect on building a healthy financial markets,whether the government should be involved in regulation,and how investors should response to it.We need to study the trigger mechanism of this collaborative relationship.Therefore,using PSTR nonlinear model,this paper tests the existence on the synergic relationship of earnings management and cash dividend management,from the perspective of opportunistic manipulation and signal transmission.At the same time,this paper compare the difference of the form of relationships under different motivations.We use the earnings management as the dependent variable,using two indexes to measure the degree of earning management-accrual earnings management and real earnings management.And,We use the cash dividend management as explanatory variable,with abnormal dividend representing the opportunistic manipulation and smoothing dividend representing the signal transmission.The empirical results show,first,there exists the synergic relationship of earnings management and cash dividend management.From the perspective of opportunistic manipulation,cash dividend management is positively associated both with the accrual earnings management and real earnings management.This suggests that there exists the synergic relationship of earnings management and cash dividend management based on the opportunistic manipulation.However,from the perspective of signal transmission,cash dividend management has no significant relationship with the accrual earnings management and real earnings management.It can be considered that there is almost no synergistic effect between cash dividend management and earnings management based on the signal transmission.In conclusion,the synergistic effect between cash dividend management and earnings management is more due to the manipulation of the controller,with the purpose of misleading investors,that is,based on the perspective of opportunism manipulation.Second,this synergistic relationship based on opportunism manipulation can be demonstrated in the following ways:When the enterprise carries on the small-scaled cash dividend management,they will choose the real earnings management to match the cash dividend management,but for the large-scaled cash dividend management,the enterprise will alternatively use the accrual earnings management.This paper provides a new evidence for a better understanding of the relationship between earnings management and cash dividend management.We distinguish the synergistic relationship from the two kinds of motivation.It suggests the synergistic relationship has more negative effects form the manipulation motivation,and positive signal effects is not obvious.This shows that the government should strengthen supervision,and investors also should enhance the vigilance of corporate manipulation behavior.Finally,This paper puts forward the corresponding policy recommendations from the two aspects of strengthening government supervision to restrain earnings and cash dividend management,and improving the information asymmetry between corporates and investors.