Dividend payment and financial restatement: US evidence
International Journal of Accounting & Information Management
ISSN: 1834-7649
Article publication date: 25 April 2022
Issue publication date: 14 June 2022
Abstract
Purpose
The purpose of this paper is to investigate the impact of financial restatement on corporate dividend payment. Firms that announce financial restatements rupture their corporate reputation and adversely affect investors’ confidence. Consequently, firms must attempt to regain lost reputation and market confidence.
Design/methodology/approach
This study uses the US regulatory setting to examine the association between corporate dividend policy and financial restatement over the 2001–2017 financial years.
Findings
The findings evidence a robust positive association between financial restatement and dividend payouts, indicating that firms pay higher dividends following the year of financial restatement. Several sensitivity tests were conducted to confirm the robustness of the findings.
Originality/value
Prior research indicates that corporate dividend payouts enhance a firm’s reputation by reducing information asymmetry and providing a positive signal to investors regarding future financial performance. This study provides valuable evidence that dividend payout can be used as a channel for image restoration by firms with lost reputations because of financial restatement.
Keywords
Acknowledgements
The authors thank 18th Auckland Regional Accounting Conference participants, Auckland, New Zealand, and the participants of the 26th Annual New Zealand Finance Colloquium for their insightful comments.
Citation
Bhuiyan, M.B.U. and Ahmad, F. (2022), "Dividend payment and financial restatement: US evidence", International Journal of Accounting & Information Management, Vol. 30 No. 3, pp. 427-453. https://doi.org/10.1108/IJAIM-07-2021-0154
Publisher
:Emerald Publishing Limited
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