Journal Screenshot

International Journal of Academic Research in Accounting, Finance and Management Sciences

Open Access Journal

ISSN: 2225-8329

The Association between Accounting Conservatism and Cash Dividends: Evidence from Emerging Markets

Gehan A. Mousa

http://dx.doi.org/10.6007/IJARAFMS/v4-i4/1346

Open access

This research examines the association between accounting conservatism and cash dividends of listed firms in the Kingdom of Bahrain. It has addressed two questions. First, does accounting conservatism actually work? Second, can accounting conservatism influence cash dividends of firms in the Kingdom of Bahrain? The findings of this study support the hypothesis that accounting conservatism plays an important role in reducing cash dividends and managing agency conflicts. It documents a significant negative association between accounting conservatism and cash dividends of Bahraini Firms.

Ahmed, A. S., Billings, B. K., Morton, R. M., Stanford-Harris, M. (2002). The role of accounting conservatism in mitigating bondholder-shareholder conflicts over dividend policy and in reducing debt costs. The Accounting Review, 77(4), 867-890.
Ahmed, A. S., and Duellman, S. (2007). Accounting conservatism and board of director characteristics: An empirical analysis. Journal of Accounting & Economics, 43 (2-3), 411-437.
Al-Najjar, B., and Hussainey, K. (2009). The association between dividend payout and outside directorships. Journal of Applied Accounting Research, 10 (1), 4-19.
Ball, R., Kothari, S. P., and Robin, A. (2000). The effect of international institutional factors on properties of accounting earnings. Journal of Accounting and Economics, 29(1), 1-51.
Ball, R., and Shivakuma, L. (2005). Earnings quality in U.K. private firms. Journal of Accounting and Economics, 39 (1), 83-129.
Basu, S. (1997). The conservatism principle and the asymmetric timeliness of earnings. Journal of Accounting & Economics, 24(1), 3-37.
Beatty, A., Weber, J., and Yu, J. J. (2008), ‘Conservatism and Debt’, Journal of Accounting & Economics, Vol.45, No.2, pp. 154-174.
Beaver, W., and Ryan, S (2005). Conditional and Unconditional Conservatism: Concepts and Modeling .Review of Accounting Studies, 10 (2-3), 269-309.
Chen, C., Bradford, W., and Zhu, S. (2012). Does Conservative Accounting Matter to Cash Dividend Policy?’ Retrieved from
http://www.fin.ntu.edu.tw/~conference/conference2012/proceedings/files/ A194.pdf (accessed October, 2013).
Daniel, N. D., Denis, D. J., and Naveen, L. (2008). Do firms manage earnings to meet dividend thresholds? Journal of Accounting and Economics, 45(1), 2–26.
Givoly, D., and Hayn, C. (2000). The changing time-series properties of earnings, cash flows and accruals: Has financial reporting become more conservative? Journal of Accounting & Economics, 29(3), 287–320.
Givoly, D., Hayn, C., and Natarajan, A. (2007). Measuring reporting conservatism, Accounting Review, 82(1), 65–106.
Grossman, S., and Hart, O. (1980), ‘Disclosure Laws and Take-over Bids’, Journal of Finance, Vol.35, No.2, pp.323-334.
Gao, P. (2013). A Measurement Approach to Conservatism and Earnings Management. Journal of Accounting and Economics, 55(2/3), 251–268.
Hayn, C. (1995). The Information Content of Losses. Journal of Accounting and Economics, 20(1), 125 -153.
Feltham, G. A., and Ohlson, J. A. (1995). Valuation and clean surplus accounting for operating and financial activities. Contemporary Accounting Research, 11(2), 689–731.
Financial Accounting Standards Board (FASB). (1980) Statement of Concepts No. 2, Qualitative Characteristics of Accounting Information. FASB, Norwalk, CT.
Frankel, R., Sun, Y., and Wang, R. (2008). Earnings Asymmetric Timeliness and Shareholder Distributions, Retrieved from http://ssrn.com/abstract=1157547 (accessed May, 2012).
Jensen, M. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. American Economic Review, 76(3), 323-329.
Jensen, M., and Meckling, W. (1976). Theory of the firm: managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3(3), 305-360.
Kowalewski, O., Stetsyuk, I., and Talavera, O. (2007). Corporate Governance and Dividend Policy in Poland. Discussion Papers no. 702, Berlin, German Institute for Economic Research.
Li, K., and Zhao, X. (2008). Asymmetric information and dividend policy. Financial Management, 37(4), 673-94.
Pae, J. M. (2008). The implications of accounting conservatism for the relation between earnings and stock returns. Journal of Business & Economics Research, 6(12), 55-68.
Pae, J. M., Thornton, D. B., and Welker, M. (2005). The link between earnings conservatism and the price-to-book ratio. Contemporary Accounting Research, 22(3), 693–717.
Penman, S. H., and Zhang X.-J. (2002). Accounting conservatism, the quality of earnings, and stock returns. The Accounting Review, 77(2), 237–264.
Shroff, P. K., Venkataraman, R., and Zhang, S. (2004). The Conservatism Principle and the Asymmetric Timeliness of Earnings: An Event-Based Approach. Contemporary Accounting Research, 30(1), 215-241.
Skinner, D. (2008). The evolving relation between earnings, dividends, and stock repurchases. Journal of Financial Economics, 87(3), 582-609.
Wang, Z. R. (2009). Accounting Conservatism, A thesis submitted to the Victoria University of Wellington in fulfillment of the requirements for the degree of Doctor of Philosophy in Accounting, UK.
Watts, R. L. (2002). Conservatism in Accounting. The Bradley Policy Research Center, Financial Research and Policy Working Paper no.FR 02-21.(
http://papers.ssrn.com/paper.taf?abstract_id=371820). (Accessed Feb., 2012).
Watts, R. L. (2003a). Conservatism in accounting part I: explanations and implications. Accounting Horizons, 17(3), 207-21.
Watts, R. L. (2003b). Conservatism in accounting part II: evidence and research opportunities. Accounting Horizons, 17(4), 287-301.
Zhang, X.-J. (2000). Conservative accounting and equity valuation. Journal of Accounting & Economics, 29(1), 125–149.
Zhang, H. Y. (2008). Corporate governance and dividend policy: A comparison of firms listed in Hong Kong and in the Mainland. China Economic Review, 19(4), 437-459.

In-Text Citation: (Mousa, 2014)
To Cite this Article: Mousa, G. A. (2014). The Association between Accounting Conservatism and Cash Dividends: Evidence from Emerging Markets. International Journal of Academic Research in Accounting Finance and Management Sciences, 4(4), 269–282.