Earnings Management and Dividend Policy with Moderating Role of Corporate Governance: Evidence from Pakistani Listed Companies
Abstract
This is reported that corporate governance (CG) is a mechanism which control, manage and direct organizations to meet long-term strategies and sustainability (Njoku, 2017). However, this is reported in previous literature that managers manipulate earnings, which in turn affect the distribution of dividend. Therefore, in this study investigated the effect of the earnings management (EM) on dividend policy (DP) with moderating role of CG. Moreover, also used leverage level, operating profit margin and current ratio as control variables. Panel data analysis techniques are used due to panel nature of the data. For this purpose, selected manufacturing sector listed firms on Pakistan Stock Exchange during 2017-22. Results of this study conclude that EM is insignificantly effect the DP, while independent director (CG indicator) is positively and significantly affected the DP. It shows that firms should hire more independent director in boards to control earnings manipulation practices of management. Finally revealed that independent director does not moderated the relationship between DP and EM. Hence, this is recommended that to strengthen the governance system to attract investors and promote the business in Pakistani market.
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