Financial Restatements and Dividend Policy: Compensation and Signaling Strategies in the Brazilian Capital Market
DOI:
https://doi.org/10.17524/repec.v19i1.3505Keywords:
Reapresentação das Demonstrações Financeiras; Política de Dividendos; Teoria da Sinalização.Abstract
Results and contributions: Our results showed that companies that restated their financial statements seek to compensate their shareholders with higher dividends when compared to those that did not. In addition, in the following year, these dividends tend to be higher, reinforcing the hypothesis of using dividends as a signaling mechanism, reducing asymmetry, and compensating shareholders. These findings can contribute to researchers interested in the subject, managers, accountants, auditors, regulators, and other stakeholders interested in understanding the implications of the representations on the dividend policy of listed companies.
Objective: This study aimed to verify whether the companies that restated the financial statements compensated their shareholders with higher dividends in the years following this event.
Gap: Previous literature has suggested that companies with lower-quality financial information tend to pay lower dividends. However, an alternative explanation is that companies that disclose lower-quality financial information seek to signal greater solidity to the market by compensating shareholders with higher dividends. The present study aims to fill this gap by presenting evidence in the context of the Brazilian capital market.
Relevance: The study is relevant because it demonstrates that companies with lower earnings tend to compensate their investors in subsequent periods with higher dividends.
Impact: Unlike previous studies, it was observed that companies with lower earnings quality may use dividend policies as a strategy to please investors. The study contributes to the risk assessment of auditors, investors, governance committee members, auditing, and regulators.
Methods: Data from 275 companies listed on the Brazil, Bolsa, and Balcão (B3) exchange from 2010 to 2020 were analyzed using descriptive statistics, tests of differences between means, and panel data regression analysis.
Translations of this article
References
Ali, M. M., Mastuki, N. A., & Besar, Najwa Tuan. (2018). Value Relevance of Financial Restatements: Malaysian Perspective. 6. https://doi.org/10.3923/jeasci.2018.804.808
Amel-Zadeh, A., & Zhang, Y. (2015). The Economic Consequences of Financial Restatements: Evidence from the Market for Corporate Control. The Accounting Review, 90(1), 1–29. https://doi.org/10.2308/accr-50869
Baltagi, B. H. (2021). Econometric Analysis of Panel Data. Springer International Publishing. https://doi.org/10.1007/978-3-030-53953-5
Bardos, K. S., & Mishra, D. (2014). Financial restatements, litigation and implied cost of equity. Applied Financial Economics, 24(1), 51–71. https://doi.org/10.1080/09603107.2013.864033
Bhuiyan, Md. B. U., & Ahmad, F. (2022). Dividend payment and financial restatement: US evidence. International Journal of Accounting & Information Management. https://doi.org/10.1108/IJAIM-07-2021-0154
Boţoc, C., & Pirtea, M. (2014). Dividend Payout-Policy Drivers: Evidence from Emerging Countries. Emerging Markets Finance and Trade, 50(sup4), 95–112. https://doi.org/10.2753/REE1540-496X5004S407
Brugni, T. V., Bortolon, P. M., Almeida, J. E. F., & Paris, P. K. S. (2013). Corporate governance: A panoramic view of Brazilian boards of directors. International Journal of Disclosure and Governance, 10(4), 406–421. https://doi.org/10.1057/jdg.2013.22
Cunha, P. R. da, Fernandes, L. B., & Dal Magro, C. B. (2017). Influência do refazimento das demonstrações contábeis no gerenciamento de resultados das empresas listadas na BM&FBovespa. RACE - Revista de Administração, Contabilidade e Economia, 16(1), 95–120. https://doi.org/10.18593/race.v16i1.7305
Dantas, J. A., Chaves, S. de M. T., Silva, M. R. da, & Carvalho, R. P. de. (2011). Restatements of financial reports determined by the CVM: the role of the independent auditors. Revista Universo Contábil, 45–64. https://doi.org/10.4270/ruc.2011212
De Luca, M. M. M., Viana, A. O. B., Sousa, K. D. F. de, Cavalcante, D. S., & Cardoso, V. I. da C. (2020b). Gerenciamento de resultados e republicação de demonstrações contábeis em empresas listadas na B3. RACE - Revista de Administração, Contabilidade e Economia, 1–24. https://doi.org/10.18593/race.23711
Deangelo, H., Deangelo, L., & Stulz, R. (2006). Dividend policy and the earned/contributed capital mix: A test of the life-cycle theory. Journal of Financial Economics, 81(2), 227–254. https://doi.org/10.1016/j.jfineco.2005.07.005
Dechow, P., Ge, W., & Schrand, C. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2–3), 344–401. https://doi.org/10.1016/j.jacceco.2010.09.001
Deng, L., Li, S., & Liao, M. (2017). Dividends and earnings quality: Evidence from China. International Review of Economics & Finance, 48, 255–268. https://doi.org/10.1016/j.iref.2016.12.011
Dewasiri, N. J., Yatiwelle Koralalage, W. B., Abdul Azeez, A., Jayarathne, P. G. S. A., Kuruppuarachchi, D., & Weerasinghe, V. A. (2019). Determinants of dividend policy: Evidence from an emerging and developing market. Managerial Finance, 45(3), 413–429. https://doi.org/10.1108/MF-09-2017-0331
Dias, R., da Silva, J. V., & Dionísio, A. (2019). Financial markets of the LAC region: Does the crisis influence the financial integration? International Review of Financial Analysis, 63, 160–173. https://doi.org/10.1016/j.irfa.2019.02.008
Eng, L. L., Rao, R. P., & Saudagaran, S. (2012). Earnings informativeness after financial statement restatements. International Journal of Revenue Management, 6(3/4), 221. https://doi.org/10.1504/IJRM.2012.050385
Farooq, O., Shehata, N., & Nathan, S. (2018). Dividend Policy and Informativeness of Reported Earnings: Evidence from the MENA Region: Earnings Informativeness, MENA Region. International Review of Finance, 18(1), 113–121. https://doi.org/10.1111/irfi.12124
Forti, C. A. B., Peixoto, F. M., & Alves, D. L. e. (2015). Determinant Factors of Dividend Payments in Brazil. Revista Contabilidade & Finanças, 26(68), 167–180. https://doi.org/10.1590/1808-057x201512260
Ge, W, & McVay, S. (2005). The disclosure of material weaknesses in internal control after the sarbanes-oxley act. Accounting Horizons, 19(3), 137–158, 1 set. https://doi.org/10.2308/acch.2005.19.3.137
Gordon, M. J. (1959). Dividends. Earnings and stock prices. The Review of Economics and Statistics, Cambridge, v. 41, n. 2, Part 1, p. 99-105, May. 1959
Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics (5th ed). McGraw-Hill Irwin.
Harakeh, M., Matar, G., & Sayour, N. (2020). Information asymmetry and dividend policy of Sarbanes-Oxley Act. Journal of Economic Studies, 47(6), 1507–1532. https://doi.org/10.1108/JES-08-2019-0355
He, W., Ng, L., Zaiats, N., & Zhang, B. (2017). Dividend policy and earnings management across countries. Journal of Corporate Finance, 42, 267–286. https://doi.org/10.1016/j.jcorpfin.2016.11.014
Herly, M., Bartholdy, J., & Thinggaard, F. (2020). A re‐examination of accruals quality following restatements. Journal of Business Finance & Accounting, 47(7–8), 882–909. https://doi.org/10.1111/jbfa.12445
Huang, C., & Nardi, P. C. C. (2020). Determinants of Restatements in Financial Statements of Brazilian Publicly Traded Companies. Contabilidade, Gestão e Governança, 23(2), 159–178. https://doi.org/10.21714/1984-3925_2020v23n2a2
Klann, R. C., & Brizolla, M. M. B. (2016). Influência dos Indicadores Econômico-Financeiros e de Governança Corporativa na Política de Dividendos em Empresas Brasileiras. Revista da Faculdade de Administração e Economia, 7(2), 162–185. https://doi.org/10.15603/2176-9583/refae.v7n2p162-185
Koo, D. S., Ramalingegowda, S., & Yu, Y. (2017a). The effect of financial reporting quality on corporate dividend policy. Review of Accounting Studies, 22(2), 753–790. https://doi.org/10.1007/s11142-017-9393-3
Kryzanowski, L., & Zhang, Y. (2013). Financial restatements by Canadian firms cross-listed and not cross-listed in the U.S. Journal of Multinational Financial Management, 23(1–2), 74–96. https://doi.org/10.1016/j.mulfin.2012.11.003
Lin, T.-J., Chen, Y.-P., & Tsai, H.-F. (2017). The relationship among information asymmetry, dividend policy and ownership structure. Finance Research Letters, 20, 1–12. https://doi.org/10.1016/j.frl.2016.06.008
Lintner, J. (1956). Distribution of incomes of corporations among dividends, retained earnings, and taxes. American Economic Review, Nashville, v. 46, n. 2, p. 97-113
Manneh, M. A., & Naser, K. (2015). Determinants of Corporate Dividends Policy: Evidence from an Emerging Economy. International Journal of Economics and Finance, 7(7), p229. https://doi.org/10.5539/ijef.v7n7p229
Marques, V. A., Amaral, H. F., Souza, A. A. de, Santos, K. L. dos, & Belo, P. H. R. (2017). Determinantes das Republicações no Mercado Brasileiro: Uma Análise a partir dos Incentivos ao Gerenciamento de Resultados. Revista de Educação e Pesquisa em Contabilidade (REPeC), 11(2), 191–213. https://doi.org/10.17524/repec.v11i2.1488
Marques, V. A., Barcelos Buenos Aires, D., Patrício Paulino Cerqueira, N., Correia da Silva, L. K., & Fernandes Amaral, H. (2016). Dinâmica das republicações das demonstrações contábeis no período de 1997-2012. Contabilidade, Gestão e Governança, 19(3), 440–464. https://doi.org/10.21714/1984-3925_2016v19n3a6
Martins, A. I., & Famá, R. (2012). O que revelam os estudos realizados no Brasil sobre política de dividendos? Revista de Administração de Empresas, 52(1), 24–39. https://doi.org/10.1590/S0034-75902012000100003
Murcia, F. D.-R., & Carvalho, L. N. (2007). Conjecturas Acerca do Gerenciamento de Lucros, Republicação das Demonstrações Contábeis e Fraude Contábil. 18(4), 22.
Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221. https://doi.org/10.1016/0304-405X(84)90023-0
Netto, F. H., & Pereira, C. C. (2010). Impacto da republicação de demonstrações financeiras no preço das ações de empresas brasileiras. Revista Contemporânea de Contabilidade, 7(14), 29–50. https://doi.org/10.5007/2175-8069.2010v7n14p29
Neves, M., Cunha, M., & Vilas, J. (2020). Determinants of Dividends in the Telecommunications Sector. Review of Business Management, 22(3). https://doi.org/10.7819/rbgn.v22i3.4069
Nguyen, T. T. N., & Bui, P. K. (2019). Dividend policy and earnings quality in Vietnam. Journal of Asian Business and Economic Studies, 26(2), 301–312. https://doi.org/10.1108/JABES-07-2018-0047
Papík, M., & Papíková, L. (2019). Detection Models for Unintentional Financial Restatements. Journal of Business Economics and Management, 21(1), 64–86. https://doi.org/10.3846/jbem.2019.10179
Pathak, R. & Ranajee. (2020). Earnings quality and corporate payout policy linkages: An Indian context. The North American Journal of Economics and Finance, 51, 100855. https://doi.org/10.1016/j.najef.2018.10.003
Patra, T., Poshakwale, S., & Ow-Yong, K. (2012). Determinants of corporate dividend policy in Greece. Applied Financial Economics, 22(13), 1079–1087. https://doi.org/10.1080/09603107.2011.639734
Perlin, M. (2020). Corporate Datasets from FRE System [Data set]. Harvard Dataverse. https://doi.org/10.7910/DVN/QIMUNZ
Pronunciamento técnico CPC 23, de 26 de junho de 2009. Políticas Contábeis, Mudança de Estimativa e Retificação de Erro. Recuperado de http://static.cpc.aatb.com.br/Documentos/296_CPC_23_rev%2020.pdf
Qasem, A., Aripin, N., & Wan-Hussin, W. N. (2020). Financial restatements and sell-side analysts’ stock recommendations: Evidence from Malaysia. International Journal of Managerial Finance, 16(4), 501–524. https://doi.org/10.1108/IJMF-05-2019-0183
Ramalingegowda, S., Wang, C.-S., & Yu, Y. (2013). The Role of Financial Reporting Quality in Mitigating the Constraining Effect of Dividend Policy on Investment Decisions. The Accounting Review, 88(3), 1007–1039. https://doi.org/10.2308/accr-50387
Reyna, J. M. (2017). Ownership structure and its effect on dividend policy in the Mexican context. Contaduría y Administración, 62(4), 1199–1213. https://doi.org/10.1016/j.cya.2015.12.006
Rodrigues Sobrinho, W. B., Rodrigues, H. S., & Sarlo Neto, A. (2014). Dividendos e accruals discricionários: Um estudo sobre a relação entre a política de distribuição de dividendos e a qualidade dos lucros. Revista Contemporânea de Contabilidade, 11(24), 03. https://doi.org/10.5007/2175-8069.2014v11n24p3
Rosa, A. A. S., Araújo, F. B. de B., & Rogers, P. (2021). Política de dividendos e volatilidade do preço das ações das empresas brasileiras de capital aberto. Research, Society and Development, 10(4), e42910414210. https://doi.org/10.33448/rsd-v10i4.14210
Salehi, M., Farhangdoust, S., & Vahidnia, A. (2017). Abnormal audit fees and future restatements: Evidence from Tehran Stock Exchange. International Journal of Accounting, Auditing and Performance Evaluation, 13(1), 42. https://doi.org/10.1504/IJAAPE.2017.081802
Schiozer, R. F., Mourad, F. A., & Martins, T. C. (2021). A Tutorial on the Use of Differences-in-Differences in Management, Finance, and Accounting. Revista de Administração Contemporânea, 25(1), e200067. https://doi.org/10.1590/1982-7849rac2021200067
Soares, C. R., Motoki, F. Y. S., & Monte-mor, D. S. (2018). IFRS e probabilidade de republicação: Um estudo das empresas brasileiras listadas na Bovespa. Revista Catarinense da Ciência Contábil, 17(52). https://doi.org/10.16930/2237-7662/rccc.v17n52.2694
Wooldridge, J. M. (2018). Introductory econometrics: A modern approach (Seventh edition). Cengage Learning.
Wu, P., Gao, L., Chen, Z., & Li, X. (2016). Managing reputation loss in China: In-depth analyses of financial restatements. Chinese Management Studies, 10(2), 312–345. https://doi.org/10.1108/CMS-12-2015-0275
Zagonel, T., Terra, P. R. S., & Pasuch, D. F. (2018). Taxation, corporate governance and dividend policy in Brazil. RAUSP Management Journal, 53(3), 304–323. https://doi.org/10.1108/RAUSP-04-2018-006
Zhang, G. (2012). Determinants of Financial Restatements in the Listed Companies in China. Em H. Tan (Org.), Knowledge Discovery and Data Mining (Vol. 135, p. 725–730). Springer Berlin Heidelberg. https://doi.org/10.1007/978-3-642-27708-5_100.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Journal of Education and Research in Accounting (REPeC)
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Authors who publish with this journal agree to the following terms:
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under Creative Commons Attribution 3.0 Unported License, which allows the sharing of the work and recognition of authorship and its initial publication in this journal. This license allows others to distribute, remix, adapt, or create derivative works, even for commercial purposes, provided credit is given for the original creation.
b)There is no financial compensation to the authors in any capacity, for articles published in RePEc.c) The articles published in RePEc are the sole responsibility of the authors.
