The Role of Managers' Ability and Smoothing Dividends in Changing the Information Content of Current Earnings

Document Type : Research Paper

Authors

1 Assistant Prof., Department of Accounting, Faculty of Management and Economics, Lorestan University, Khorramabad, Iran.

2 PhD, Department of Accounting, Faculty of Management, University of Tehran, Tehran, Iran.

Abstract

Objective: The desire to change the dividend payment method can indicate the ability of managers to control fluctuations in the capital market, so that managers limit changes in dividends to cover the risk of these fluctuations. In this research, the aim is to investigate the role of managers' ability and dividends smoothing in changing the information content of current earnings.
Methods: For this purpose, data related to 120 companies listed on the Tehran Stock Exchange for the period 2008 to 2019 has been extracted and the combined data regression model has been used to test research hypotheses.
Results: The results indicate the confirmation of the first and second hypotheses of the research. In other words, the research results indicate that the ability of managers leads to increased dividends smoothing. In addition, the results of the second hypothesis of the research indicate a significant relationship between the managers’ ability and the information content of dividends smoothing.
Conclusion: Managers with high ability are more inclined n deliberately smooth dividends, and this smoothness relates to the company's future profitability. Managers with high ability provide information about the future earnings in the form of smoothing current dividends, given their skills in forecasting and estimating future performance.

Keywords

References

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Accounting and Auditing Review
Volume 27, Issue 4
2021
Pages 581-603

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