Dividend Behavior and Pure Accrual Management of Japanese Banks
Osaka University of Economics
Nagoya City University - Department of Economics
Sumitomo-Life Research Institute, Inc.
December 24, 2002
Osaka University Economics Working Paper No. 2003-1
This paper provides some evidence of dividend-motivated earnings management using pure accruals defined as accruals and deferrals (A&D) by Japanese banks under the governmental guideline. This guideline had until August 1992 explicitly limited dividend payments by banks to 40 percent or less of their current net income. A bank with the potential to violate the guideline would increasingly manage its A&D to stay within the upper limits. Bias caused by measurement error and research method seems to remain in our tests. Though, under the comparative study, our empirical results consistently support the direct relationship between earnings management and dividend payment policies of Japanese banks: the magnitude of income increasing A&D management becomes significantly smaller when dividend-driven motivation disappears.
Number of Pages in PDF File: 21
Keywords: bank, capital regulation, accruals and deferrals, dividend payment policy
JEL Classification: M41, M43, G21, G35, K23
Date posted: January 29, 2003
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