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Dividend Behavior and Pure Accrual Management of Japanese Banks

Osaka University Economics Working Paper No. 2003-1

21 Pages Posted: 29 Jan 2003  

Kazuo Kato

Osaka University of Economics

Michio Kunimura

Nagoya City University - Department of Economics

Yasushi Yoshida

Sumitomo-Life Research Institute, Inc.

Date Written: December 24, 2002

Abstract

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.

Keywords: bank, capital regulation, accruals and deferrals, dividend payment policy

JEL Classification: M41, M43, G21, G35, K23

Suggested Citation

Kato, Kazuo and Kunimura, Michio and Yoshida, Yasushi, Dividend Behavior and Pure Accrual Management of Japanese Banks (December 24, 2002). Osaka University Economics Working Paper No. 2003-1. Available at SSRN: https://ssrn.com/abstract=365960 or http://dx.doi.org/10.2139/ssrn.365960

Kazuo Kato (Contact Author)

Osaka University of Economics ( email )

2-2-8 Osumi
Higashiyokogawa-ku
Osaka
Japan

Michio Kunimura

Nagoya City University - Department of Economics ( email )

Yamanohata 1, Mizuho-cho, Mizuho-ku
Nagoya, 467-8501
JAPAN
+(81) 52-872-5744 (Phone)
+(81) 52-871-9429 (Fax)

Yasushi Yoshida

Sumitomo-Life Research Institute, Inc. ( email )

2-2-1 Yaesu Chuo-ku
Tokyo 104-0028
Japan
81-3-3272-5885 (Phone)

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