Dividend policy, earnings management and the moderating effect of corporate governance in ghana

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The present study aimed to examine the moderating role of corporate governance mechanisms in the relationship between earnings management and dividend policy. Employing a correlational design and descriptive research methodology, secondary data were gathered from the annual financial reports of ten selected firms listed on the Ghana Stock Exchange from 2010 to 2021. Panel estimation techniques, including static and dynamic models, were employed to analyse the data, while diagnostic tests and robustness checks were conducted to address endogeneity concerns. The study's results indicate a notable impact of profits management practices on dividend policy decisions. Companies that engage in earnings management are more inclined to increase dividend payments, thus aligning their interests with those of their shareholders. The study also underscores the impact of corporate governance mechanisms on dividend policy. Consistent with agency theory, a larger board size, board independence, and CEO duality are positively associated with dividend policy. These mechanisms provide enhanced oversight and governance, which can lead to more favourable dividend policies. Moreover, the interaction between earnings management and larger board sizes or CEO duality magnifies the influence of these factors on dividend policy. This suggests that when combined with a larger board size or CEO duality, earnings management practices exert a stronger effect on dividend policy decisions. This study contributes to the understanding of how corporate governance mechanisms moderate the relationship between earnings management and dividend policy. It highlights the importance of implementing effective corporate governance practices to ensure sound dividend policy decisions and emphasises the need to strike a balance between earnings management activities and maintaining transparency and investor confidence. Research on investor views and reactions to earnings management and its effect on dividend policy, as well as other elements and contexts that may affect this relationship, is necessary.
A thesis submitted to the department of accounting and finance, school of business, kwame nkrumah university of science and technology in partial fulfillment of the requirements for the award of the degree of master of science in accounting and finance