Review of Accounting Studies

, Volume 16, Issue 1, pp 1–28

What do dividends tell us about earnings quality?

Authors

    • University of Chicago Booth School of Business
  • Eugene Soltes
    • Harvard Business School
Article

DOI: 10.1007/s11142-009-9113-8

Cite this article as:
Skinner, D.J. & Soltes, E. Rev Account Stud (2011) 16: 1. doi:10.1007/s11142-009-9113-8

Abstract

Over the past 30 years, there have been significant changes in the distribution of earnings—cross-sectional variation has increased, with increasing left skewness—as well as in corporate payout policy, with many fewer firms paying dividends and the emergence of stock repurchases. We investigate whether the informativeness of payout policy with respect to earnings quality changes over this period. We find that the reported earnings of dividend-paying firms are more persistent than those of other firms and that this relation is remarkably stable over time. We also find that dividend payers are less likely to report losses and those losses that they do report tend to be transitory losses driven by special items. These results do not hold as strongly for stock repurchases, consistent with them representing less of a commitment than dividends.

Keywords

DividendsEarnings qualityPayout policyStock repurchases

JEL Classification

G11G35M41

Copyright information

© Springer Science+Business Media, LLC 2009