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Do fair value adjustments influence dividend policy?

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Do fair value adjustments influence dividend policy? / Goncharov, Igor; van Triest, Sander.

In: Accounting and Business Research, Vol. 41, No. 1, 2011, p. 51-68.

Research output: Contribution to journalJournal articlepeer-review

Harvard

Goncharov, I & van Triest, S 2011, 'Do fair value adjustments influence dividend policy?', Accounting and Business Research, vol. 41, no. 1, pp. 51-68. https://doi.org/10.1080/00014788.2011.549637

APA

Goncharov, I., & van Triest, S. (2011). Do fair value adjustments influence dividend policy? Accounting and Business Research, 41(1), 51-68. https://doi.org/10.1080/00014788.2011.549637

Vancouver

Author

Goncharov, Igor ; van Triest, Sander. / Do fair value adjustments influence dividend policy?. In: Accounting and Business Research. 2011 ; Vol. 41, No. 1. pp. 51-68.

Bibtex

@article{c16c1d7fed3b4444bceb28a6237f9f6a,
title = "Do fair value adjustments influence dividend policy?",
abstract = "We examine the impact of positive fair value adjustments on dividend policy. If fair value adjustments are transitory in nature and managers are able to assess their implications for future earnings, fair value adjustments in net income is expected to have no distribution consequences. However, positive fair value adjustments may lead to higher dividends when management incorrectly assesses their persistence. This can have a procyclical impact because higher dividends increase leverage, and thus risk. We use a Russian setting that mandates fair value accounting for financial instruments and requires disclosure of unrealised fair value adjustments in income. We find no empirical support for the concern that dividends increase in response to positive fair value adjustments. Rather, there is a negative relationship between positive fair value adjustments and dividend changes, which holds after controlling for dividend policy determinants and any endogenous nature of the revaluation decision. We discuss several possible explanations for this finding.",
keywords = "fair value accounting, dividend policy, earnings persistence, SHARE PRICES, INTANGIBLE ASSETS, AGENCY COSTS, FIRM VALUE, MARKET, EARNINGS, INFORMATION, MANAGEMENT, REPURCHASES, ACCRUALS",
author = "Igor Goncharov and {van Triest}, Sander",
year = "2011",
doi = "10.1080/00014788.2011.549637",
language = "English",
volume = "41",
pages = "51--68",
journal = "Accounting and Business Research",
issn = "0001-4788",
publisher = "Routledge",
number = "1",

}

RIS

TY - JOUR

T1 - Do fair value adjustments influence dividend policy?

AU - Goncharov, Igor

AU - van Triest, Sander

PY - 2011

Y1 - 2011

N2 - We examine the impact of positive fair value adjustments on dividend policy. If fair value adjustments are transitory in nature and managers are able to assess their implications for future earnings, fair value adjustments in net income is expected to have no distribution consequences. However, positive fair value adjustments may lead to higher dividends when management incorrectly assesses their persistence. This can have a procyclical impact because higher dividends increase leverage, and thus risk. We use a Russian setting that mandates fair value accounting for financial instruments and requires disclosure of unrealised fair value adjustments in income. We find no empirical support for the concern that dividends increase in response to positive fair value adjustments. Rather, there is a negative relationship between positive fair value adjustments and dividend changes, which holds after controlling for dividend policy determinants and any endogenous nature of the revaluation decision. We discuss several possible explanations for this finding.

AB - We examine the impact of positive fair value adjustments on dividend policy. If fair value adjustments are transitory in nature and managers are able to assess their implications for future earnings, fair value adjustments in net income is expected to have no distribution consequences. However, positive fair value adjustments may lead to higher dividends when management incorrectly assesses their persistence. This can have a procyclical impact because higher dividends increase leverage, and thus risk. We use a Russian setting that mandates fair value accounting for financial instruments and requires disclosure of unrealised fair value adjustments in income. We find no empirical support for the concern that dividends increase in response to positive fair value adjustments. Rather, there is a negative relationship between positive fair value adjustments and dividend changes, which holds after controlling for dividend policy determinants and any endogenous nature of the revaluation decision. We discuss several possible explanations for this finding.

KW - fair value accounting

KW - dividend policy

KW - earnings persistence

KW - SHARE PRICES

KW - INTANGIBLE ASSETS

KW - AGENCY COSTS

KW - FIRM VALUE

KW - MARKET

KW - EARNINGS

KW - INFORMATION

KW - MANAGEMENT

KW - REPURCHASES

KW - ACCRUALS

U2 - 10.1080/00014788.2011.549637

DO - 10.1080/00014788.2011.549637

M3 - Journal article

VL - 41

SP - 51

EP - 68

JO - Accounting and Business Research

JF - Accounting and Business Research

SN - 0001-4788

IS - 1

ER -