دانلود The Earnings Quality Information Content of Dividend Policies and Audit Pricing

Abstract

Recent studies indicate dividends are associated with higher quality earnings. Our study extends the literature by examining whether dividends’ information is associated with auditors’ assessment of their clients’ earnings quality.   Our results show that auditors charge lower fees to dividend-paying clients than to non-dividend-paying clients and the average fee discount ranges from 6.0-10.6  percent.    More  importantly,  we  find  dividends  have  an  interactive  effect  with  respect  to  earnings persistence and earnings manipulation: the negative association between audit fees and earnings  persistence  is  more  pronounced  for  dividend  firms;  and  dividend  payouts  mitigate  the  positive relation between earnings manipulation risk and audit fees.  Our results imply dividends reduce  audit  risk  by  enhancing  clients’  earnings  quality  information.    We  contribute  to  the  literature  by  showing  that  auditors  reflect  the  earnings  quality  information  content  of  firms’  dividend policies in their pricing decisions.