The relationship between audit quality and earnings management - Evidence from Vietnam

Abstract

This paper examines the dividend policy of Vietnamese companies listed on HOSE and HNX over the period 2003-2009. Emperically, dividend payouts and other characteristics of firms are following and influenced by the stages life cycle in which firm is located. The study employs the logical proxy of life cycle stages, the earned/contributed capital mix measured by the ratio of retained earnings to total equity (or total assets) (proposed by DeAngelo et al. (2006), Fama and French (2001) to evaluate its impact on Vietnamese firms’ dividend policy. The results show that firms with high proportion of earned capital (retained earnings) relative to contributed capital, larger size, lower leverage and high levels of cash holdings tend to pay higher dividends. In addition, the evidence indicates that firms with higher growth opportunities, proxied by market-to-book ratio, tend to pay lower dividend payout ratio. In the regression, the mix of earned/contributed capital shows a quantitatively greater impact than measures of growth opportunities and profitability. Besides, signaling characteristics of dividends play some roles in determining the dividend payouts of companies. Collectively, the findings from this paper provide much support for the life cycle hypotheses. Further research and development on dividend policy in the context of Vietnam in general specifically may be stemmed from this study.