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Meeting Dividend Thresholds Through Earnings Management of Listed Companies in South Africa

Dividend distribution influences corporate operating decisions, and the prior year’s
dividends represent an earnings threshold. The purpose of this study was to clarify
perceptions regarding the manipulation of income toward a desired earnings goal
(i.e., dividend threshold). In this study, data from 2011 to 2019 were collected from
the S&P Capital IQ database. A regression model was adopted to analyze the
manipulation of income toward a dividend threshold (i.e., desired earnings goal)
among South Africa’s listed industry. Moreover, the behavior of managers of listed
South African firms tended to meet or exceed dividend thresholds by manipulating
earnings, which is consistent with signal theory, prospect theory and agency theory.
Keywords: Dividend thresholds, Earnings management, South Africa, Signal
theory, Prospect theory.