The Impact of Final and Interim Cash Dividends on Earnings Quality: Timing Matters
Abstract
This research examines and evaluates the impact of cash dividends on the quality of corporate earnings. Unlike prior studies, this research emphasizes the distinction between cash dividends based on their timing of distribution. The sample comprises non-financial companies listed on the Indonesia Stock Exchange, selected through purposive sampling, resulting in a dataset of 1,428 observations. To test the hypotheses, the study employs descriptive and frequency statistical analyses alongside multiple regression techniques. Grounded in signaling theory, the findings reveal that cash dividends and final cash dividends positively influence the quality of corporate earnings, whereas interim cash dividends show no significant effect. Implications for investors provide insights into whether cash dividend distribution can serve as a signal of earnings quality credibility and help investors make more informed investment decisions, not merely by considering the dividend amount but also by assessing whether it truly reflects high-quality earnings. In addition, the findings of this study may serve as a valuable consideration for regulators in formulating policies that promote information transparency, particularly regarding dividend distribution practices and earnings reporting quality.
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DOI: https://doi.org/10.21107/jaffa.v13i2.31769
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