Rashidi, Mohsen
A icle
O e con idence, manage ial accoun ing compe ence and
di idend smoo hing: E idence om eme ging ma ke s
Re iew o Economics and Poli ical Science (REPS)
P o ided in Coope a ion wi h:
Cai o Uni e si y, Cai o
Sugges ed Ci a ion: Rashidi, Mohsen (2025) : O e con idence, manage ial accoun ing compe ence
and di idend smoo hing: E idence om eme ging ma ke s, Re iew o Economics and Poli ical
Science (REPS), ISSN 2631-3561, Eme ald, Bingley, Vol. 10, Iss. 2, pp. 168-188,
h ps://doi.o g/10.1108/REPS-07-2024-0031
This Ve sion is a ailable a :
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O e con idence, manage ial
accoun ing compe ence and di idend
smoo hing: e idence om
eme ging ma ke s
Mohsen Rashidi
Lo es an Uni e si y, Kho amabad, I an
Abs ac
Pu pose –The pu pose o his esea ch is o e iew he di idend smoo hing e ec i eness om he pe spec i e
o manage s’ o e con idence and accoun ing compe ence. Accoun ing compe ence is conside ed as an
impo an ac o in ecognizing managemen ’s abili y o o e ide in e nal con ols as an oppo uni y o dis o
inancial epo s.
Design/me hodology/app oach –The cu en s udy applies mul i a iable linea eg ession me hod es ima o o
in es iga e he ela ionship be ween O e con idence, Manage ial Accoun ing Compe ence and Di idend
Smoo hing o 1,320 i m-yea obse a ions in I an o he pe iod o 2012–2022.
Findings –The esul show ha manage o e con idence leads o di idend smoo hing. Mo eo e , his ela ion is
s onge in low in o ma ion quali y and no d i en by high in o ma ion quali y o by o he s measu es. This
esea ch show ha accoun ing compe ence has led o posi i e change in he e iciency o he manage
pe o mance and educe he sel -in e es ing mo i es o manage .
P ac ical implica ions –In he p esen s udy, he weaknesses caused by he ambigui y o capi al ma ke
e iciency in ma ke pe o mance-based s a is ical models a e compensa ed and pa ially co e ed by classi ying
he ela ionships and implemen ing models in each g oup. Resul s ob ained om his s udy will aid ma ke
p ac i ione s o e alua e he i ms’ di idend smoo hing. The esul s p o ide e idence and in o ma ion o
policymake s and in es o s abou he heo e ical gap and he ac o s a ec ing o i . I also in o ms policymake s
o he di idend smoo hing associa ed wi h he manage cha ac e is ics.
O iginali y/ alue –The p e ious esea ches emphasize on limi ing agency cos s by c ea ing limi s o he
op imis ic ac ions o manage s, while aming and s anda dizing a majo pa o managemen beha io s is no
possible. In his esea ch, he manage ’s execu i e abili y has been examined in he o m o accoun ing
compe ence a he same ime as excessi e sel -con idence, in o de o con ol pa o he inhe en limi a ions
caused by he manage s’ beha io . This s udy also conside s he posi i e aspec o manage s’ abili y in he o m
o accoun ing compe ence.
Keywo ds O e con idence, Manage ial accoun ing compe ence, Di idend smoo hing
Pape ype Resea ch pape
1. In oduc ion
The adi ional me hod ega ding di idends is based on he Lin ne (1956) esea ch, which
show ha i m manage s change he paymen o di idends based on long- e m goals and
cu en ea nings. Based on manage ’s pe spec i e, he di idend is educed only i he e is no
subs i u e p ocedu e and inc ease in he di idend happen when he e is ce ain y abou he
u u e cash lows s abili y. Capi al ma ke p ac i ione s place a highe alue on companies wi h
uni o m di idend p ocess, and he ma ke conside s he educ ion o di idends by i ms as a
communica ion o un a o able in o ma ion (Gu man e al., 2010). Fo his pu pose, he
manage s i s de e mine he di idend and hen based on ha , hey adjus he decisions ela ed
o liquidi y up o he de e mined le el. In his ega d, B a e al. (2005) concluded ha he o
di idend smoo hing plays a undamen al ole in lis ed i ms.
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© Mohsen Rashidi. Published by Eme ald Publishing Limi ed. This a icle is published unde he C ea i e
Commons A ibu ion (CC BY 4.0) licence. Anyone may ep oduce, dis ibu e, ansla e and c ea e
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h ps://www.eme ald.com/insigh /2631-3561.h m
Recei ed 8 Augus 2024
Re ised 29 Oc obe 2024
Accep ed 29 Oc obe 2024
Re iew o Economics and Poli ical
Science
Vol. 10 No. 2, 2025
pp. 168-188
Eme ald Publishing Limi ed
e-ISSN: 2631-3561
p-ISSN: 2356-9980
DOI 10.1108/REPS-07-2024-0031
In es o s conside he educ ion o di idends as bad news, which is caused by in o ma ion
asymme y be ween i m’s manage and capi al ma ke p ac i ione . In o med manage s
classi y he ea nings be ween di idends and capi al expendi u es and inc ease he alue o
s ock in he long e m. Acco ding o hei p edic abili y, di idends a e a unc ion o he wo
hypo heses o ma king and smoo hing. Based on signaling hypo hesis, di idends can p edic
he beha io o u u e ea nings and sha e p ice, and he di idend smoo hing hypo hesis s a es
ha he p ocess o di idend is depend on cu en and pas p o i s (Godda d e al., 2006).
Manage s do no wan o de ia e di idends om he s anda d s a e, and o his eason, hey use
di idends as an ins umen o communica e da a and in o ma ion abou u u e changes in
ea nings (Kao and Wu, 1994). The le el o di idends is unc ion o manage s’ u u e
expec a ions o ea nings, and changes in i leads o luc ua e in sha e p ices, while in e icien
ma ke s, he i m alue is no ela ed o he me hod o di idend dis ibu ion (Mille and
Modigliani, 1961). As a esul , manage ’s abili y and in es men decisions a e he ac o s ha
change in di idends app oach.
O e con iden manage s bo ow mos o he esou ces hey need because hey o e es ima e
he p obabili y o he i m’s u u e success. Speci ically, his g oup o manage s assume ha
hey ha e impo an in o ma ion ha he ma ke is no awa e o i (Tan, 2017). In his ega d,
H iba and Yang (2016) concluded ha o e con iden manage s p edic ea nings wi h espec
o sel -a icula e in o ma ion and he es ima ed ea nings is p esen ed e y op imis ically. The
lack o simila i y be ween manage s’ and in es o s’ in o ma ion leads o misp icing o bonds
(Mye s and Majlu , 1984). Imp ope p icing o bonds leads o highe cos s o sha eholde s
han c edi o s (Pa el e al., 2009) and manage s use di idend smoo hing in o de o keep he
isk a a low le el in o de o con ol he expec a ions o sha eholde s.
In case o di idend smoo hing, luc ua ions in p o i s should be abso bed by o he ac o s.
Assuming he s ickiness o manage s’ beha io , he accoun ing compe ence o i m manage s
should abso b shocks o p o i s. In o he wo ds, i is expec ed ha he sus ainabili y o
di idends will also inc ease wi h he inc ease in he accoun ing compe ence o manage s.
Accoun ing quali ica ion can be conside ed he p e ious expe iences o manage s who wo ked
as manage s o audi pa ne s. Accoun ing compe ence o manage show ha he execu i e
eam ha e high knowledge and expe ience abou he quali y o accoun ing epo and
e iciency o in e nal con ols (Alb ech e al., 2018). The inabili y o companies o adap o
en i onmen al condi ions as a esul o luc ua ions has led o an inc ease in he isk o
inco ec selec ion o in es o s, and so, he cos o capi al and changes in in es o s’
expec a ions a e o med. By iden i ying he end and s abili y o di idends based on he abili y
o manage s in companies, he c ea ed isk can be pa ially co e ed (Rashidi, 2020). In
eme ging economies, he banks ha e he main ole in p o iding inancial esou ces needed by
companies, and in hese ma ke s, he le el o e iciency is weak and hey a e a he beginning o
he de elopmen p ocess (Al-Najja and Cla k, 2017). In his si ua ion, capi al ma ke
ac i i ies a e subjec o changes, co po a e go e nance e o ms and imp o emen o in e nal
con ols guidelines ha ha e been o med based on he implica ions o ele an egula ions
and ins i u ions (Rashidi, 2022). In his ega d, in 2006, I an capi al ma ke was aced wi h he
p o ision o co po a e disclosu e ins uc ions, in e nal con ol ins uc ions, audi commi ee
and in e nal audi ins uc ions. In his si ua ion, he link be ween he beha io al cha ac e is ics
and he le el o manage s’ knowledge wi h he di idends smoo hing is unknown. In ou
e iew, he e ec s o manage s’ o e con idence and accoun ing compe ence on he di idends
smoo hing ha e been in es iga ed, and we belie e ha he esul s o his esea ch will ill he
li e a u e gap ela ed o he beha io al cha ac e is ics o manage s, and he smoo hing o
di idends in eme ging ma ke s.
The knowledge enhancemen o he cu en esea ch can be exp essed in di e en ields.
Fi s , he p e ious esea ches emphasize on limi ing agency cos s by c ea ing limi s o he
op imis ic ac ions o manage s, while aming and s anda dizing a majo pa o managemen
beha io s is no possible. In his esea ch, he manage ’s execu i e abili y has been examined
in he o m o accoun ing compe ence a he same ime as excessi e sel -con idence, in o de o
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con ol pa o he inhe en limi a ions caused by he manage s’ beha io . Second, he inancial
epo ing app oach is de i ed om he abili y and compe ence o manage s. In o he wo ds, he
accoun ing compe ence o manage s is e ec i e on conside a ions ela ed o dis o ion in
inancial s a emen s and smoo hing o di idends. Thi d, he high abili y o managemen by
c ea ing oppo uni ies and mo i a ion o achie e pe sonal bene i s cause o a nega i e change
in he inancial epo ing quali y, bu in ou esea ch, he posi i e aspec o manage s’ abili y in
he o m o accoun ing compe ence is conside ed. Finally, he ela ionship be ween
o e con idence and accoun ing compe ence o manage s wi h i m cha ac e is ics (high
in o ma ion quali y i ms and hose wi h low in o ma ion quali y) has been e iew.
The s uc u e o ou a icle is p esen ed as ollows. In he i s pa , we examine he
heo e ical ounda ions and p epa e he main hypo heses o he esea ch. In he nex
sec ion, we discuss he sample and me hodology used o conduc he esea ch. Then we
analyze he expe imen al esul s, and inally, we p esen he conclusions and implica ions
o he esea ch.
2. Theo y, li e a u e e iew and hypo heses de elopmen
To p epa e inancial epo s, ea ning is conside ed as an indica o o he i m’s and manage
pe o mance. His o ical ea nings and de aul di idend paymen pa e ns play a basic ole in
changing he di idend policy condi ions (Skinne and Sol es, 2009). Ea nings pa e ns and
di idends ha e he i m’s alue cha ac e is ics ha a e alued by he ma ke . The e o e,
policies in luence managemen decision-making (Ba h e al., 1999). Manage s y o con ol
and inc easing di idends ega dless o unexpec ed p o i s is based on di idend smoo hing
(Mikhail e al., 2003;Lin ne , 1956;DeAngelo e al., 2004,2006). Because o he ac ha
manage s end o educe ongoing obliga ions in he o m o egula p o i dis ibu ions, a
dec ease in di idends is a sign o a dec ease in he expec ed p o i abili y o he i m (DeAngelo
e al., 1992;Koch and Sun, 2004;B a e al., 2005). Fo his eason, in o de o educe
in o ma ion asymme y and con ol bad news, manage smoo h di idends (Joose and Plesko,
2005) and his ac ion highligh he di idends ole in desc ibing u u e ea nings (DeAngelo
e al., 1992;Cha i ou, 2000). In ac , di idend policy ega dless o income pa e ns and
di idend dis ibu ion, has in o ma ional con en in desc ibing u u e incomes, and i shows ha
changes in di idend pa e n imp o e he abili y o cu en ea nings o show he u u e
pe o mance acco ding o his o ical ea ning ends. and p o i s (Allen and Michaely, 2003;
DeAngelo e al., 2004;B a e al., 2005). In his ega d, Mille and Modigliani (1961) s a ed
ha i an o ganiza ion adop s a long- e m di idend pa e n, ma ke p ac i ione s a e p e e ing
o in e p e he di idend a e as a change in manage ’s belie s abou he u u e pe o mance
o i m.
The di idend smoo hing li e a u e show ha he cause o his beha io s associa ed wi h
sha eholde s and manage s’ in o ma ion asymme y (Gu man e al., 2010). So, in o de o
con ol agency cos s caused by cash lows (Lamb ech and Mye s, 2012) and he inancing
cos s (Ai azian e al., 2006), di idend smoo hing is sugges ed. Acco ding o Lin ne (1956)
and Fama and Babiaik (1968), many companies ha e a long- e m and smoo h plan o paying
di idends. Fi m manage s ha e ound ha sha eholde s p e e cash di idend dis ibu ion o
ha e a smoo h end o e ime because he smoo hing end o cash di idend dis ibu ion
ca ies he message ha he i m has a s able inancial posi ion, less business isk, and he e o e
i s s ock ma ke alue will inc ease in he nea u u e.
2.1 O e con idence and di idend smoo hing
O e con idence is an indi idual beha io ha could be de ined as op imis ic and un ealis ic
(posi i e) belie s ela ed o any aspec o an e en unde si ua ion o unce ain y (Malmendie
and Ta e, 2005). Mos manage s wi h his beha io a e so posi i e in o hei inancial decisions
and ou comes, mainly in he in es men con ex (Coope e al., 1988). Because o his
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app oach, o e con idence manage s may p edic p ojec s’ cash lows e y a o able and
hence, es ima e p ojec s’ esul highe han hei ac ual alue. In o he ways, hey belie e ha
he i m capaci y is mo e han ma ke es ima ion, and his ma ke mise alua ion cause o
inc ease inancing cos . Fo ha , o e con iden manage s may be mo e inclined o o e in es
i he i m has in e nal esou ces, bu unde in es may ake place in condi ion ha p ojec
inancing equi es mo e ex e nal esou ces (Malmendie and Ta e, 2005). Success in he
ma ke equi es he desi e o pu sue un ecognized oppo uni ies (Ma ch, 1991), bu some imes
manage s do no ha e he desi e o ollow and poin ou hese oppo uni ies. Ne e heless,
op ion plans can be a ac o o con ince manage s o accep isks (A ms ong and Vashish ha,
2012), howe e he desi e o do basic decisions is o en es ic ed by inhe en and in e nal
mo i a ions, and so, inancial incen i es lose hei impo ance (Ma ch and Shapi a, 1987). The
po en ial ai o o e con idence is he main sou ce o in e nal mo i a ions and show ha
manage s wi h o e con idence a e mo e willing o do unique plans ha ha e a po en ial
ea nings (Hi shlei e e al., 2012). Howe e , in o de o achie e success, only implemen ing
bold in es men p ojec s is no enough because he p obabili y o achie ing he expec ed
esul s in hese plans is low (B oihanne e al., 2014).
O e con iden manage s ha e a high endency o implemen high- isk p ojec s and
pos pone un a o able news and esul s, which leads o an inc ease in he scope o isk imposed
on in es o s. Acco ding o he agency amewo k, o e con iden manage s do no desi e
p ocedu al s abili y and ixed budge ing. i ms end o main ain inancial s eng h and educe
he capi al ma ke s accessing cos (DeAngelo e al., 2006), and because o his pe spec i e, big
i ms a oid educing di idends due o he cos s i en ails o hem (including educed c edi in
he capi al ma ke ) a oid (Daniel e al., 2008). On he o he hand, he a iable budge app oach
wi h ega d o con ac ual obliga ions and in es men in ixed asse s ha do no change in he
sho e m, causes he need o change he p ocess o di idends o con ol he isk in he s able
h eshold.
Companies may be inclined o inance and inc ease he le el o deb in o de o use i s
bene i s, bu he bene i s o cash paymen s o sha eholde s a e highe han he cos s o ex e nal
inancing because di idends educe in o ma ion asymme y be ween in es o s. and
pa icipa ion (Acha ya e al., 2007). In his ega d, Hackba h (2008) concluded ha
o e con iden manage s ha e a highe endency o inc ease he le el o deb . Also,
Malmendie and Ta e (2008) showed ha o e con idence cause o do plans ha a e mo e likely
o educe he i m alue. Deshmukh e al. (2013) concluded ha manage s’ o e con idence
conside s ex e nal inancing cos ly and he e o e end o educe di idends.
H1. Ce e is Pa ibus, O e con iden manage s lead o inc eased di idend smoo hing
in i ms.
2.2 Manage s’ accoun ing compe ence and di idend smoo hing
Manage s’ compe ence is usually conside ed synonymous wi h hei specialized knowledge
(Blue Ribbon Commi ee, 1999). Howe e , he accoun ing quali ica ion can be conside ed he
p e ious expe iences o manage s who wo ked as manage s o audi pa ne s. An accoun ing
quali ica ion p o ides he managemen eam wi h high abili y and knowledge abou he quali y
o accoun ing in o ma ion and i m’s in e nal con ols (Alb ech e al., 2018). Also, academics,
esea che s and compile s o accoun ing s anda ds and s ock exchange equi emen s usually
concen a e on inc easing he le el o p o essional compe ence and p o ide e o - ee
inancial epo s. In ac , he esul s o p e ious esea ch such as Aie e al. (2005) show ha
accoun ing expe ience is gene ally associa ed wi h a educ ion in misin o ma ion and in e nal
con ol weaknesses. Howe e , accoun ing compe ence has a dual na u e in a way ha , on he
one hand, i can lead o he imp o emen o accoun ing knowledge and in e nal managemen
app oaches (lennox, 2005) and on he o he hand, he compe ence o manage s can cause o
dec ease in boa d o di ec o s’ independence (He malin and Weisbach, 1998) due o he
manage ’s jus i ica ion powe om he inancial aspec .
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Manage s wi h accoun ing compe ence use hei supe io abili ies o hide dis o ions o
p e en adjus men s. Accoun ing compe ence is conside ed as an impo an ac o in
ecognizing managemen ’s abili y o o e ide in e nal con ols as an oppo uni y o dis o
inancial epo s (PCAOB, 2015a,b). Accoun ing quali ica ion does no lead o dis o ion and
mis ep esen a ion o in o ma ion, because i ep esen s he manage abili y o epo eliable
inancial in o ma ion, and he e is no eason o expec changes in hones p esen a ion om
manage s wi h accoun ing compe ence compa ed o manage s who lack his ea u e. In con as ,
some esea ches s a e ha accoun ing compe ence can in e ac o o he ac o s o aud isk
(including mo i a ion) o inc ease he abuse and inancial miss a emen isk (Alb ech e al.,
2018). The exis ence o a common execu i e backg ound be ween manage s and audi o s can
lead o excessi e us in manage s and he possibili y o disco e ing mis akes and co ec ions by
he i m is educed. High us in manage s wi h accoun ing compe ence allows o mo e
lexibili y in inancial epo ing, which indica es he ecip ocal ela ionship be ween accoun ing
compe ence and dis o ion-based incen i es (Be gs esse and Philippon, 2006).
The main esponsibili y o he i m’s senio manage s is o se mac o and s a egic policies,
which is accompanied by he mo i a ion and abili y o in luence accoun ing decisions (Cheng
e al., 2016). The nega i e aspec o accoun ing compe ence is conside ed as a s a e o
oppo uni y o aud and dis o ion in inancial s a emen s. This means ha managemen ’s
abili y o igno e in e nal con ols can be conside ed as an oppo uni y o abuse inancial epo s.
P e ious expe ience in he ield o audi ing as a manage o pa ne leads o inc eased knowledge
and expe ience o audi ing and ecogni ion o in e nal con ols as a esul o in e ac ion wi h
mul iple and di e en clien s o e ime, which leads o he disco e y o concealmen o
de ia ions in inancial s a emen s and epo s. E e y one o hese skills can p o ide oppo uni y
o manage s o manage ea nings wi h no adjus ing audi epo (a leas in he sho - e m).
Howe e , accoun ing compe ence could no necessa ily cause o dis o ion, and he po en ial
nega i e aspec s o accoun ing compe ence can be seen only when i is combined wi h o he isk
ac o s (Alb ech e al., 2018). Manage s wi h high compe ence and abili y ha e mo e skills in
co e miss a emen s due o ha ing expe iences in he ield o audi ing as a manage o pa ne
(Le e al., 2010). Manipula ed inancial epo s a e o en p epa ed by ac i e, p o essional and
inno a ed people wi h he high unde s anding o he i m’s co po a e con ols and weaknesses.
Also, his g oup o manage s ha e high expe ience in how o analyze he inancial epo s, as a
esul , his ca ego y o manage s has a high abili y o co ec dis o ed inancial s a emen s. On
he o he hand, he common backg ound o manage s wi h independen audi o s and mo e us
in managemen educes he disco e y o dis o ion and abuse in he sho e m (Wol e and
He manson, 2004). In his ega d, Lennox (2005) showed ha he p e ious job dependence o
he managemen o he audi ing i m can lead o a dec ease in accoun ing quali y.
Financial and in es men decisions made by pa icipan s who y o maximize he p esen
alue o hei u u e acqui ed in e es s. Manage s on behal o he i m a e esponsible o
c ea ing sui able p o i abili y o in es o s in each pe iod. Based on he heo y o con lic o
in e es , manage s a e op imis ic and do no ha e loyal y o sha eholde s, bu he exis ence o
con olling sha eholde s p e en s he oppo unis ic app oaches o manage s, and o his
eason, manage s conside hei in e es s acco ding o he limi a ions in he i m and he capi al
ma ke (Lamb ech and Mye s, 2012). In his ega d, manage s wi h accoun ing compe ence
may use s a egies ha lead o changes in he quali y o accoun ing in o ma ion and di idends.
H2. Ce e is Pa ibus, manage s accoun ing compe ence lead o inc eased di idend
smoo hing in i ms.
3. Resea ch design
3.1 Sample selec ion
To compose esea ch sample, we p epa e o e con idence, manage accoun ing compe ence and
di idend smoo hing da a om Codal (“Comp ehensi e Da abase o All Lis ed Companies”)
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o e he yea s 2012–2022. The manage ial accoun ing compe ence da a is coming om
“TSETMC” and same websi e which collec esume o manage s o all he lis ed i ms. Finally,
we combine he all da a and es ic ou sample o i ms wi h no los da a on any o he esea ch
a iables. Financial i ms a e also excluded because o hei di e en ope a e en i onmen and
subsequen ly ollow dis inc i e accoun ing app oaches. Fu he , we emo e he i ms ha does
no ha e he manage ial accoun ing compe ence in o ma ion. Ou esea ch sample consis s o
1,320 i m-yea obse a ions o Teh an Secu i y Exchange i ms be ween 2012 and 2022 yea s.
3.2 Measu emen o a iables
3.2.1 Manage accoun ing compe ence. Fo manage accoun ing compe ence a iable, he
de ini ion o Alb ech e al. (2018) was used. Accoun ing compe ence is a dummy a iable ha
akes he “one” i he p esiden ; any co po a e ice p esiden in cha ge o he majo business
di ision, uni o unc ion; any o he manage who has a decision-making asks; o any o he
indi idual who pe o ms same decision-making asks, has p e ious expe ience as a manage
o pa ne in an audi i m, and ze o o he wise.
3.2.2 Manage o e con idence. Conside ing ha he in es men plans o i m is based on
manage s’ decisions and pe sonali y app oaches, he i s c i e ion was se based on he
in es men and manage s’ decisions; his app oach is applied in some esea ches (e.g. Ahmed
and Duellman, 2012).
Based on Ben-Da id e al. (2013), ou measu e o o e con idence is dummy a iable ha
equal o “one” in case he capi al expendi u es in yea is mo e han he middle le el o indus y
capi al expendi u es o ha yea , o he wise ze o.
3.2.3 Di idend smoo hing. Lin ne (1956) wi h espec o pa ial adjus men hypo hesis
show ha i m manage s know he non-pe sis en na u e o i m ea nings. Flie s (2019) show
ha manage s end o di idend uni o mi y. The p e ious le els o di idend and cu en
ea nings assess he cu en luc ua e in i m di idends. The op imal le el o di idends (Di *) is
ep esen by:
Di *
¼ E (1)
whe e E
is he i m cu en ea nings and is he s anda d a e o i m payou . Flie s (2019)
show ha based on high isk o di idend dec ease, luc ua e in di idends will be impe cep ible.
So, we es ima e he Flie s (2019) ollowing pa ial adjus men model:
Di *
¼β0þβ1E þβ2Di −1þe(2)
whe e Di
is he di idends’ changes. The a ge payou a io o i ms is de e mine by β1=β2, and
he speed o adjus men o di idend is de e mine by −β2.
3.3 Empi ical model
To es he impac o manage ial o e con idence and manage ial accoun ing compe ence on
di idend smoo hing, we use he ollowing eg ession model:
AD DIVi ¼β0þβ1O e con idence i þβ2Acc Compe encei þβ3MTBi þβ4Le i
þβ5ROAi þβ6C o S di þβ7Re S di þβ8Ins i þβ9Mg i þβ10Lossi
þβ11B Sizei þβ12B Indi þβ13VIXi þβ14Sizei þδYea Dummyi
þδIndus yDummyi þεi (3)
whe e AD DIV is he di idend smoo hing, while O e con idence and Acc_Compe ence a e
p oxy o manage ial o e con idence and manage ial accoun ing compe ence, espec i ely. To
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es main hypo hesis, esea ch ocus on β1 and β2 coe icien . In si ua ion ha manage ial
o e con idence inc eases he di idend smoo hing o esea ch i ms, hen, he coe icien s on
O e con idence (β1) should be posi i e and signi ican . I manage ial accoun ing compe ence
inc eases he di idend smoo hing, hen, he coe icien s on Acc_Compe ence (β2) should be
posi i e and signi ican . Following some s udies (Flie s, 2019;Rashidi, 2020), we con ol
o he a iables ha a ec he di idend smoo hing o I anian i ms, oo. These a iables consis
i m size (Size) is he na u al log o o al asse s’ book alue, ma ke o book a io (MTB) is he
ma ke alue o book alue o i m’s o al asse s, le e age (Le ) is o al deb s di ided by o al
asse s, ins i u ional owne ship (Ins ) is he sum o ins i u ional owne ship’ pe cen age,
manage ial owne ship (Mg ) is he pe cen age o he sha es owned by he manage s, boa d size
(B_size) is he numbe o he boa d o di ec o s, boa d independence (B_Ind) is he
independen di ec o s di ided by he o al numbe o he boa d o di ec o s and ROA is he
income be o e ex ao dina y i ems adjus by lagged o al asse s. LOSS is a dummy a iable ha
ake he alue o “one” o i m wi h nega i e income be o e ex ao dina y i ems o and �
1 yea s, o he wise ze o. Re _S d show he sha e e u ns s anda d de ia ion du ing he , �1 and
�2 yea s. C o_S d show he s anda d de ia ion o cash low om ope a ing du ing he , �1
and �2 yea s. The s anda d de ia ion o p o i abili y change a es o e he , �1 and �
2 yea s is used o measu e en i onmen al unce ain y (VIX). This measu e has been used by
esea che s such as Diche and Tang (2009). Finally, eg ession analysis con ol o he
indus y and yea e ec . Appendix show he esea ch a iables de ini ion.
4. Resul s
4.1 Uni a ia e esul s
Table 1 ep esen s he sample desc ip i e s a is ics. I shows he desc ip i e s a is ics o
manage ial o e con idence, manage ial compe ence and o he a iables used in eg ession
analyses. I epo s ha di idend smoo hing (AD DIV) o sample is �0.039 ha is in line o
p io s udies (Shahab e al., 2020), and indica es he change o di idends in o de o con ol he
i m’s c edi posi ion among in es o s. The a e age alue o manage o e con idence
(O e con idence) in in es ing expendi u e p oxy is 0.537 which is highly compa able wi h he
s a is ics epo ed by Ahmed and Duellman (2012).
The a e age alue o manage ial accoun ing compe ence (Acc_Compe ence) is 0.242
which is highly compa able wi h he s a is ics epo ed by Ahmed and Duellman (2012). In
addi ion o his, Table 1 con ains he desc ip i e s a is ics o con ol a iables. The sample
owne ship s uc u e consis s o 71% ins i u ional sha eholde s, and he a iable o MGT is
66.6%. The en i onmen al unce ain y shows he low sales p ocess luc ua ion. The mean o
LEV (0.662), indica ing ha he esea ch sample is highly le e aged. The mean o 0.213 o
ROA show he e u n o 21.3 money uni o in es men in 100 money uni asse s. By analyzing
he a ia ion o he sample da a, i appea s ha he a iable dis ibu ion is no mal (Xu
e al., 2013).
Table 2 shows he co ela ion ma ix, which ep esen a posi i e ela ionship be ween
manage ial o e con idence (O e con idence) and manage ial accoun ing compe ence (Acc_
Compe ence). In addi ion, he alues o a iables’ co ela ion a e no high, showing ha
mul icollinea i y is no a main issue o esea ch. The able coe icien s also ha e
expec ed signs.
4.2 Mul i a ia e esul s
4.2.1 Baseline esul . Whi espec o in o ma i e o desc ip i e s a is ics and co ela ion
analysis, mo e conclusi e esul and e idence can be used h ough mul i a ia e eg ession
analysis ha con ols o special i m-speci ic a iables (Bhuiyan and Hooks, 2019). Table 3
ep esen s he esul s o ou main eg ession whe e equa ion (1) es ima ed o examine he
associa ion be ween manage o e con idence (O e con idence), manage ial accoun ing
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compe ence (Acc_Compe ence) and di idend smoo hing (AD_DIV) wi h espec o con ol
a iables consis o ixed e ec s o yea and indus y. In Model (1) we can see ha he ela ion
be ween O e con idence and AD_DIVis posi i e a e con olling o o he a iables. Also, he
esul shows he nega i e ela ion be ween Acc_Compe ence and AD_DIV. The posi i e
ela ionship be ween O e con idence and AD_DIV is s a is ically signi ican wi h s ong
coe icien . The nega i e ela ionship be ween Acc_Compe ence and AD_DIV is con i m
s a is ically, oo. So, he signi ican o O e con idence and Acc_Compe ence in Table 3
p o ide high suppo o esea ch hypo hesis. Abou he o he a iables, Size,ROA,Loss and b_
ind a e posi i ely associa ed while Ins ,Mg ,C o_S d, Re _S d,MTB,Le , and B_Size, a e
nega i ely linked wi h di idend smoo hing. The esul s o esea ch con ol a iables a e linked
o di idend smoo hing s udies (e.g. Flie s, 2019;Aie e al., 2005;Chen e al., 2022).
Finally, he esul s a e in line wi h execu i es’ accoun ing compe ence (Alb ech e al.,
2018;Kalelka and Khan, 2016;Ma sunaga e al., 2013) and manage o e con idence aspec s
(Zhou e al., 2020;Cohen and Za owin, 2010) which show he ac ha he accoun ing
backg ound o manage s and hei o e con iden cha ac e is ic, inc ease he endency o
di idend smoo hing. In pa icula , hey ocus on beha io al p oxies and expe imen al
backg ound o manage s as hese c i e ia a e some o he mos basic ac o s o he in es ing
and epo ing. Empi ically, esea ch indings de elop he li e a u e on he epo ing
consequences o manage ial o e con idence and manage accoun ing compe ence om I an
con ex .
4.2.2 Subsample es : HIQ s LIQ. In his s ep, we examine whe he in o ma ion quali y
change he impac o O e con idence, Acc_Compe ence on AD_DIV. So, we cu ou sample in
Table 1. Summa y desc ip i e s a is ics
Va iables NMean S d. De . Min Max
AD_DIV 1,320 �0.039 0.823 �0.934 0.991
Acc_Compe ence 1,320 0.242 0.428 0.000 1.000
O e con idence 1,320 0.537 0.210 0.000 1.000
Size 1,320 16.828 0.623 12.354 21.000
MTB 1,320 1.154 0.174 �0.870 1.927
Le 1,320 0.662 0.221 0.040 1.824
Ins 1,320 0.713 0.274 0.050 1.000
Mg 1,320 0.666 0.207 0.050 0.980
B_size 1,320 5.205 0.487 5.000 9.000
B_Ind 1,320 0.626 0.242 0.200 1.000
ROA 1,320 0.213 0.231 �0.347 1.455
Loss 1,320 0.036 0.187 0.000 1.000
Re _S d 1,320 0.385 0.246 0.012 0.979
C o_S d 1,320 0.015 0.017 0.152 0.165
VIX 1,320 0.185 0.169 0.017 0.998
No e(s): Table 1 show he desc ip i e s a is ics o esea ch sample o eg ession. whe e AD DIV is he di idend
smoo hing, while O e con idence and Acc_Compe ence a e p oxy o manage ial o e con idence and
manage ial accoun ing compe ence, espec i ely. The i m size (Size) is he na u al log o o al asse s’ book
alue, ma ke o book a io (MTB) is he ma ke alue o book alue o i m’s o al asse s, le e age (Le ) is o al
deb s di ided by o al asse s, ins i u ional owne ship (Ins ) is he sum o ins i u ional owne ship’ pe cen age,
manage ial owne ship (Mg ) is he pe cen age o he sha es owned by he manage s, boa d size (B_size) is he
sum o he boa d o di ec o s, boa d independence (B_Ind) is he independen di ec o s di ided by he o al
numbe o he boa d o di ec o s and ROA is he income be o e ex ao dina y i ems scaled by lagged o al asse s.
LOSS is an indica o a iable equal o one o i m-yea s wi h nega i e income be o e ex ao dina y i ems o
and �1 yea s, o he wise ze o. Re _S d is he s anda d de ia ion o s ock e u ns o e he h ee pas yea s. C o_
S d is he s anda d de ia ion o ope a ing cash low o e he h ee pas yea s. The s anda d de ia ion o
p o i abili y changes o e h ee yea s is used o measu e en i onmen al unce ain y (VIX)
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ha hey can con ol he ele an luc ua ions in he long un and achie e hei desi ed ea ning
(Lamb ech and Mye s, 2012). O e con iden manage s ha e he abili y o pe suade he boa d
o adop agg essi e app oaches. In o he wo ds, o e con idence o manage s leads o a
Table 7. Endogenei y es s
O e con idence
PSM IV
Acc_Compe ence �0.736*** �0.622***
[5.051] [�3.155]
O e con idence (Ins umen ed in IV) 0.644*** 0.280***
[3.822] [3.201]
Size 0.324*** 0.362
[2.924] [1.174]
MTB 0.719* �0.024
[1.774] [�0.028]
Le 0.024 0.357**
[0.096] [2.149]
Ins �0.571* �0.181
[�1.966] [�1.04]
Mg �0.519 �0.102
[�1.262] [�0.466]
B_size �0.925*** 0.062
[�7.580] [0.767]
B_Ind 0.081 0.502***
[0.263] [3.668]
ROA 0.980** 0.021
[2.219] [1.106]
Loss 0.531 0.218
[1.595] [1.453]
Re _S d �0.265 0.182
[�0.911] [1.150]
C o_S d �4.127 �6.636**
[�1.012] [�2.719]
VIX 1.318** �0.019
[2.327] [�1.251]
C 3.100** �1.520**
[2.593] [�2.225]
Yea ixed e ec Yes Yes
Indus y ixed e ec Yes Yes
Adj R
2
0.609 –
Wald endogenei y es – 27.56**
Wald weak IV es – 16.01***
Numbe o obse a ions 1,320 1,320
No e(s): Table 7 shows he PSM and IV es esul s in which he na u e o p ope ies and ma ke sha e se e
ins umen s o esea ch main O e con idence measu e. whe e O e con idence and Acc_Compe ence a e p oxy
o manage ial o e con idence and manage ial accoun ing compe ence, espec i ely. The i m size (Size) is he
na u al log o o al asse s’ book alue, ma ke o book a io (MTB) is he ma ke alue o book alue o i m’s
o al asse s, le e age (Le ) is o al deb s di ided by o al asse s, ins i u ional owne ship (Ins ) is he sum o
ins i u ional owne ship’ pe cen age, manage ial owne ship (Mg ) is he pe cen age o he sha es owned by he
manage s, boa d size (B_size) is he numbe o he boa d o di ec o s, boa d independence (B_Ind) is he
independen di ec o s di ided by he o al numbe o he boa d o di ec o s and ROA is he income be o e
ex ao dina y i ems scaled by lagged o al asse s. LOSS is an indica o a iable equal o one o i m-yea s wi h
nega i e income be o e ex ao dina y i ems o and �1 yea s, o he wise ze o. Re _S d is he s anda d de ia ion
o s ock e u ns o e he h ee pas yea s. C o_S d is he s anda d de ia ion o ope a ing cash low o e he h ee
pas yea s. The s anda d de ia ion o p o i abili y changes o e h ee yea s is used o measu e en i onmen al
unce ain y (VIX). ***, ** and * indica e s a is ical signi icance a he 0.01, 0.05, and 0.10 le els, espec i ely
Sou ce(s): Au ho ’s own wo k
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dec ease in cash e en ion in o de o do agg essi e p ojec s, which esul s in a dec ease in
inancial esou ces o dis ibu ion. In his ega d, manage s y o smoo h he di idend in o de
o con ol he nega i e e ec s o hei op imis ic decisions (Yang and Kim, 2020). So, manage
o e con idence can lead o enhances di idend smoo hing.
Nex , he esul show ha he manage accoun ing compe ence and di idend smoo hing
ela ion is signi ican ly posi i e. This esul is linked o ela ed li e a u e (e.g. Alb ech e al.,
2018;Aie e al., 2005;Deme jian e al., 2012) and show ha p e ious expe ience o manage s
(manage compe ence) in he ield o audi ing has led o he manage ’s ex ensi e knowledge o
accoun ing s anda ds and ope a ional complexi ies, and he possibili y o inancial s a emen s
mis ep esen a ion is educed, and he e o e, wi h espec o low possibili y o inancial
mis ep esen a ion, he condi ions o di idend smoo hing a e educed. Mo eo e , he esul s o
subsamples show ha esea ch indings a e no d i en by accoun ing quali y p oxy. Finally,
esea ch esul suppo hypo hesis and a e obus o he applican o o he measu es o a iable
and es s o endogenei y.
The esul s ha e pe sonal and public implica ions o egula o , s ockholde and ma ke
p ac i ione s. The indings cause o con olling and di ec ing he abili y o manage s o make
op imal decisions leads o an imp o e in he inancial epo ing quali y and a educ ion in he
di idend smoo hing. The cu en app oach o accoun ing compe ence is based on he
assump ion ha accoun ing compe ence has led o an e iciency o he managemen ’s
pe o mance and educe he sel -in e es ing mo i es o manage . E en ually, howe e his
esea ch p esen s some con ibu ions and indings, bu we can see ew limi a ions, which can
mo i a e o u u e esea ch. The e a e limi a ions, including he me hod o measu ing he
accoun ing compe ence o manage s. Conside ing ha he accoun ing compe ence o
manage s is one o he pe sonal and in e nal cha ac e is ics o manage s and canno be di ec ly
obse ed and measu ed, he p esen ed c i e ia ha e limi a ions.
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Appendix
Table A1. Va iable de ini ions
Va iables Symbols De ails
Dependen a iable
Di idend smoo hing AD_DIV Flie s (2019) show ha manage s end o di idend uni o mi y.
The p e ious di idend le els and cu en ea nings assess he
cu en luc ua e in di idends. The op imal le el o i m’s
di idends (Di *) is gi en by
Di *
¼ E (1)
whe e E
is he cu en ea nings o he i m and is he s anda d
payou a io o he i m. Flie s (2019) show ha based on high
isk o di idend dec ease, luc ua e in di idends will be
impe cep ible. So, we es ima e he Flie s (2019) ollowing
pa ial adjus men model:
Di *
¼β0þβ1E þβ2Di −1þeð2Þ
whe e Di
is he di idends’ changes. The a ge payou a io o
i ms is de e mine by β1=β2
, and he di idend speed o
adjus men is de e mine by −β2
Independen a iable
Manage o e con idence O e con idence Is dummy a iable ha equal o one in case he capi al
expendi u es in a gi en yea is mo e han he middle le el o
indus y capi al expendi u es o ha yea , o he wise ze o
Accoun ing compe ence Acc_
Compe ence
Accoun ing compe ence is a i ual a iable ha akes he
alue o one i he p esiden ; any co po a e ice p esiden in
cha ge o he majo business di ision, uni , o unc ion; any
o he manage who pe o ms a decision-making asks; o any
o he indi idual who pe o ms same decision-making asks,
has p e ious audi expe ience as a pa ne o manage in an
audi i m, and ze o o he wise
Con ol a iables
Fi m Size Size Na u al loga i hm o he o al asse s’ book alue
Ma ke o book a io MTB The ma ke alue o book alue o i m’s o al asse s
Le e age Le To al deb s di ided by o al asse s
Re u n o asse s ROA Income be o e ex ao dina y i ems scaled by lagged o al
asse s
Ins i u ional owne ship Ins The sum o ins i u ional owne ship’ pe cen age
Manage ial owne ship Mg The pe cen age o he sha es owned by he manage s
Boa d size B_Size The numbe o he boa d o di ec o s
Boa d independence B_Ind The cumula i e pe cen age o he la ges sha eholde
owne ship o each sample i m a yea end
(con inued)
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187
Co esponding au ho
Mohsen Rashidi can be con ac ed a : [email p o ec ed]
Table A1. Con inued
Va iables Symbols De ails
LOSS LOSS Is an indica o a iable equal o one o i m-yea s wi h
nega i e income be o e ex ao dina y i ems o and �1 yea s,
o he wise ze o
S anda d de ia ion o
e u n
Re _S d The s anda d de ia ion o s ock e u ns o e he h ee pas
yea s
S anda d de ia ion o
cash low o ope a ion
C o_S d The s anda d de ia ion o ope a ing cash low o e he h ee
pas yea s
En i onmen al
unce ain y
VIX The s anda d de ia ion o p o i abili y changes o e h ee
yea s
Sou ce(s): Au ho ’s own wo k
Fo ins uc ions on how o o de ep in s o his a icle, please isi ou websi e:
www.eme aldg ouppublishing.com/licensing/ ep in s.h m
O con ac us o u he de ails: [email p o ec ed]
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