Investigating the effect of the effect of quality of internal controls on Dividend Policy With Emphasis on the moderating role of Institutional Investors Horizon

Document Type : Original Article

Authors
Mohammad Khademian 1
esmail eghdami 2
Seyed Reza Seyed Nezhad Fahim 2
1 Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran.
2 Ph.D. of Accounting, Department of Accounting, Lahijan Branch, Islamic Azad University, Lahijan, Iran
10.30495/jik.2025.23543
Abstract
The decision on the amount of payment of dividend is an important decision that the company is facing with it because dividend is an effective factors on the value of the company.Dividend, reward to stockholder for their investment and risk bearing, depends on various factors.Foremost of these determinants are level of profits, Institutional investors and regulatory mechanism.Accordingly,the internal control system, as a regulatory mechanism may is bound to have a significant influence on the dividend policy. An effective internal control system can help limit managers' opportunistic behaviors and lead to greater compliance with financial reporting standards.This is especially a problem when the internal control system is weak financial reporting system cannot generate precise information. Institutional investors can be more effective monitors as and can adopt various formal and informal mechanisms to affect management. However, the heterogeneity of their investment horizons across institutional investors may influence the extent to which management is effectively monitored. Therefore, the purpose of this study is to Investigating the effect of the effect of quality of internal controls on Dividend Policy With Emphasis on the moderating role of Institutional Investors Horizon.Therefore, to achieve the research goal, 90 sample companies were collected in the period 2013 to 2021 and analyzed by descriptive-correlation analysis with multiple regression tests. The results showed that there is a positive and significant relationship between the quality of internal controls and dividend policy and long-term institutional investors have a moderating effect on the relationship between the quality of internal controls and dividend policy.
Keywords
quality of internal controls
Dividend Policy
Institutional Investors Horizon
  1. زکی زاده، محمدامین؛ رضایی، فرزین؛ نوروش، ایرج.(1398).تبیین الگوی شناسایی خطرحسابرسی مبتنی بر مدیریت خطر جامع و راهبری شرکتی.مجله مدیریت توسعه وتحول. 36،صص11-23.
  2. علیقلی، منصوره؛ جلیلیان، عادل.(1391). بررسی رابطه میان سرمایه گذاران نهادی بلندمدت/ موقت و مدیریت سود. دانش حسابداری و حسابرسی مدیریت، 4، صص27-42.
  3. فیل سرائی، مهدی؛ زارعی، علی رضا.(1398). بررسی درون­زائی و برون­زائی مالکیت و خطمشی تقسیم سود: شواهدی از بورس اوراق بهادار تهران( بررسی مقایسه ای تخمین زن های GMM ، PSM،OLS). پژوهش مدیریت دارایی و تامین مالی، 1، صص82-63.
  4. کامیابی، یحیی؛ پرهیزگار، بتول(1395). بررسی رابطه بین سرمایه گذاران نهادی و همزمانی قیمت سهام در شرکت­های پذیرفته شده در بورس اوراق بهادار تهران.دانش سرمایه گذاری، 17، صص165-186.
  5. مرادی، مهدی؛ پرنده، الهام؛ مرندی، زکیه.(1396). بررسی ارتباط افق سرمایه گذاری سهامداران نهادی و محتوای اطلاعاتی سودهای تقسیمی غیر منتظره. مهندسی مالی و مدیریت اوراق بهادار، 33، صص227-207.

 

References

  1. Adjaoud, F., & Ben-Amar, W.(2010). Corporate Governance and Dividend Policy: Shareholders’ Protection or Expropriation? Journal of Business Finance & Accounting, 37(5-6), 648–667.
  2. Ashbaugh, H., D. Collins, & W. Kinney, (2007) The Discovery and Reporting of Internal Control Deficiencies Prior to SOX-mandated Audits, Journal of Accounting and Economics, 44 , 166 192.
  3. Amihud, Y., Li, K., (2006). The declining information content of dividend announcements and the effects of institutional holdings. Journal of Financial and Quantitative Analysis 41(3), 637-660.
  4. Chalmers, K., Hay, D., & Khlif, H. (2019). Internal control in accounting research: A review. Journal of Accounting Literature, 42, 80-103.
  5. Chen, X., J. Harford, & K. Li., (2007). Monitoring: Which Institutions Matter? Journal of Finan cial Economics, 86 , 279-305.
  6. Cheng, M., Dhaliwal, D., & Zhang, Y. (2013). Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting? Journal of Accounting and Economics, 56(1), 1–18.
  7. Chenhall, R.H., (2008). Accounting for the horizontal organization. In: Chapman, C.S., Hopwood, A., Shields, M.D. (Eds.), Handbook of Management Accounting Research, 3, 1207-1234.
  8. (2011). Internal Control—Integrated Framework. Available online at: http://www.coso.org/icintegratedframework-summary.htm.
  9. Doyle, J. T., Ge, W., & McVay, S. (2007). Accruals quality and internal control over financial reporting. The Accounting Review, 82(5), 1141-1170.
  10. Etengu, R. O., & Amony, M. (2016). Internal Control System and Financial Performance in Non-Governmental Organisations in Uganda: A Case Study of International Union for Conservation of Nature. International Journal of Contemporary Applied Sciences, 3(2), 2308-1365.
  11. Elyasiani, E., Jia, J.,( 2010). Distribution of institutional ownership and corporate firm performance. Journal of Banking and Financ, 34, 606-620.
  12. Fooladi,M., & Farhadi,M.(2019). The Effect of Institutional Investors on Dividend Payout. Iranian Journal of Accounting, Auditing & Finance.3(4), 93-99.
  13. Feng,M. Chan,L. Mcnay, S.(2009). Internal Control and Management Guidance. Journal of Accounting and Economics 48(2),190-209.
  14. Fairchild, R. (2010). Dividend policy, signalling and free cash flow: an integrated approach. Managerial Finance, 36(5), 394–413.
  15. Gupta, S., and Abed, K. (2002). Determinants of the variability in corporate effective tax rate:Evidence from longitudinal data, Journal of Accounting and Public Policy, 16(1), 1-39.
  16. H.(2020). Internal Control Quality and Dividend Policy in French Setting: Does Managerial Ownership Concentration Matter? International Journal of Accounting and Financial Reporting . 10(2).
  17. Gao, W. & Wang W. (2017). The fifth geometric-arithmetic index of bridge graph and carbon nanocones. Journal of Difference Equations and Applications, 23(1-2SI), 100-109.
  18. J,. Labro,. E. (2015). “The importance of the internal information environment for tax avoidance”, Journal of Accountingand Economics, 60, 149–167.
  19. Hammersley,J., Myers, L. A. .,  Shakespeare,C.(2008). Market reactions to the disclosure of internal control weaknesses and to the characteristics of those weaknesses under Section 302 of the Sarbanes Oxley Act of 2002, Review of Accounting Studies ,13(1) , 141–165.
  20. Harakeh, M., Matar, G., & Sayour, N. (2019). Information Asymmetry and Dividend Policy  Around the Sarbanes‐Oxley Act. Journal of Economic Studies .
  21. Ji , A E. (2019). Internal Control Weakness and Managerial Myopia: Evidence from SOX Section 404 Disclosures. ACRN Journal of Finance and Risk Perspectives, 8, 71-83.
  22. Jain, R.,( 2007). Institutional and individual investor preference for dividends and share repurchases. Journal of Economics and Business, 59, 406-429.
  23. Khan, T., (2006). Company dividends and ownership structure: Evidence from UK panel data. Economic Journal, 116(510), C172-C189.
  24. Kahn, C., and A. Winton, (1998)."Ownership Structure, Speculation, and Shareholder Intervention," Journal of Finance, 53 , 99-129.
  25. Khlif, H., Samaha, K., & Mark, S. (2019). Internal control quality, voluntary disclosure, and cost of equity capital: The case of an unregulated market. International Journal of Auditing, 23(1), 144-160.
  26. Kin'yua, J. K. (2016). Effect of internal control systems on financial performance of companies quoted in the Nairobi securities exchange. Thèse de doctorat, Jomo Kenyatta University of Agriculture and Technology.
  27. Kilincarslan, E & Ozdemir, O. (2018). Institutional investment horizon and dividend policy: An empirical study of UK firms, Finance Research Letters, Elsevier, 24(C), 291-300.
  28. Maug, E.,(1998) "Large Shareholders as Monitors: Is There a Trade-off between Liquidity and Con trol?" Journal of Finance, 53 , 65-98.
  29. Renneboog, L., Trojanowski, G., (2005). Control structures and payout policy. European Corporate Governance Institute (ECGI). Finance Working Paper No 80/2005.
  30. Ruan,l.,& Li, C.(2017). The Application of Empirical Study in Accounting Education: An Example of Internal Control and Cash Dividend. EURASIA Journal of Mathematics Science and Technology Education , 13(10), 6565-6578.
  31. Shleifer, A. and Vishny, R.W. (1986), Large shareholders and corporate control, Journal of Political Economy, 94 (3), 461-488.
  32. Shleifer, A. and Vishny, R.W. (1997), A survey of corporate governance, The Journal of Finance, 52 (2), 737-783.
  33. Tang ,A P. Xu ,L.(2010). Institutional Ownership and Internal Control Material Weakness .Quarterly Journal of Finance and Accounting, 49(2), 93-117.
  34. Thi Xuan A.T. T..,& Quoc Tuan,L. (2019). The Relationship between Ownership Structure and Dividend Policy: An Application in Vietnam Stock Exchange. Academic Journal of Interdisciplinary Studies. 8 (2).
  35. Wali, S. & Masmoudi, S.M. (2020), Internal control and real earnings management in the French context, Journal of Financial Reporting and Accounting, Vol. 18 ( 2), 363-387.
  36. Ying, Y. (2016). Internal Control Information Disclosure Quality, Agency Cost and Earnings Management—Based on the Empirical Data from 2011 to 2013. Modern Economy, 07(01), 64–70.
  37. Yan, X., Zhang, Z., (2009). Institutional investors and equity returns: are short-term institutions better informed? Review of Financial Studies, 22(2),893-924.
  38. Yang, H. M. (2008). The life circle, the payment of stock dividend and value of enterprise, Management World, 4, 181–182.