Please use this identifier to cite or link to this item:
Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: Disclosure and dividend signalling when sustained earnings growth declines
Authors: Hussainey, Khaled
Aal-Eisa, Jinan
Contact Email:
Keywords: Disclosure
Financial reporting
United Kingdom
Issue Date: 2009
Publisher: Emerald
Citation: Hussainey K & Aal-Eisa J (2009) Disclosure and dividend signalling when sustained earnings growth declines, Managerial Auditing Journal, 24 (5), pp. 445-454.
Abstract: Purpose - The purpose of this paper is to examine whether voluntary disclosure and dividends signal future earnings for decline earnings growth firms. It seeks to inform regulators (and managers) about the potential benefits of increased disclosure and increased dividends to investors for firms that suffer an earnings decline after a sustained period of annual earnings growth. Design/methodology/approach - The event study methodology is used to examine the behaviour of 33 non-financial UK firms after a decline of their sustained earnings growth. It also uses the computerised content analysis to count the number of forward-looking sentences in the annual report narratives. It calculates changes in disclosure and dividends in the year of earnings growth declines and examine their association with the abnormal future earnings. Findings - Consistent with prior research, it is found that increasing dividends does not convey value relevant information about future earnings for decline earnings growth firms. However, based on disclosure signalling theory, it is found that increasing levels of forward-looking information in annual report narratives is an important mechanism for signalling future earnings for these firms. Practical implications - For an effective communication with the stock market in the years of earnings decline after sustained period of growth, managers should give high priority to developing an appropriate and complete set of forward-looking information in their annual reports. This will enable investors to better anticipate firms' future prospects. The results suggest that if forward-looking statements in annual report narratives contain value relevant information for investors, then regulators should consider a compulsory narrative section (i.e. operating and financial review) in the annual report. Originality/value - This paper is the first to study the value relevance of voluntary disclosure for decline earnings growth firms.
Type: Journal Article
DOI Link:
Rights: The publisher does not allow this work to be made publicly available in this Repository. Please use the Request a Copy feature at the foot of the Repository record to request a copy directly from the author. You can only request a copy if you wish to use this work for your own research or private study.
Affiliation: Accounting and Finance
Higher College of Technology, Oman

Files in This Item:
File Description SizeFormat 
Hussainey_2009_Disclosure_and_dividend_signalling.pdf71.04 kBAdobe PDFUnder Embargo until 31/12/2999     Request a copy

Note: If any of the files in this item are currently embargoed, you can request a copy directly from the author by clicking the padlock icon above. However, this facility is dependant on the depositor still being contactable at their original email address.

This item is protected by original copyright

Items in the Repository are protected by copyright, with all rights reserved, unless otherwise indicated.

If you believe that any material held in STORRE infringes copyright, please contact providing details and we will remove the Work from public display in STORRE and investigate your claim.