Does dividend smoothing also smooth-out bad news release? Evidence from stock price crash risk
Abstract
This paper investigates whether dividend smoothing will exacerbate firms’ bad news hoarding and increase their future stock price crash risk. By employing a large sample from 30 economies during the period 1987–2018, we find that dividend smoothing amplifies firms’ crash risk. This effect is robust after addressing potential endogeneity issues, using stricter fixed effects models, difference-in-differences estimation, and two-stage least squares regressions. We find that dividend smoothing amplifies future crash risk because it increases the level of information asymmetry between managers and investors. In addition, this effect is more pronounced in economies with weaker shareholder protection or lower institutional quality.
Fields of Study & Subjects
Corporate Finance and Governance
Financial Markets and Investment Strategies
Auditing
Earnings Management
Governance
Publication details
- Journal / source
- Review of Quantitative Finance and Accounting
- Publisher
- Springer Science and Business Media LLC
- Volume
- 67
- Issue
- 2
- Pages
- 771–815
- Publication date
- 24 January 2026
- Language
- EN