Using a sample covering practically all dividend-paying small and medium-sized private companies in Finland during 2006–2010, we document that earnings management in these companies is driven by two concurrent forces: the willingness to pay (tax-exempt) dividends and avoiding unnecessary...

This paper provides evidence that firms issuing new shares at higher discounts and hence with larger expected dividend increases, use their opportunities for earnings management in such a way that, by the year of a share issue, they report larger earnings in excess of current dividends than...