| Summary: | This research examined the association between dividend paying status and the
quality of earnings. Earnings quality is measured using three proxies, namely the
absolute value of discretionary accruals (DA), accruals quality (AQ), and value
relevance (VR). Sample consists of 129 firms from non-financial and nonregulated
industries that listed in Indonesia Stocks Exchange from 2004 to 2010.
The results found evidence that dividend paying status is associated negatively
with the three proxies of earnings quality. It means that the firm which pays the
cash dividends in specific period has lower value of discretionary accruals,
accrual quality, and value relevance. Therefore, dividend paying status is
positively associated with the earnings quality and can indicate the quality of
reported earnings.
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