Dividend Restrictions and Accounting Choices.

Accounting changes affirms surrounding a tightening of the dividend constraint are examined for evidence of debt-contract-induced, income-increasing accounting changes. No meaningful difference in the number of material income-increasing accounting changes was detected between the sample of firms experiencing near-binding dividend constraints and a control group of firms. Weak evidence suggests that these results may be sensitive to the definition of near-binding and the persistence of the firm's downturn. [ABSTRACT FROM AUTHOR]