The purpose of this study is to examine how the influence of the internal corporate governance mechanism, namely ownership structure, on firms’ earnings management (EM) practices and insider choices between accrual-based and real EM changed after regulatory reform in Vietnam. The author considers the role of three ownership types, managerial, state and foreign, and assess how the relation between ownership structure and EM was affected by the Code of Corporate Governance reform. The study relies on a comprehensive sample of 4,408 firm-year observations of 596 firms listed on either the HOSE or HNX between 2008 and 2016. The study finds a significant effect of the reform on the relation between ownership structure and EM. Thus, the reform mitigated agency problems of managers and foreign investors in Vietnamese listed firms. The study contributes to the literature as it provides a more complete picture of the effects of managerial, state and foreign ownership on EM where the protection of minority investors is generally weak and legal enforcement is low in a developing economy.
BaileyN. (2018). Exploring the relationship between institutional factors and FDI attractiveness: A meta-analytic review. International Business Review, 27(1), 139–148.
2.
BergstresserD., & PhilipponT. (2006). CEO incentives and earnings management. Journal of Financial Economics, 80(3), 511–529.
3.
BurkartM., GrombD., & PanunziF. (1997). Large shareholders, monitoring, and the value of the firm. The Quarterly Journal of Economics, 112(3), 693–728.
4.
ChiW., LisicL. L., & PevznerM. (2011). Is enhanced audit quality associated with greater real earnings management?Accounting Horizons, 25(2), 315–335.
5.
CohenD. A., DeyA., & LysT. Z. (2008). Real and accrual-based earnings management in the pre-and post-Sarbanes-Oxley periods. The Accounting Review, 83(3), 757–787.
6.
CohenD. A., & ZarowinP. (2010). Accrual-based and real earnings management activities around seasoned equity offerings. Journal of Accounting and Economics, 50(1), 2–19.
7.
CollinsN. (2009). Economic reform and employment relations in Vietnam. Routledge.
8.
CollinsN. (2011). Vietnam’s labour relations and global financial crisis. Research and Practice Human Resource Management, 19(2), 60–70.
9.
CollinsN., NgoA., StantonP., RenS., & RowleyC. (2021). Employee perceptions of pay equity and compensation factors: A study of Vietnamese state-owned enterprises. Asia Pacific Business Review, 29(3), 778–796. https://doi.org/10.1080/13602381.2021.1943941
10.
CollinsN., SitalaksmiS., & LansburyR. (2013). Transforming employment relations in Vietnam and Indonesia: Case studies of state-owned enterprises. Asia Pacific Journal of Human Resources, 51(2), 131–151.
11.
CorreiaM. M. (2014). Political connections and SEC enforcement. Journal of Accounting and Economics, 57(2–3), 241–262.
12.
CoxA., HannifZ., & RowleyC. (2013). Leadership styles and generational effects: Examples of US companies in Vietnam. The International Journal of Human Resource Management, 25(1), 1–22.
13.
DechowP. M., SloanR. G., & SweeneyA. P. (1995). Detecting earnings management. The Accounting Review, 70(2), 193–225.
14.
DingY., ZhangH., & ZhangJ. (2007). Private vs state ownership and earnings management: Evidence from Chinese listed companies. Corporate Governance: An International Review, 15(2), 223–238.
15.
DoX. Q., & WuZ. X. (2014). The impact of ownership structure and capital structure on financial performance of Vietnamese firms. International Business Research, 7(2), 64–71.
16.
FamaE. F., & JensenM. C. (1983). Separation of ownership and control. The Journal of Law and Economics, 26(2), 301–325.
17.
FerrisS.P., & ParkK. (2005). Foreign ownership and firm value: Evidence from Japan. In Corporate Governance (pp. 1–29). Emerald Group Publishing Limited.
18.
FirthM., FungP. M., & RuiO. M. (2007). Ownership, two-tier board structure, and the informativeness of earnings: Evidence from China. Journal of Accounting and Public Policy, 26(4), 463–496.
19.
García LaraJ. M., García OsmaB., & MoraA. (2005). The effect of earnings management on the asymmetric timeliness of earnings. Journal of Business Finance and Accounting, 32(3&4), 691–726.
20.
GibsonM. S. (2003). Is corporate governance ineffective in emerging markets? Journal of Financial and Quantitative Analysis, 38(1), 231–250.
21.
GillanS. L., & StarksL. T. (2003). Institutional investors, corporate ownership and corporate governance: Global perspectives. In Ownership and governance of enterprises: Recent innovative developments (pp. 36–68). Palgrave Macmillan.
22.
GonzálezJ. S., & García-MecaE. (2014). Does corporate governance influence earnings management in Latin American markets?Journal of Business Ethics, 121(3), 419–440.
23.
GrahamJ. R., HarveyC. R., & RajgopalS. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1), 3–73.
24.
GunnyK. A. (2010). The relation between earnings management using real activities manipulation and future performance: Evidence from meeting earnings benchmarks. Contemporary Accounting Research, 27(3), 855–888.
25.
Hochiminh Stock Exchange. (2016). Annual report 2016. Ho Chi Minh City, Vietnam.
26.
HossainM., MitraS., RezaeeZ., & SarathB. (2011). Corporate governance and earnings management in the pre- and post-Sarbanes-Oxley Act regimes: Evidence from implicated option backdating firms. Journal of Accounting, Auditing & Finance, 26(2), 279–315.
27.
HsiehT. S., BedardJ. C., & JohnstoneK. M. (2014). CEO overconfidence and earnings management. Journal of Business Finance and Accounting, 41(9&10), 1243–1268.
28.
HutchinsonM. R., PercyM., & ErkurtogluL. (2008). An investigation of the association between corporate governance, earnings management and the effect of governance reforms. Accounting Research Journal, 21(3), 239–262.
29.
International Finance Corporation and the Global Corporate Governance Forum. (2012). Vietnam Corporate Governance Scorecard 2012.
30.
International Monetary Fund. (2018). Vietnam 2018 Article IV Consultation – Press Release and Staff Report. IMF Country Report, 18/215.
31.
JensenM. C., & MecklingW. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
32.
JiangG., & WangH. (2008). Should earnings thresholds be used as delisting criteria in Stock market? Journal of Accounting and Public Policy, 27(5), 409–419.
33.
KothariS. P., LeoneA. J., & WasleyC. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163–197.
34.
LakhalF., NekhiliM., & ZoueriZ. (2015). Do CEO characteristics affect earnings management? Evidence from France. International Journal of Innovation and Applied Studies, 2(4), 804–819.
35.
La PortaR., Lopez-de-SilanesF., ShleiferA., & VishnyR. (2000). Investor protection and corporate governance. Journal of Financial Economics, 58(1), 3–27.
36.
LeC. T., RowleyC., QuangT., & WarnerM. (2007). To what extent can management practices be transferred between countries? The case of human resource management in Vietnam. Journal of World Business, 42(1), 113–127.
37.
LeT. P. V., & TannousK. (2016). Ownership structure and capital structure: A study of Vietnamese listed firms. Australian Economic Papers, 55(4), 319–344.
38.
LeuzC., NandaD., & WysockiP. (2003). Investor protection and earnings management: An international comparison. Journal of Financial Economics, 69(3), 505–527.
39.
MorckR., ShleiferA., & VishnyR. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315.
40.
MorckR., WolfenzonD., & YeungB. (2005). Corporate governance, economic entrenchment, and growth. Journal of Economic Literature, 43(3), 655–720.
41.
NgoM. N., CaoH.-H., NguyenL. N., & NguyenT. N. (2020). Determinants of foreign direct investment: Evidence from Vietnam. Journal of Asian Finance Economics and Business, 7(6), 173–183.
42.
NgoT. N. A. (2017). Examining relationships between compensation components and employee perceptions of pay equity in a transitional economy: the case of Vietnamese state-owned enterprises[PhD thesis, RMIT University – Melbourne].
43.
NguyenD. V., & NguyenL. T. N. (2017). Impact of corporate disclosure on cost of equity capital in Vietnam. International Journal of Financial Research, 8(4), 64–70.
44.
NguyenT. T., & Van DijkM. A. (2012). Corruption, growth, and governance: Private vs. state-owned firms in Vietnam. Journal of Banking and Finance, 36(11), 2935–2948.
45.
ParkM. S., & ParkT. (2004). Insider sales and earnings management. Journal of Accounting and Public Policy, 23(5), 381–411.
46.
PetersenM. A. (2009). Estimating standard errors in finance panel data sets: Comparing approaches. The Review of Financial Studies, 22(1), 435–480.
47.
PhungD. N. (2015). Ownership structure, corporate diversification, and firm performance: A study of listed firms in Vietnam. University of Western Sydney, Australia.
48.
PhungD. N., & MishraA. V. (2016). Ownership structure and firm performance: Evidence from Vietnamese listed firms. Australian Economic Papers, 55(1), 63–98.
49.
RoychowdhuryS. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335–370.
50.
RyuY. R., & JiS. H. (2015). A study on the impact of foreign investors on earnings management: Using investment horizons of foreign investors [Annual Report]. International Accounting Research Society.
51.
ShenC. H., & ChihH. L. (2007). Earnings management and corporate governance in Asia’s emerging markets. Corporate Governance: An International Review, 15(5), 999–1021.
52.
ShleiferA., & VishnyR. W. (1986). Large shareholders and corporate control. Journal of Political Economy, 94(3), 461–488.
53.
The Standing Committee of National Assembly. (1994). The Labour Code of the Socialist Republic of Vietnam[No: 35/L-CTN].
54.
TranN. M., NonnemanW., & JorissenA. (2015). Privatization of Vietnamese firms and its effects on firm performance. Asian Economic and Financial Review, 5(2), 202–217.
55.
WangK., & XiaoX. (2011). Controlling shareholders’ tunneling and executive compensation: Evidence from China. Journal of Accounting and Public Policy, 30(1), 89–100.
56.
WangL., & YungK. (2011). Do state enterprises manage earnings more than privately owned firms? The case of China. Journal of Business Finance & Accounting, 38(7&8), 794–812.
57.
WarfieldT. D., WildJ. J., & WildK. L. (1995). Managerial ownership, accounting choices, and informativeness of earnings. Journal of Accounting and Economics, 20(1), 61–91.
58.
XuanV. N. (2020). Determinants of investment capital size: A case of small and medium sized enterprises in Vietnam. The Journal of Asian Finance, Economics and Business, 7(6), 19–27.
59.
YouS.-J., TsaiY.-C., & LinY.-M. (2003). Managerial ownership, audit quality, and earnings management. Asia Pacific Management Review, 8(3), 409–438.
60.
YoungM. N., PengM. W., AhlstromD., BrutonG. D., & JiangY. (2008). Corporate governance in emerging economies: A review of the principal-principal perspective. Journal of Management Studies, 45(1), 196–220.
61.
ZangA. Y. (2012). Evidence on the trade-off between real activities manipulation and accrual-based earnings management. The Accounting Review, 87(2), 675–703.
62.
ZhongK., GribbinD. W., & ZhengX. (2007). The effect of monitoring by outside blockholders on earnings management. Quarterly Journal of Business and Economics, 46(1), 37–60.
63.
ZhuY., CollinsN., WebberM., & BensonJ. (2008). New forms of ownership and human resource practices in Vietnam. Human Resource Management, 47(1), 157–175.
