Board Characteristics and Earnings Management: Evidence from the Vietnamese Market

Sangjun Cho and Chuneyoung Chung ()
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Sangjun Cho: School of Business Administration, College of Business and Economics, Chung-Ang University, 84 Heukseok-ro, Dongjak-gu, Seoul 06974, Korea
Chuneyoung Chung: School of Business Administration, College of Business and Economics, Chung-Ang University, 84 Heukseok-ro, Dongjak-gu, Seoul 06974, Korea

JRFM, 2022, vol. 15, issue 9, 1-16

Abstract: This study empirically analyzes the relationship between Vietnamese firms’ earnings management, board characteristics, and ownership structures. I use board size and the proportion of outside directors to reflect board characteristics, and the ownership percentages of the board of directors, outside directors, and the chief executive officer (CEO) to reflect the ownership structures. I use discretionary accruals, measured by the modified Jones model, to proxy for earnings management. From analyzing firms listed on the Ho Chi Minh and Hanoi Stock Exchanges from 2012 to 2017, I find that board size and the ownership percentages of outside directors and CEOs are negatively related to earnings management, whereas the board of directors’ ownership percentage is positively related. The proportion of outside directors is not significantly associated with earnings management. This study provides policy insights for improving Vietnamese firms’ financial transparency. Specifically, corporate laws regulating board composition should be enacted to ensure that all firms meet a minimum number of board members. Moreover, a policy mandating boards to include independent outside directors is necessary, as establishing an independent outside director system within Vietnam’s corporate law can strengthen the sustainability of the board of directors.

Keywords: earnings management; Vietnam; sustainable board characteristics; ownership structure; discretionary accruals (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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