CEO power and earnings management: Dual roles of foreign shareholders in Vietnamese listed companies

Hanh Thi My Le, Qian Long Kweh, Irene Wei Kiong Ting and Mohammad Nourani

International Journal of Finance & Economics, 2022, vol. 27, issue 1, 1240-1256

Abstract: Using a sample of Vietnamese listed companies from 2007–2016, this study examines the impact of CEO power on earnings management. This work also explores how the association between CEO power and earnings management differs between companies with high foreign ownership (FOR) and low FOR. Our fixed‐effects panel regression analyses reveal that CEO power significantly and positively affects earnings management, whereas FOR can control earnings management. However, when the sample is split into companies with high and low FOR, the significantly positive effect of CEO power is evident only in the group with high FOR, thereby suggesting that CEO power works positively on earnings management given high FOR. These results remain qualitatively the same when the composite CEO power is replaced with individual measures of CEO power. Overall, policymakers with an oversight function should be aware of the potential dual roles of foreign investors.

Date: 2022
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