Earnings Management, Board Composition and Earnings Persistence in Emerging Market

Nguyen Vinh Khuong,Abdul Aziz Abdul Rahman,Nguyen Thanh Liem,Huynh Thi Ngoc Ly,Cao Thi Mien Thuy,Le Huu Tuan Anh,Pham Quoc Thuan

doi:10.3390/su14031061

Abstract

Income data are useful for making economic decisions and anticipating future revenues. Earning quality, or the utility of earnings in making decisions, is determined by real economic performance. Firms with greater performance should, on average, have higher profits quality. Managers, investors, and scholars are interested in the influence of earnings management (EM) on earnings persistence (EP). This study evaluates the relationship between these variables in terms of accrual, real EM, board composition, and EP. We conducted quantitative research using GMM regression on a sample of 228 listed businesses in the Vietnamese stock market from 2014 to 2017. Our findings indicate that accrual earnings management (AEM) is associated with a negative connection with EP, but real earnings management (REM) is associated with a mixed association with EP. Additionally, the data indicate that board of directors (BODs) play a critical role in EP. Our research contributes to the existing body of knowledge by establishing a foundation for future research in this subject and by proposing some feasible options for functional government agencies and enterprise management interested in enhancing EP.

Highlights

Income information is helpful for economic decision making and forecasting future earnings [1,2]
The reason why this study considers the relationship between accrual earnings management (AEM), real earnings management (REM), board composition, and earnings persistence (EP) is that Vietnam’s stock markets are still in their infancy [40], and the quality of public information is relatively low [41]
Two representative variables of AEM both have negative signs, showing that businesses show the direction of manipulating income reduction

Summary

Introduction

Income information is helpful for economic decision making and forecasting future earnings [1,2]. The decision usefulness of earnings, results from actual economic performance [1]. Firms with higher performance should, in general, be associated with higher earnings quality [3]. (FASB) conceptual framework, earnings information should assist users in determining the amount, timing, and uncertainty of future cash flows (Statement of Financial Accounting Concepts No 1). High earnings quality is a significant contribution to long-term persistence and sustainability of a firm and the effectiveness of the financial market. In this paper, we decided to use EP to measure earning quality as one of the most off-cited approaches

Methods

Results

Conclusion