The role of state ownership in regulating the impact of financial leverage on the application of the conservatism principle in accounting

Abstract

The aim of this paper is to explore the role of state ownership in regulating the impact of financial leverage on the application of the conservatism principle in accounting of non-financial listed enterprises in Vietnam from 2016 to 2020. The Poold-OLS, fixed-effects model, and random-effects model methods were employed in the study. The finding shows that state-ownership and financial leverage have a positive effect on the level of accounting conservatism. Which means, the higher share of state ownership, the stronger positive impact on the accounting conservatism of the non-financial listed enterprises in Vietnam. Moreover, financial leverage has a negative impact on the level of accounting conservatism with the state ownership as a moderating variable. This reveals that the state ownership can limit the positive impact of using the financial leverage on the accounting conservatism of the enterprises. On one hand, it is because the state owned enterprises have to perform socio-economic goals of the country; on the other hand, they are sponsored by the government on guaranteed loans, therefore it tends to reduce the positive effect of the financial leverage on the accounting conservatism of the non-financial listed enterprises. Accordingly, the research results recommend that the government should design policies to accelerate the equitization of state-owned enterprises for improving the quality of accounting information.