INISTRY OF EDUCATION
UNIVERSITY OF ECONOMICS HO CHI MINH CITY
NGO NHAT PHUONG DIEM
REPRESENTATIVE SYNTHESIS FACTORS FOR
CORPORATE GOVERNANCE WITH IMFACT ON
EARNINGS MANAGEMENT OF THE LISTED
MANUFACTURE COMPANIES IN VIETNAM
SUMMARY OF PHD THESIS
HO CHI MINH CITY
This thesis ia made at: University of Economics Ho Chi Minh City
Professional advisor: PhD LE DINH TRUC
PhD TRAN VAN THAO
This thesis will be presented to the Thesis Committee at:
This thesis can be found in library:
the day month day.
1. Reason for research
Thesis “Representative synthesis factors for corporate governance with impact on earnings
management of the listed manufacture companies in Vietnam” has been selected by the author
as a doctoral thesis for the following reasons:
Firstly, the behavior of earnings management causes loss of investment value.
Fraud scandals of accounting data have shocked the financial world about the extent of their impact
on society such as Enron, Worldcom, Xerox ... Enron - global energy group, ranked by Fortune as
"public America's most innovative company "- filed for bankruptcy in 2001, became the biggest
bankruptcy at the time with losses of about $ 70 billion for investors with stock prices from $ 90
plunging without braking. less than US $ 1 for a stock and more than 80,000 unemployed
employees made the world financial market wobble. Nearly the following year Worldcom went
bankrupt with nearly double losses of Enron, such as causing losses to its 180-billion-dollar
shareholders, US economic losses of about 10 billion US dollars and 20,000 job losses. Or as in
Vietnam, Truong Thanh Wood Industry JSC has the result of auditing in 2017, reducing 91% of
profit compared to the independent report. In particular, the scandals all shared the same reason that
the manager with its power used accounting policies, economic transactions to inflate profits,
conceal losses to serve fish interests. Such behaviors and behaviors are behavioral violations.
Therefore, it is necessary to research on earnings management, to consider the impact of the factors
affecting the management board and from that, propose appropriate measures of earnings
management restriction of listed companies.
Secondly, there are many researches on corporate governance, research on individual
characteristics of corporate governance (CG) to earnings management, but there are very few
studies mentioning the elements of corporate governance representation impacted on earnings
Stemming from the above problem, over the past 30 years in the world, there are many studies on
behavioral identification models of earnings management (Healy, 1985; Jones, 1991; Dechow,
Sloan and Sweeney, 1995, Kothari and colleagues, 2005; Roychowhury, 2006 ...) as well as, there
have been many studies examining the impact of individual characteristics of corporate governances
(scale, independence, qualification, ownership rate, number of meetings ... ) to behavior of earnings
management but the results of studies are very different (Chtourou et al., 2001; Klein, 2002; Xie et
al., 2003, Abbott et al., 2004; Ebramhim, 2007; Osma, 2008; Lin, 2011; Swasika, 2013; Susanto
and Pradipta, 2016 ...). Therefore, in order to provide a unified view of the impact of corporate
governance on the behavior of corporate governance, a number of authors who study the corporate
governance representation synthetic factors impact on earnings management such as Carcello et al
(2006) said that corporate governance practices are good. restricting behaviors of integrated
management with general corporate governance factors including 6 characteristics: (1) size of the
Board, (2) the independence of the Board, (3) the size of the Audit Committee, (4) the
independence of the Audit Committee, (5) the rights of shareholders and (6) organizational
ownership. Hay Kang and Kim (2012) also believe that good corporate governance limits the
behavior of corporate governance with the general corporate governance element including 5
characteristics: (1) Scale of Board, (2) Number of meetings of Board, (3) Independent member
ratio, (4) Ratio of independent members attending meetings and (5) Members with financial
In Vietnam, there are quite a number of studies on individual characteristics of corporate
governances to Behavior of earnings management, but the results in the studies are not the same as
independent members of the Board do not affect the earnings management (Ngo Hoang Diep and
Bui Van Duong, 2017) but (Nguyen Thi Phuong Hong, 2016) said that independent members limit
the behavior of financial statements, improve the quality of financial statements. At the same time,
according to the author's own research, when conducting regression of single individual
characteristics of the Board and the Audit Committee, all these characteristics have no correlation
with earnings management, or when multivariate regression all The characteristics of the Board and
the Audit Committee, most of the individual characteristics also have no correlation with the
management board through the accrued variable, except for the characteristics of the Audit
Committee's professional qualifications, which increase the behavior of corporate governance.
According to the critical theory (Critical mass theory), along with the research results of the author,
the author thinks that in Vietnam, the individual characteristics of the Board and the Audit
Committee may not reach the value large enough to be sufficient. impacting on earnings
management and maybe when aggregating individual characteristics into a synthetic factor, it will
reach a large enough value, so it will affect the QTSC. At the same time, inheriting the research
idea of Hoang (2014) on the synthesis factor representing the diversity of the BD impacting on the
quality of profit, the author thinks that it is necessary to have a research on corporate governance
with a result homogeneous expression of corporate governances impacting on the behaviors of
earnings management. Therefore, in the study, the author examines the factors of summing up the
Board (summing up 5 characteristics: scale, independent membership rate, professional
qualifications, concurrent positions, number of meetings), factor of Audit Committee (synthesizing
4 characteristics: The size, the proportion of independent members, the professional qualifications,
the number of meetings) represent the corporate governance to limit the behavior of corporate
Thirdly, there has been scientific research on earnings management of the manufacture
companies in Viet Nam.
According to information from the General Statistics Office in 2018, the total GDP (total national
product value) of the first quarter of 2018 increased by 7.38% over the same period last year, of
which the public sector manufacturing increased by 9.7%, contributing 3.39 points and being the
highest contributor and the highest increase in other regions. This shows that the role of the
manufacturing company in the development of the economy is very large and its diversity in the
manufacturing sector increases competitiveness, attracting investment. However, Nguyen Thi
Phuong Hong (2016) stated that this is also the industry with the lowest financial reporting quality.
Typical series of scandals in the announcement of profit information at listed manufacture
company: Hoang Anh Gia Lai Joint Stock Company (HAG) has a significant decline in profit after
auditing, reducing VND 661 billion; Vietnam Steel Corporation (TVN - Upcom) reduced 108
billion dong, Hung Vuong Joint Stock Company had an additional loss after auditing of 642 billion
dong, An Giang Seafood Import-Export Joint Stock Company from 4 billion profit to loss 187
billion after auditing, Fisheries Trading Investment Joint Stock Company (ICF) made a loss of
21.42 billion to make a loss of 29.04 billion after auditing or GTN Foods Joint Stock Company
increased profit after auditing. nearly 20 billion dong, PetroVietnam Transportation Joint Stock
Company increased nearly 37 billion dong after auditing ...However, up to now, there has not been
any research on earnings management of the listed manufacture companies, thus proposing the
suggesting to improve the quality of financial statements for this sector.
Therefore, for the above reasons, the author of the study "Representative synthesis factors for
corporate governance with impact on earnings management of the listed manufacture
companies in Vietnam" for the doctoral thesis.
2. Research objectives - research questions
Research objective 1: Discovering the general factors of corporate governance
representation impact on the behavior of corporate governance at listed manufacture
company in Vietnam.
Research objective 2: Measurement of the impact level of the general agent of corporate
governance behavior affects the behavior of quality management at listed manufacture
company in Vietnam.
Research question 1 (RQ1): What is the factor of corporate governance representation
affecting the behavior of corporate governance in listed manufacturing companies in
Research question 2 (RQ2): How does the impact of the corporate governance representative
factor affect the behavior of corporate governance in the production companies listed in
3. Research objects, research scope
Research subjects The research object of the thesis is a factor to synthesize corporate governance
representation, affecting earnings management of listed manufacturing companies in Vietnam.
Research scope: Manufacturing company listed on Hose and Hnx
Research period : From 2012 to 2016
4. Research methods: The dissertation implementing mixed research method includes:
Research on qualitative research through in-depth interviews with experts to explore the general
factors of BD and Audit Committee.
Quantitative research to test the reliability of the factor of synthesizing BD and Audit Committee
through multivariate regression model.
5. Contributions of the thesis
About theory: Contributing to the treasure of knowledge about the factors of synthesis of the
Board Director and the Audit Committee to represent corporate governance impacts on the earnings
About practice: (1) Provide a comprehensive picture of earnings management behavior, thereby
assisting the competent authorities in issuing sanctions and binding regulations for listed
companies, corporate governance regulations for listed company. (2) Contribute a basis for listed
manufacture companies to develop effective corporate governance frameworks to limit the earnings
management. (3) Contributing useful tools for auditing companies, auditors have a preliminary
assessment of the earnings management through the assessment of the synthesis factors of the
Board Director and Audit Committee for effective auditing planning.
6. Some terms used in the thesis
The dissertation uses two terms "synthesis of Board Director" and "synthesis of Audit
Committee " representing corporate governance to affect the behavior of corporate governance, this
term only applies to this research.
- Factor: According to the Vietnamese dictionary, the factors are the conditions that combine
to create results.
- Synthetic: According to the Vietnamese dictionary, the synthesis is composed of many
components that are related to each other into a whole BD.
- Synthesis factor of Board Director : is a whole BD including 5 individual characteristics
of the Board (independent members, experience, scale, number of meetings, concurrently holding
two titles) combine together to form.
- Synthesis factors of Audit Commitee : Similar to the above definition, synthesizing Audit
Committee is also a whole BD including 4 individual characteristics of the Audit Committee
(independent members, scale, experience, number of meetings) combine together to form.
7. Structure of the thesis
The thesis has structure including: introduction, chapter 1: Research overview, chapter 2: theoretical
basis, chapter 3: Research method, chapter 4: Research results and chapter 5: conclusions and
CHAPTER 1: LITERATURE REVIEW
1.1. Literature review on the World
1.1.1. The researches of earnings management
126.96.36.199. The research model of measuring
real earnings management through
Roychowdhury's model (2006)
Roychowdhury (2006) argues that when there is one of three abnormal signs such as abnormal cash
flow, abnormal production or abnormal cost, there exists a behavioral problem.
188.8.131.52.The research the model of Accruals-based Earnings Management
There are many studies on this measurement model, typically:
Healy model (1985): Healy (1986) assumes that NDA value is constant over time, not affected by
manager or means that NDA has zero expected value. Thus, the total accrual (Total Accruals -TA)
is also NDA and if TA-NDA is not different or is the project different, does the enterprise have the
behavior of the earnings management?
Model DeAngelo (1986): DeAngelo (1986) argued that if the company is in stable normal
operation over the years with no changes, the total NDA in year t must be equal to the total NDA in
year t-1. If there is a difference between the unregulated cumulative sum of the year t and the total
unregulated cumulative amount in the t-1 year, then there is a behavioral bias.
Jones model (1991): Jones (1991) argues that when revenue changes, business capital will change
and make changes accumulate, and depreciation of fixed assets reduces cumulative performance. So
with those changes (Revenue, capital, accumulation) make the profit decrease so Jones used two
independent variables that are changes in revenue and fixed assets to predict the DA variable. Thus
in the Jones model (1991) used assets and changes in revenue to control the change of NDA,
overcome the limitations of Healy (1985) and DeAngelo (1986) models with assumptions business
situation does not change over time.
Adjustment models of Jone (1991)
Models of Dechow, Sloan and Sweeney (1995): Dechow et al. (1995) overcame the weakness of
the original Jones model (1991) by using "non-cash revenue difference" to replace revenue
Models Kothari, Leone, Wasley (2005 ): Kothari et al. (2005) developed a new measurementcapable model of the DA associated with performance -matched discretionary accrual measure
based on two basic original models, Jones (1991) and Adjusted Jones model (1995).
Models of Jeter and Shivakumar (1999)
Jeter and Shivakumar (1999) used to change the cash flow of business activities every quarter and
every year to measure the project. The research results show that the CFO model is more effective
than the Jones model (1991).
Model Yoon (2006)
Although the improved Jones model (Dechow et al., 1995) has been very effectively used in
previous studies to identify the behavior of earnings management but recently Yoon and Miller
(2002) and Yoon et al. (2006 ) said that the model is no longer suitable for Asian companies
(Korean companies). Yoon et al. (2006) have shown that TA usually depends on changes in sales
revenue in cash, cash costs and depreciation, provisioning ...
1.1.2. Research on factors affecting on the earnings management
184.108.40.206.Corporate governance studies affect the earnings management
220.127.116.11.1. Studying the individual characteristics of corporate governance affecting the
Case studies in this direction are very common, such as those of Chtourou et al (2001), Klein
(2002), Xie et al (2003), Ebrahim (2007), Murhadi (2010), Swaskita (2013). ... However, the results
of the authors are not uniform when considering the effects of individual characteristics of the
Board and the Audit Committee on the behavior of business promotion. For example, the
characteristics of the independent members in the study of Xie et al. (2003), Ebrahim (2007)
reduced the behavior of earnings management, while this characteristic did not affect the earnings
management in studies (Murhadi, 2010; Gulzar and Wang, 2011; Swastika, 2013; Soliman and
Ragab, 2013). Thus, with heterogeneous results among authors, it is difficult to draw a conclusion
about how the corporate governance impacts on earnings management behaviors and also cause
difficulties when using foundation theories the explanation. Therefore, in order to limit the
inconsistencies in the study, some authors did not study in the direction of using individual
characteristics to consider the impact of corporate governance on the earnings management but
using an aggregate factor of The number of characteristics of corporate governances affects the
behavior of earnings management such as Carcello et al (2006), Kang and Kim (2012) ...
18.104.22.168.2. Researching corporate governance factors affecting the earnings management
Research Joseph V. Carcello, April Klein, Terry L. Neal (2006)
This study aims to examine the impact of the financial expertise of the AC, the corporate
governance effectively and the earnings management of 283 US-listed domestic non-financial
companies. The study using OLS least squares regression with the dependent variable is the
earnings management behavioral representation project measured by the adjusted Jones model
In research, strong corporate governance is a measure of aggregate of 6 (six) quality characteristics
with characteristics of equal weight. (1) Scale of the Board (receive a value of 1 if the scale is
smaller than the average of the data sample, on the contrary is 0), (2) Independent of the Board
(binary variable receives a value of 1 if over 60% of the city members are independent, vice versa is
0), (3) Audit Committee size (binary variable value is 1 if the percentage of members of the Audit
Committee / member of the Board is greater than the sample average value, otherwise 0), (4)
Independent Audit Committee (binary value is 1 if 100% of the members are independent,
otherwise 0), (5) Shareholder rights (binary variables receive a value of 1 if the corporate
governance card score is large more than the opposite sample value is 0), (6) owned organization
(binary variable receives the value of 1 if the organization ownership ratio is greater than the
reverse sample value of 0). With the result of showing strong corporate governance, the financial
expertise of the Audit Committee has an inverse correlation with the corporate governance.
Research of Kang and Kim (2012)
This study aims to assess the impact of corporate governance on operations through the actual
economic activities of listed companies of manufacturing industry in Korea. The study of corporate
governance measurement in this study is the corporate governance performance index represented
by the BD composite index, in which the BD includes all the components: Board size, number of
meetings, ratio of auditing, membership of financial expertise.
Research results of individual factors in multivariate regression equation make the scale of Board
and independent members have an inverse correlation with the behavior of corporate governance.
The remaining variables: the number of meetings of the Board, the activities of independent
members, professional qualifications of non-profit organizations did not affect the Behavior of
earnings management through technical activities.
The research results in the direction of the synthesis of corporate governance representation have a
negative correlation with the level of abnormality through technical activities. At the same time, the
research results also acknowledge that when there is an effective combination of the Audit
Committee in the Board, it will reduce the behavior of wrongdoing.
Research by Hassan and Ahmed (2012)
The author conducted this study to examine the impact of corporate governance on the behavior of
human resources at the listed manufacture companies with a sample of 60 observations in the period
of 2008-2010 in the Nigierian market. The research results recognize that two characteristics of
corporate governance representation have an impact on specific earnings management: The
proportion of independent and organizational members has a negative correlation with the
management and general variables of the Audit Committee (including 3 individual characteristics,
independent members, number of meetings) that do not have any correlation with the QE.
22.214.171.124. Studies on the impact of company characteristics on earnings management
126.96.36.199.1. Capital Structure
An et al. (2013), Akbari (2013), Waweru and Riro (2013), Bassiouny (2016) argue that debt ratio is
positively correlated with the behavior of corporate governance. Meanwhile, some other studies
acknowledge that the higher the debt ratio, the more restrictive the behavior of Liabilities such as
Jelinek (2007), Naz et al.
Lin (2011) shows that the state ownership ratio has an inverse correlation with the behavior of job
188.8.131.52.2. Company size:
Some studies have suggested that the company size has a negative correlation with the behavior of
corporate governance like Iskandar et al (2006), Akbari et al (2013), Soliman and Ragab (2013),
Swastika (2013). In contrast, Alves (2012), Ali et al. (2015) have demonstrated that the company
size increases the behavior of corporate governance. Whereas Waweru and Rio (2013), Bassiouny
(2016) believe that the company size has no correlation with the behavior of corporate governance.
184.108.40.206.Studies on earnings management and operational efficiency
Lee et al. (2005) found a positive correlation between profitability, market capitalization and
behavioral assessment and this result is similar to that of Moradi et al. (2012). But Cohen (2008)
admits that market capitalization has a negative correlation with earnings management.
Peasnell et al (2005); Bowen et al. (2008), Moradi et al. (2012) in the study have suggested that
cash flow of BOFs has a negative correlation with earnings management. In the meantime, Gulzar
and Wang (2011), Soliman and Ragab (2014) acknowledge that cash flow of business activity
increases the behavior of corporate governance.
Research by Olhson (1995), Jordan et al. (2010) showed that the manager has many reasons to
conduct a earnings management for the purpose of changing EPS, so the research results show that
EPS has a positive correlation with earnings management. .
To assess the impact of auditing firms earnings management, Zhou and Elder (2001), Chen et al.
(2005), Alzoubi (2016) conducted research and acknowledged the quality of auditing firms as
limited Institutional behavior management
1.2. Overview of studies in Vietnam
1.2.1. Study corporate governance characteristics affecting the behavior of earnings
Researching corporate governance general factors affecting the behavior of earnings
management : Hoang (2014) with a sample of 150 listed companies data on two HOSE and HNX
from 2005-2011, to assess the diversity of the Board to the quality of profits, corporate social
responsibility for information disclosure. General variables representing diverse functions of the BD
include 4 characteristics (concurrently holding two positions, non-executive members holding more
than 5% voting rights, State ownership, number of members) Foundation); Synthetic variable
representing diversity Board of structure consists of 4 characteristics (gender, age, expertise and
nationality of members). The research results acknowledge that the general factor representing the
diversity of functions of the Board has the effect of increasing the quality of profits, while the
Board' diversity on structure does not affect the quality of benefits. profit.
Studying the individual characteristics of corporate governances affecting the behavior of
corporate governance, quality of profit, financial efficiency : Nguyen Tri Tri (2013) re-codified
the factors affecting earnings management behavior as a foundation for future studies. Nguyen
Trong Nguyen (2015) said that the ratio of the Board of the BD increased the quality of financial
statements; Board members with financial expertise, many members of the Board meeting,
members of the Audit Committee with a level of financial expertise, and corporate governance have
existed an internal audit committee to increase the quality of financial statements and the research
also acknowledges that the Board of Management in the Audit Committee and concurrently
concurrently holding two positions of Chairman of the Board and CEO of the Board have no impact
on corporate governance. Research by Nguyen Manh Ha (2016) argued that the scale of BD and
State ownership had an impact on operational efficiency. Nguyen Thi Phuong Hong (2016) uses the
adjusted Jones model (1995) to identify the impact of individual corporate governance
characteristics on financial statement quality. The research results acknowledged the rate of
accreditation, members with professional finance and accounting, organizational ownership, the
non-dual position of the Board to increase the quality of financial statements. Essa et al (2016) used
data of 570 listed companies in Vietnam stock market with research results that said: The larger the
scale of the Board, the less the behavior of earnings management, the State ownership and foreign
ownership have a negative correlation with the behavior of corporate governance.
Following the above studies, Bui Van Duong and Ngo Hoang Diep (2017) with the results of the
size of the Board, financial expertise, the proportion of female members in the Board is positively
correlated with the behavior of corporate governance and characteristics. The remainder of
corporate governance is not correlated with the behavior of quality management (the ratio of
independent members, frequency of meetings of the Board, concurrently holding two titles).
Nguyen Ha Linh (2017) in the doctoral thesis concludes the scale of the Board, foreign ownership,
turning Big4 auditing firm to reduce the behavior of corporate governance; The independent
members in the BD, concurrently hold two positions that do not affect the Quality Management. Or
as Pham Thi Kieu Trang (2017) acknowledged the size of the Board, independent members of the
Board, the percentage of ownership by major shareholders (State, foreign and private) increases
financial efficiency and the remaining features corporate governance does not affect financial
performance like concurrently holding two titles, professional qualifications, and female members.
1.2.2. Other studies on earnings management
Research on optimal earnings management measurement model
Pham Thi Bich Van (2012) identifies the Jones model (1991) which is not suitable to measure the
behavior of job creation. Nguyen Ha Trang (2014) recognizes the adjusted Jones model (2005) as
the best DA measurement model in Jones (1991) models, adjusted Jones model (1995) and adjusted
Jones model (2005). . Meanwhile, Nguyen Anh Hien and Pham Thanh Trung (2015) prove that the
adjusted Jones model (2005) is most suitable for measuring projects for listed companies in
Vietnam. Finally, Vo and Duong (2017) acknowledge that the model Jones (1991) and the adjusted
Jones model (2005) are the most suitable DA measurement model.
Research on motivation to implement earnings management behavior
Bui Thi Mai Hoai and Nguyen Thi Tuyet Hoa (2015) stated that enterprises enjoying tax incentives
will adjust their profits to increase payable CIT in order to enjoy the highest incentives. In addition,
the study also acknowledges that enterprises have recognized the revenue received in advance,
revenue according to the progress in the fiscal year, the implementation of business management is
higher than that of enterprises not recognized; The more enterprises have recorded the provisions,
the greater the possibility that enterprises implement their business management and the end result
is that enterprises have recorded deferred CIT expenses, the probability of adjusting taxable income
reduces high CIT than other businesses. Dang Ngoc Hung (2015) said that listed companies has
adjusted to reduce taxable income in 2013 in order to save corporate income tax and adjust profit
growth regardless of enterprise size.
1.3.Research gap and problem to study
Firstly , the research before the corporate governance study impacts on the management of the
majority of studies in the aspects of individual characteristics of the Board and the Audit Committee
(independence, financial qualifications, scale, frequency, meeting rates, etc.) impact on earnings
management behavior and research results are not consistent among authors. While the research
towards the factor of corporate governance representation has impact on the quality of management
with the result of effective corporate governance synthesis factors to reduce the behavior of sexual
behavior. At the same time, according to the understanding of the author, there are currently no
studies mentioning the general factors of corporate governance representation as a factor of
summing up the Board and the general factors of the Audit Committee affecting the management of
corporate governance in Vietnam stock market except Hoang's study (2014) refers to a synthetic
factor representing the Board's diversity that affects the quality of profits.
Secondly , most of the researches in Vietnam use the sample of all non-financial listed companies
on the HOSE and HNX in Vietnam, and no authors mentioned the data sample as listed
manufacture company although this The industry contributes a large proportion to GDP, the highest
growth rate and the industry with financial reporting quality is proven to be the lowest in other
sectors (Nguyen Thi Phuong Hong, 2016). Therefore, the author's study examines the impact of the
factor of corporate governance representation to earnings management for the sample of
manufacturing industry which is suitable for the current situation.
Therefore, this study is really necessary in the current context because: (1) Firstly, this is the first
study in Vietnam on the collection of all the individual characteristics of the Board and the Audit
Committee into one of the elements of general representation of corporate governance to affect the
behavior of corporate governance. Therefore, this study provides fascinating knowledge in
corporate governance theory, which impacts on the quality management; (2) secondly, the study
focused on the data sample of all listed manufacture company; (3) Thirdly, in terms of auditing,
auditors can apply the general factors of BD and AC as a tool to assess whether there are critical
errors in financial statements?
With all the reasons mentioned above, the author conducts research on general factors of corporate
governance representation for the dissertation: " Representative synthesis factors for corporate
governance with impact on earnings management of the listed manufacture companies in
CHAPTER 2: THEORETICAL FRAMEWORK
1.1. Corporate governance and earnings management
1.1.1. Corporate governance
220.127.116.11. Definition of corporate governance
Currently there are many definitions of corporate governance and these definitions depend entirely
on the author, the institution as well as the legal provisions of a country. These are (1) corporate
governance for the purpose of maximizing profits for shareholders (Cadbury, 1992; Shleifer and
Vishny, 1997) governed by representation theory; (2) corporate governance in addition to
maximizing the wealth of shareholders, corporate governance also cares about social and
environmental issues (Solomon, 2007). In this study, the Ministry of Finance's definition is used
because of its availability and widespread use throughout the territory of Vietnam, specifically the
corporate governance is "a system of rules to ensure the company operating direction and being
effectively controlled for the benefit of shareholders and people related to the company ”.
18.104.22.168. Principles and content of corporate governance
corporate governance principles are presented in the Circular 121/2012/TT-BTC and are now
stipulated in Decree 71/2017 / ND-CP, with corporate governance targets in practice: (first) Ensure
the establishment of a reasonable governance structure; (2) Ensuring fair treatment of shareholders;
(3) Ensuring transparency in the operation of the company; (4) Ensure the rights of shareholders
and related people; (5) Assurance of operational efficiency of the Board and the Audit Committee.
And The corporate governance model in each country is developed differently in accordance with
the specific characteristics of the economy, each nation's specific characteristics.
In Vietnam, corporate governance contents include:(1) Issues related to shareholders and
shareholders' meeting;(2) Issues of BD members (candidates, nomination of members of the Board,
membership of the Board, members of the Board, remuneration, meetings ...); (3) Issues related to
the Audit Committee and Audit Committee members; (4) Issues related to preventing conflicts of
interest; (5) Issues related to corporate governance training; (6) Issues related to reporting and
According to the OECD corporate governance principles, corporate governance is only assessed as
effective when encouraging and encouraging the Board of Directors and the Board to work for the
objectives and benefits of shareholders and the company, as well as the corporate governance to
create the best conditions for the Board and the Audit Committee perform the task of monitoring
activities of the Board of Management and the corporate governance, and are also evaluated
effectively when encouraging the company to use the resources for the most optimal production and
22.214.171.124. Corporate governance model
Currently, there are two corporate governance models, one-level model and two-level model.
Vietnam organizes corporate governance according to a two-level model with a structure consisting
of: General Meeting of Shareholders, Chairman, Board, Audit Committee, Executive Board.
126.96.36.199. The relationship between corporate governance and earnings management
The Board plays the highest role in the management decentralization of the corporate governance
mechanism, responsible for all activities, strategies, financial efficiency, including data on financial
statements. Therefore, the Board effectively works to increase the quality of financial statements,
limit the behavior of financial statements (Carcello et al, 2006).
The AC is also a mechanism in corporate governance that is directly related to the quality of
financial statements, Menon and Williams (1994) proposed two very important roles of the Audit
Committee, which are to improve quality and preserve the integrity of the company and increase the
transparency of financial statements, limit the behavior of financial statements, maintain investor
confidence (The Blue Ribbon Committee, 1999, p. 19). Therefore, in this thesis, the author only
focuses on studying the role as well as the impact of the Board and the Audit Committee on the
management of accountability of managers.
1.1.2. earnings management
188.8.131.52. Definition of earnings management
Schipper (1989) argued that "earnings management behavior is considered to be a purposeful
action for the process of making and presenting financial statements in order to achieve personal
benefits." Or Healy and Wahlen (1999) have defined broader scope of earnings management
behaviors. "Behavior of earnings management practices appear when the managers uses its
judgments on the financial statements and in the structure of economic transaction events born in
order to change financial statements, make related subjects misunderstand about the operational
status of enterprises ” . However, the study uses the definition of Ronen and Yaari (2008, page 27)
because this is the most complete definition of earnings management " is a set of management
decisions that result in not reflecting benefits Net profit in the short term, is the nature of
maximizing business value that manager has known about them. The behavior of earnings
management can be beneficial (providing signals on long-term value), harm (hiding short-term or
long-term value) or neutral (hiding short-term or long-term value)".
184.108.40.206. Motivation to implement the behavior of earnings management
The motivation of earnings management of the manager is often formed when there are some
special conditions in the enterprise in view of subjective or self-interest. Gumanti (1996), Yue
(2004) argued that the economic context in enterprises was an incentive for manager to implement
the earnings management practices such as earnings management in the first time that enterprises
offered public shares, earnings management in the conditions that the government has issued a tax
incentive policy or subsidy policy, aid and assistance from the government. Likewise, in the study
of Phan Thi Thuy Duong (2015) mentioned three manager motivations to implement earnings
management: The purpose of attracting capital flows into the company from outside, the purpose of
remuneration, promotion opportunities for the manager and the motivation to enjoy the incentives
of the tax on taxes.
220.127.116.11. Classify earnings management behavior
18.104.22.168.1. Accrual earnings management
The term "QTLN trên cơ sở dồn tích" in English is Accrual earnings management (sometimes also
meaning Accrual management - abbreviated as AEM) as "The earnings management behavior
based on accumulation is the manager selects and flexibly uses regulations on accounting policies
to influence income ” .
Real earnings management
The term "Real earnings management" is Real Activities Manipulation or Real Earning
Management (REM). According to Ronen and Yaari (2008), "Behavior of earnings management
through events and economic transactions is how manager organizes and arranges economic
activities to influence income and profit information of enterprises ”
1.2. The theoretical foundation that governs the behavior of earnings management
1.2.1. Signal Theory
Spence (1973) has proposed the theory of signals with the assumption of the existence of
information asymmetry, the signal theory will provide an equilibrium in which the object has a
better advantage of information. provide some signals (such as appropriate information) to other
objects. According to research by Healy and Palepu (2001), it is very clear about the losses that the
financial market suffers when information is held by the manager and the capital investors are
different. And asymmetric information is the cause of the earnings management activities of the
Management Boards for their own goals. In order to reduce this situation, the listed company BOM
must provide useful information to investors and on the other hand must establish a monitoring
mechanism through shareholder representatives as BD and Audit Committee
1.2.2. Representative theory
Jensen & Meckling (1976) mentioned that in a joint stock company, it is the separation between the
owner and the manager and manager of the company that forms the representative relationship in
which the representative is the shareholders and the representative is the director. Representative
theory that, derived from the separation and the conflict of interests between the owner and the
Board is the person who has the right to issue executive decisions, in the supervisory mechanism of
shareholders to the Board of Management, the Board accountability must be provided through the
provision of financial and accounting information shown on the financial statements to shareholders
with the supervision of the BD and the Audit Committee (Jensen and Mecking, 1976). The Board
performs the task of overseeing all decisions and activities of manager, maximally protecting the
interests of shareholders (Ragothaman and Gollakota, 2009). Representation theory also suggests
that the supervisory effectiveness of the Board is higher when independent members become more
and more (Nicholson and Kiel, 2007), reducing conflicts of interest, reducing agency costs. Epstein
and Roy (2010) concede that the Board should meet regularly, dynamically as well as have many
skills and knowledge to maintain operations before increasing pressure of conflict.
Thus, the author uses the theory of representation to explain the role of the Board and the Audit
Committee in dealing with the costs of representation arising between the owner and the managers
in the proxy contract, as well as using the role of the Board, The Audit Committee reduces the
conflict between owners and manager about related benefits. At the same time, using this theory,
the author thinks that corporate governance is good when fully complying with the requirements of
the OECD's governance principles and the Board and the Audit Committee effectively reduce the
behavior of earnings management as well as improving the quality of financial statements.
1.2.3. Theory of related parties
The theory of related parties introduced by Freeman in 1984 opened up a different perspective on
related parties such as: employees, customers, suppliers, sponsors, regulatory organizations, even
corporate rivals. According to this theory, businesses operate based on the interests, needs and
views of many stakeholders. John and Senbet (1998) said that the more the Board with number of
members, the more diverse the structure of gender, the diversity of professional qualifications is
appropriate and facilitates the increase in the linkage between components to increase efficiency.
monitoring. At the same time, research by Baker and Wurgler (2002) also applied the relevant
theory to explain the monitoring role of external auditors to ensure the interests of all parties
1.2.4. Theory depends on resources
Pfeffer and Salancik (1978) introduced this theory and used to explain the structure of the Board
and the Audit Committee. This theory argues that the relationships between divisions and efficient
use of resources increase the function of an organization. Xie et al. (2003) suggested that a BD with
number of members is much; The structure of gender and professional diversity has the advantage
of taking advantage of all the advantages that the structure brings, such as taking advantage of
experience, social understanding and capital. An ideal BD should consist of members with a deep
understanding to be able to access a useful and necessary resource for the company (Hillman and
Dalziel, 2003). Resource dependence theory also said that a BD is diversified in structure, many
channels contribute to increase monitoring effectiveness and improve the company's operations.
Alzoubi & Selamat (2012) argued that effective BD and AC depends on the components:
independent members, number of members, professional qualifications, and in frequency of
meetings . In this study, the author used Resource dependence theory to explain the impact of the
BD and the AC on the behavior of business promotion. At the same time, the thesis expects the
Board and the Audit Committee with the ability to adjust resources (how many sizes, how many
independent members, how many members have professional qualifications, how many times in a
year, take part or not) respond well to your supervisory role.
1.2.5. Behavior theory
The theory of human nature Doughlas Gregor
This theory holds that governance decisions and management strategies are greatly influenced by
the viewpoint of human nature. He proposed two theories of X theory and Y theory. So follow Mc.
Gregor, which operates effectively, needs a mechanism to monitor behavior through labor
regulations, procedures and disciplines in parallel with policies of policies that encourage creativity,
enhance self-worth workers.
Theory of management behavior of Herbert A. Simon
Simon's management behavior theory mainly refers to making decisions that affect performance.
All management decisions are only considered valuable when they contain practical and feasible
elements and depending on the organizational structure, the authority should be delegated or
centralized to motivate work at grassroots levels.
According to representative theory, listed joint stock companies always have a conflict between the
interests of shareholders and manager, so with the theory of Mc. Gregor to limit manager behavior,
listed companies should establish an effective monitoring mechanism such as the BD, the Audit
Committee and. According to Simon's behavioral theory, the responsibilities of the Board, the Audit
Committee and the Internal Audit must be separate from each other and ensure a structure with all
the components of the corporate governance rules mentioned.
1.3. Theoretical basis of factors affecting earnings management behavior
1.3.1. Group of internal factors of the business
22.214.171.124. Salary of managers
Salary is the basic salary that executives receive, which is very little changed. According to Murphy
(1999), wages are closely related to firm size. Gao and Shrieves (2002) concede that wages have a
negative impact on the level of corporate governance.
Bonus: The bonus has an impact on the management of the Management Board in the management
of enterprises, specifically the study of Healy (1985) that the manager will use accruals to increase
and decrease profits in order to reach the maximum level of reward. Holthausen et al. (1995);
Pengjie Gao and Ronald E.Shrieves (2002), Gu and Hu (2015) also acknowledge that bonuses
increase the level of earnings management.
Stock options: The managers have the right to buy stocks that tend to accounting for financial
management to increase their own benefits according to Healy (1985). The study by Cheng and
Wafield (2005) also suggests that the manager has a stock-based bonus regime or owning stock
tends to increase the risk of EM.
126.96.36.199. Capital mobilization activities
There are two capital mobilization activities: through issuing shares and through credit operations.
There are two views related to debt ratio:
- The first view is that debt ratio increases the level of corporate governance. Dichev and Skinner
(2002) argue that debts are often accompanied by terms in the loan agreement that the company
must meet or that Richardson et al (2002) argue that the company implements earnings management
due to pressure and expectations. big from the market. Similar to the results of Klein (2002),
Davidson et al. (2005), it is found that the more leveraged enterprises use financial leverage, the
more the trend of increasing EM.
- The second view is that maintaining the debt ratio with appropriate ratio will help maximize the
value of the company, reduce agency costs and limit earnings management behavior (Jensen, 1986).
Lee et al. (2007), Jelinek (2007), Alsharairi and Salama (2012), Zamri et al (2013) also
acknowledge the debt ratio to reduce EM.
188.8.131.52. Type of business ownership
Research by Chen et al. (2010) suggests that the managers of most state-owned enterprises have
remuneration regimes defined by many political and social objectives such as improving
employment rates, Financial conditions of the region are under their jurisdiction, building
relationships with peers and superiors by other income, in addition to securing executive and
financial results (Fan et al., 2007). They will be less likely to implement the earnings management
or to reduce the behaviors to stabilize the profits over the years and avoid the failure to meet the
targets of the future years.
184.108.40.206 Company management characteristics
220.127.116.11.1. The Board of Directors
Carcello et al. (2006) stated that the effectiveness of corporate governance practices reduces the
behavior of corporate governance. Whether a unit's corporate governance is effective depends
entirely on the BD and the AC (Alzoubi & Selamat, 2012). Fama (1980); Fama and Jensen (1983)
argued that Board is an important feature of corporate governance architecture and they argue that
establishing an effective BD depends on its composition. Therefore, the monitoring function of the
BD and the Audit Committee is highly effective, depending on number of members, professional
qualifications, frequency of meetings (Abbott et al, 2004; Carcello et al, 2006; Chen & Zhou, 2007;
Ronen & Yaari, 2008). Some studies of Zahra & Pearce (1989); Alzoubi & Selamat (2012), said
that the effectiveness of the Board depends on the number of independent members, number of
members, professional qualifications and frequency of meetings in the year.
The number of members of the Board is significant in the effectiveness of manager
supervision as well as increasing the business performance of enterprises (Persons, 2006).
The larger the scale of the Board, the more diversity of experience, the diversity of expertise
increases the monitoring function (Dalton et al., 1998; Pearce and Zahra, 1992; and John
and Senbet, 1998) and restricts earnings management than small size (Xie et al., 2003;
Soliman and Ragab, 2013; Daghsni et al, 2016). Meanwhile, the views of Lipton and Lorsch
(1992) suggest that the company size should not be greater than 8 or 9 members; view of
Jensen (1993), the size of the Board should not exceed 8 members . In this study, with the
data model of listed companies combined with the characteristics of Vietnam, the author is
in line with the research's point of view that the size of the Board of Management should not
be too large, so it is less than the average of the data sample (cut-off point according to
Carcello et al., 2006).
Independent members of the BD are more appreciated than other members of the Board,
who are dedicated to supervising the management and management behavior of the Board,
so (Jonson et al., 1996; Peasnell et al., 2005; Shah et al., 2009) argue that these DLs have
the potential to detect earnings management behaviors, all of which lead to a reduction in
the level of earnings management in the presence of surname in the BD. Beasley (1996)
argues that the BD's e-Government is necessary to monitor activities, to maintain investor
interest, protect investors' interests and also prevent abuse of power. manager (Roe, 1991).
A number of studies acknowledge that independent memberss limit the behavior of earnings
management such as Beasley (1996), Carcello et al (2002), Xie et al (2003), Peasnell (2005),
Davidson et al. 2006), Osma (2008), Siregar and Utama (2008). Meanwhile Hsu and Wen
(2005), Mulgrew and Forker (2006), Murhadi (2009), Lin (2011), Gulzar and Wang (2011),
Abed et al (2012), Seng and Findlay (2013 ) no evidence of lumbar spondylitis was found to
affect earnings management. In this study, the author believes that the independent member
restricts the quality control.
The expertise of members of the Board makes the monitoring function of the Board more
effective when the Board members have CMTC (Carcello et al, 2002; Xie et al., 2003;
Agrawal and Chadha, 2005). Because one of the roles and responsibilities of the Board is to
control the process of preparing financial statements to publicize to the public. Therefore, to
be able to fulfill this role, the Board must have professional qualifications in finance,
accounting, as a basis for them to be able to understand the basis of the information
presented in the financial statements, therefore, they have performed well their supervisory
role in the quality of financial statements, limiting the behaviors of financial statements
(Abbadi et al., 2016). In this study, the author agrees with the research when determining the
monitoring effectiveness of the Board increases when there are members with financial
Frequency of Board meetings: One of the responsibilities of the Board is to participate in the
general meeting of shareholders, the Board meeting and receive the opinions of shareholders
about business operations of the company (Ronen and Yaari, 2008). According to Conger et
al. (1998); Ronen and Yaari (2008) believe that the Board meets regularly, the supervisory
effectiveness of the Board increases. Carcello et al. (2002), Ebrahim (2007), Krishnan and
Visvanathan (2009), when the Board meets more and more, it shows that the company has
more problems to solve, so the audit fee is higher, the quality requirement is also high,
therefore, the ability to implement the earnings management is lower. The author agrees
with the research when admitting that the more the Board meets, the more the conflict will
be reduced, the quality of financial statements, limiting the behavior of financial statements
and division is the average of the data sample (according to Carcello research et al, 2006;
The Director Duality of the Chairman of the Board: According to research by Shleifer and
Vishny (1997), the supervision, management and operation of the Board are very important
to avoid the situation of manager for the sake of causing damages to businesses. Dechow et
al. (1996) provided an important evidence when the Chairman of the Board concurrently
held the role of executive director, who tends to violate the accounting law, generate
conflicts of interest and cause business risks. The study of Chaganti et al. (1985) suggested
that, to achieve the highest monitoring efficiency, the function of the Board must be
independent, who is the Chairman of the Board and CEO must be two independent
individuals. At the same time, the studies acknowledge the concurrent assignment of two
titles that increase the behavior of earnings management (Klein, 2002; Gulzar and Wang,
2011; Nugroho and Eko, 2011; Lin, 2011; Soliman and Ragab, 2013; Daghsni et al, 2016).
Therefore, the author thinks that for the Board to be highly effective in supervising and
limiting conflicts of interests, the two titles of Chairman and CEO / CEO must be separated.
18.104.22.168.2. Board of Supervisors;
A key function of the Audit Committee is to effectively monitor the process of preparing financial
statements, quality assurance, financial statement. Therefore, with its roles and functions, the Audit
Committee effectively prevents the illegal behaviors. According to the study (Dezoort et al., 2002;
Walker, 2004; Siregar and Utama, 2008; Alzoubi and Selamat, 2012; Metawee, 2013), it is shown
that the Audit Committee with size, independence, and financial accounting expertise and the
frequency of meetings during the year is good for the monitoring role, increasing the monitoring
effectiveness of the Audit Committee.
The size of the Audit Committee: Vefeas (2005) said that the size of being too small or too
large of the Audit Committee is also not good, and the most perfect members are 3 or 4
(Jensen, 1993), which increases monitoring effectiveness. Yang and Krishnan (2005), Lin et
al (2006), Chen and Zhou (2007) argue that the size of the Audit Committee has the
opposite effect to the level of earnings management. However, there are some studies that
show that the size of the IC does not have an impact on the level of earnings management
such as Bédard et al (2004) Soliman and Ragab (2014). However, in this study, the author
views consensus when the Audit Committee has a number of members from 3 to 4, the
monitoring effectiveness of the Audit Committee increases, limiting the behaviors of
The independence of the Audit Committee: Abbott et al. (2004) argued that the independent
IC is less relevant to financial fraud and has a very low rate in relation to financial
statements adjustment (Agrawal & Chadha, 2005). Xie et al. (2003) agree with the
conclusions in the SEC report that the members of the IC are highly independent of
management activities, which will limit the behaviors of earnings management. At the same
time, other studies also acknowledge that the IC of the Audit Committee has increased the
role of supervision, reducing the level of abnormal accumulation, limiting the behaviors of
LBP (Klein, 2002; Ebrahim, 2007; Iqbal et al, 2015) . Klein (2002) in his study found that a
CC with 100% independent members who had no correlation with earnings management
and Klein (2002), Bronson et al. (2006) also found the independence of the IC impact on the
level of accountability when only need more than 50% of independent members. So in this
thesis, based on the research of Klein (2002), Bronson et al. (2006), the author agrees that
the Audit Committee increases supervisory roles, works more effectively when the
proportion of independent members is greater than 50%.
Experience of the Audit Committee: The Audit Committee members with financial expertise
will understand the financial and accounting decisions of manager, ensure the reliability of
financial statements, increase the quality of financial statements (Carcello et al, 2002;
Abbott et al., 2003; Bédard et al, 2004; Xie et al., 2003) supposed that earnings management
will be lesser when the members of Audit Committee had financial expertise, which is an
effective method of controlling personal interests of manager and increasing corporate
governance effectiveness. Defond et al. (2005), Krishnan and Visvannathan (2008), Soliman
and Ragab (2014) stated that the Audit Committee has a professional level of finance that
increases the effectiveness of controlling and preventing illegal behaviors. Abbott et al.
(2004), Bédard et al. (2004); Dhaliwal and colleagues (2010) believe that only one member
with financial experience in the Audit Committee will increase the quality of financial
statements. Therefore, in this study, the author agrees with the view that the Audit
Committee in listed companies only needs one member with technical expertise to increase
the role of monitoring and limiting the behavior of earnings management.
Frequency of meeting: Abbott et al. (2004) said that the Audit Committee had a large
frequency of meetings, the risk of re-reporting the financial statements is lesser, not related
to the penalties of frauds and the restriction of illegal legal actions (Xie et al, 2003).
Ebrahim (2007), Krishnan and Visvannathan (2008) in their research has demonstrated that
when the IC is active, regular meetings will improve the effectiveness of supervision,
increase the quality of financial statements to limit the behaviors of corporate governance. In
ng In this study, the author agrees that the meeting of the Audit Committee is more and
more limited, thus limiting the behaviors of earnings management.
1.3.2. Group of external factors
22.214.171.124. Regulatory environment
Chen et al. (2010) for policies and legal environments that affect the behavior of job creation. The
protected industries often tend to reduce their profitability (Jones, 1991) and enterprises that violate
the competition law that are being investigated also tend to conceal their profits by recording
multiple items deducted or recorded many provisions (Cahan, 1992).
126.96.36.199. Quality of auditing financial statements
Chen et al. (2005) demonstrated the impact of audit quality (represented by big4 or non - big4
variables) and the audit opinion has a negative impact on CG. Therefore, improving the quality of
auditing will contribute to reducing the quality of operations.
188.8.131.52. Fluctuation of market return rate, stock price
According to Burgstahler and Dichev (1997), the manager tends to hide losses because this affects
investors greatly, investor sentiment always likes to make the company profitable. Indicators of
profit or loss on financial statements tend to affect market price (Hayn, 1995). In addition, if the
business fails to meet the market's expectation, it may cause negative impacts on the price of the
main stock so the profit may be managed to achieve the desired direction that the financial analyst
has forecast (Kinney et al., 2002).
CHAPTER 3: RESEARCH METHODS
3.1/. research process
In order to answer the objectives as well as the proposed questions, the research conducted
qualitative research and quantitative research with the process is done through the following steps:
Step 1: The author codified relevant studies to find gaps and identify research problems.
Step 2: Determining new factors included in the formal research model, the dissertation conducts
qualitative research with expert insights. After the interview, the author analyzes and refines
comparison with background theory to identify the new factor representing corporate governance.
Step 3: With the proposed research model identified in step 2, the author conducts quantitative
research through collecting information and data for calculating variables in the research model
from financial statements, annual reports, and international reports. on vietstock.vn. The thesis
regression, perform testing to select the appropriate estimation model, perform disease testing of the
model and then accept or reject the hypothesis that the thesis has set. With the results of the
regression model, the thesis satisfies the objective 2 as well as to answer question 2 in the research.
Step 4: From the analysis of the results of step 3, the thesis has a basis to propose policy
implications for listed manufacture company and related agencies to promulgate regulations to
increase corporate governance effectiveness and increase transparency and honesty of Financial
3.2/. research design
3.2/1. Qualitative research methods
184.108.40.206. Process of qualitative research
The process of qualitative research is the steps to collect new points in the study, so the author of
Creswel (2013), Corbin & Strauss (2015) establishes the steps: (1) Determine the interview outline
and the intended interview sample, (2) Formal interview, (3) Analyze and screen the topics into new
220.127.116.11. Sample and interview characteristics
Experts selected for the interview process include 3 groups: specialized accounting and auditing
lecturers; Managers and chief accountants of unlisted and listed companies (In the research sample
for in-depth interviews, the author chooses the majority of chief accountants of unlisted companies
because the author wants to diversify views of companies on research issues).
18.104.22.168. Sample size
Creswel (2007) suggested that the sample size in qualitative research must range from 20-30, Guest
et al. (2006), only need samples from 6 to 12; (Corbin and Strauss, 2015) suggest that only about 5
or 6 interviews are needed if there is no new information collected during the interview, so the
sample size in this study is 6 to 12.
22.214.171.124. Data collection and data analysis
To get a new topic in qualitative research, the study takes steps: (first) Read carefully and
summarize each interview table and store according to each specialist , (2) Based on each
summary, similar contents of the same topic are grouped into a new research issue , (3) the topic
group has been gathered (step 2) will be compared against the current background theory to identify
new factors. .
3.2/2. Quantitative research
126.96.36.199. Quantitative research process
The quantitative research process is carried out through the following steps:
Step 1: Identify research samples and data collection sources
The sample is 223 listed manufacturing companies in the period of 2012 - 2016 with an estimated
total of 1,115 observations - years and official samples of 290 observations of 58 companies.
Collected data sources are taken on the cafef.vn www page; specialized finance page
Step 2: Data is collected through the secondary market (available data) so the data processing tool
is the regression equation so it is necessary to have the help of stata statistics software 12. The
analysis steps are taken:
First: identify the project according to the model Jones (1991) and the criteria for calculating
anomalies through economic activities according to Roychowdhury model (2006).
Secondly: Correlation analysis is used to consider the relationship between independent variables
and dependent variables, between variables.
Thirdly: After analyzing the correlation between the variables, the thesis builds the regression
equation to show the relationship between the dependent variable, the independent variable and
perform the tests to select the appropriate estimation model.
Fourthly: The thesis continues to test the autocorrelation diseases, the change of residual variance,
the phenomenon of multicollinearity.
188.8.131.52. Research models
The research model consists of the dependent variable of earnings management representative
according to Jones (1991) and measured according to Roychowdhury (2006), two independent
variables are synthesized factors of the Board, Audit Committee and 7 control variables to show the
company characteristics. , performance.
184.108.40.206. Research hypothesis
220.127.116.11.1. Research hypothesis on the factor of board synthesis
Carcello et al. (2006) argued that the BD effectively limited the earnings management's behaviors;
Fama and Jensen (1983) admit that the Board is an important feature of corporate governance
architecture and they argue that establishing an effective Board depends on its components such as
TVTV, professional qualification, frequency of meetings (Abbott and partner, 2004; Carcello et al,
2006; Chen & Zhou, 2007; Ronen & Yaari, 2008). At the same time, in the qualitative research
phase, the experts interviewed said that the Board had all the following characteristics: the number
of members, the independence of members, financial and accounting expertise, the number of
meetings and the non-duality of positions increases the effectiveness of monitoring and affecting
the behavior of accountability. Therefore, the author considers that the factor of Board increases the
quality of financial statements and restricts the behavior of earnings management. Therefore, the
author expects research hypothesis:
H1: Synthesis factor the Board has a negative correlation with the behavior of corporate
18.104.22.168.2. Research hypothesis on the factor of Audit Committee
Research by Dezoort et al (2002), Walker (2004), the monitoring effectiveness of the Audit
Committee depends on the characteristics: size, number of members, professional experience and
number of meetings per year. At the same time, in the qualitative research phase, the experts
participating in the in-depth interviews shared the Audit Committee, which had an impact on the
behaviors of human rights management with full characteristics: number of members,
qualifications, number of meetings and independence of the Audit Committee. Therefore, according
to the sharing point of experts in the qualitative research phase, the author thinks that the Audit
Committee may affect the earnings management's behavior and expect the research hypothesis as
H2: Synthesis factor The control committee has a negative correlation with the behavior of sexual
The author establishes two regression equations to test the reliability of two factors of synthesis of
the Board and the synthesis factor of the BOS that was discovered at the qualitative stage. :
Regression model first
SKIN it = α 0 + β 1 BD it + β 2 AC it + β 3 SIZE it + β 4 CFO it + OW 5 OWNER it + β 6 LEV it + β 7
EPS it + β 8 MKTVAL it + AUD 9 AUDIT + £ it
Regression model 2
REM it = α 0 + β 1 BD it + β 2 AC it + β 3 SIZE it + β 4 CFO it + OW 5 OWNER it + β 6 LEV it + β 7
EPS it + β 8 MKVAL it + AUD 9 AUDIT + £ it
- REM it : The dependent variable reflects the earnings management calculation based on
Roychowdhury model (2006).
- DA it : Dependent variable reflects earnings management calculated by Jones model (1991)
22.214.171.124. Describe and measure variables
126.96.36.199.1. Describe and measure dependent variables
Measure dependent variable according to Jones model (1991)
According to Jones model (1991) to identify the project, the author performs the following steps:
Step 1: Use the formula (1) to calculate the total cumulative value for each firm:
Total cumulative value (TA it ) = LNKT after tax it - Operating cash flow it (1)
Step 2: Then based on the formula (2) calculate the parameters α, β (parameters must be statistically
significant) of the model through regression equation:
Step 3: Calculate the accrued value without adjusting by the parameters just calculated in step 2 into
Step 4: Calculate the DTCDC amount
DA it = TA it - NDA it
Measurement of dependent variables according to Roychowdhury model (2006)
Dependent variable of earnings management representative through economic activities is measured
according to Roychowdhury model (2006) with: (1) the level of cash flow abnormality (REMCFO); (2) The level of production cost abnormality (REM –PROD), and (3) unusually useful cost
The order to calculate the level of anomaly represents the dependent variable in the regression
model 2 as follows ::
First: The author calculates three levels of normalization according to the formulas of numbers (5)
(6) and (7):
operating cash flow
Secondly: After collecting the above data, the author uses the least squares regression tool to
calculate the coeffearnings managementients of equations (5), (6), (7).
Thirdly: The estimated regression results have determined the coefficients calculated separately for
each equation. The author then substitutes the coefficients calculated into each corresponding
equation (8), (9), (10) to calculate the normal, specific level.
Sales it 1
Fourthly: The author continues to calculate the level of cash flow abnormality, the degree of
abnormal production and the level of useful cost anomaly by calculating the difference in book
value and the normal level obtained from equations ( 8), (9) and (10) by equation (11) (12) and
The abnormal level of cash flow
RM _ CFOit
The abnormal level of production costs
RM _ PROBit
The abnormal level of useful costs
RM _ DISEXPit
Finally, determining the level of abnormality includes:
REM = RM_CFO * (- 1) + RM_PROD + RM_DISEXP * (- 1)
188.8.131.52.2. Measurement of independent variables and control variables
The board variable (BD) is an aggregate variable representing the Board. The factor of summing
up the Board is the sum of 5 corporate governance characteristics (scale of Board, independent
members, technical expertise, number of meetings and non-concurrently) and the BD reaches the
value from 0 to 5, The variable of Audit Committee (AC) is also the general variable
representing the Audit Committee to operate effectively and the general factor of the Audit
Committee includes 4 above characteristics: scale, independence, expertise and meeting frequency
and get values from 0 to 4.
For board variables (BD)
BDit = BSIZEit + BINDit+ BEXPit + BMEETit + CEODUALit
BSIZE it : is a binary variable representing the size of the Board receiving a value of 1 if the size of
the Board is smaller than the average of the data sample, otherwise it receives a value of 0.
BIND it : is a binary variable that expresses the independence of the Board, receives a value of 1 if
the ratio of LDR from at least 1/3 number of members of the Board, otherwise, the value is 0.
It is a binary variable BEXP expressed qualified financial board members, the value is 1 if the
Board has members financial expertise exist, otherwise the value is 0
BMEET it : is a binary variable that represents the number of meetings in the year of the Board ,
The value is 1 if the number of meetings in the year of the Board is at least equal to the average
value of the reverse research sample, the value is 0
CEODUAL it : is a binary variable that represents the independence of the Chairman of the
Executive Council, receiving a value of 1 if the Chairman of the Board and the Director General of
the Board are two independent individuals, on the contrary, the value of 0.
AC it = ACSIZE it + ACIND it + ACEXP it + ACMEET it
ACSIZE it : is a binary variable representing the size of the Audit Committee, taking a value of 1 if
number of members Audit Committee is a minimum of 3 or 4 members, otherwise 0.
ACIND it : is a binary variable, representing the independence of the Audit Committee, taking a
value of 1 if the proportion of independent members is greater than 50% of the members of the
Audit Committee. The opposite is 0
ACEXP it : is a binary variable representing the level of financial expertise of the Audit Committee,
receiving a value of 1 if there is a member in the Audit Committee with a financial expertise;
ACMEET it : is a binary variable representing the frequency of meetings in the year of the Audit
Committee, receiving a value of 1 if the minimum number of meetings of the Audit Committee in
the year is the average of the research sample, otherwise 0
Company size (Size) uses the base 10 log criteria total TS value to determine company size.
The cash flow of the BOF (CFO) is measured according to the ratio of cash flow to business / total
State Ownership (OWNER): is a binary variable that receives a value of 1 if there is a minimum
state ownership rate of 20%, otherwise 0.
Debt ratio (LEV), measured by the ratio between total liabilities on total assets.
The average earnings per share (EPS) is a variable that continuously receives value according to
the EPS indicator on the business result report.
The market capitalization value (MKVAL), measured according to the ten basis log of market
Auditing company (AUDIT) is a binary variable that receives a value of 1 audited by Big 4 or vice
CHAPTER 4: RESEARCH RESULTS AND DISCUSSION
4.1. Results of qualitative research
Based on the summary content through the interview with the experts, the views of the experts on
the management and review are summarized by the author: There are 2 topics (new factors) that
experts believe have impact on the behavior of corporate governance in Vietnam stock market,
which is a factor of summing up the Board and the synthesis factor of the Audit Committee with
individual characteristics in the general factor : number of members, independence, expertise,
number of meetings and non-duality (for the Board).
4.2 Quantitative research results
4.2/1. Descriptive statistics
Descriptive statistical results show that there are behaviors of earnings management at listed
manufacture companies based on cumulative basis and through technical testing in all years of
research, but the level of corporate governance in REM is much higher than that of Project. The
majority of enterprises in the sample observed an increase in earnings management for REM, but
the trend of earnings management increased and decreased relatively equally for the project. The
average level of earnings management for adjustment increases and decreases is not different,
typical for the project, the average level of the whole management increased or decreased about 8%
compared to the total value of assets at the beginning of the year, while for REM, on average, the
quality of management both increases and decreases by about 19%. . And in 2014, the highest level
of management and financial management was achieved, according to REM of 19.2%, the quality
of management according to the project was 3.03% compared to the beginning of the year.
4.2/2. Correlation between variables
The variables in the regression equation 1 and the regression equation 2 have a correlation
coefficient of less than 0.8, so it is difficult to exist the multicollinearity phenomenon.
4.2/3. Multivariate regression analysis
For regression equation 1 : The study performed regression of Pooled OLS estimates, FEM and
REM and the most suitable model was Pooled OLS. At the same time, the model of OLS Pooled
estimation is violated, assuming the variance change but does not exist the phenomenon of selfcorrelation and multicollinearity. The result of Pooled OLS - Robust regression with adjusted R 2 is
72.62%, acknowledging the variables BD, SIZE, CFO, OWNER, EPS, MKVAL are correlated and
statistically significant with the behavior based on quality management based on .
For regression equation 2 : The study performed regression of Pooled OLS estimates, FEM and
REM and the most suitable model was FEM. At the same time, the model estimates that FEM does
not violate the assumptions of variance variance, autocorrelation, multicollinearity. Multivariate
regression results with R 2 is 18.23%, reflecting the variable BD, SIZE, CFO, AUDIT correlation
and statistical significance with earnings management behavior through economic activity.
CHAPTER 5: CONCLUSION AND IMPLICATIONS FOR POLICY
The basic thesis has solved two very important goals as well as answered two questions.
- Income: The dissertation through the qualitative research process along with the verification
process through multivariate regression has basically solved the research goal 1 as well as the
research question 1 that has identified the general synthesis factor corporate governance aspect
impacts on specific earnings management behavior, which is a factor of general BD.
- Monday: The dissertation through multivariate regression model with related statistical
techniques, the thesis answers the second goal as well as answers the second question is the factor
of synthesizing BD effectively increases quality information on financial statements, limiting the
quality of corporate governance behavior of the Management Boards in Vietnam.
5.2. Contribution of the thesis
5.2/1. In theory
This research has contributed to the treasure of scientific knowledge about the synthesis factor of
the Board influencing the behavior of earnings management, as a solid theoretical foundation for
other researches in the field of corporate governance research and corporate governance.
5.2/2. About practice
The dissertation provides a basis for CTSPs to see the role of corporate governance effectively,
thereby perfecting the corporate governance system.
The thesis has evidence to suggest policy implications and is a basis for the relevant agencies to
issue regulations related to the non-compliance of listed companies on information disclosure
regulations and regulations on establishment. corporate governance model to protect investors,
improve competitiveness through management point cards.
The thesis also contributed more useful tools for auditing companies and auditors in the preliminary
assessment of the earnings management behavior through assessing the factors of the Board,
thereby serving the planning of auditing. effective, limiting audit risks.
5.3. Policy implications
5.3/1. For listed manufacturing companies
(1) listed manufacture company needs to improve and have a deep understanding of the role of
corporate governance especially the role of the Board in the quality of financial statements.
Specifically, the listed company must complete the corporate governance model according to
OECD, according to corporate governance regulations of Decree 71/2017 / ND - CP; structure of
the Board to meet the requirements as mentioned in the study.
(2) listed manufacture company should provide more information related to the models of
measuring quality management, supporting investors and analysts with more information in
(3) listed manufacture company should consider the selection of large and reputable auditing units
to ensure the best quality of information provided, increasing the interest of investors and
restrictions on earnings management.
5.3/2. For related units
(1) Investors who choose investment should choose enterprises with sufficient signs of an effective
BD with all the characteristics mentioned by the dissertation. Investors can base on the information
provided on the annual report to calculate the factor of the Board and the factor of the Board with
greater value, the more effective the Board's monitoring activities and the lower the level of
(2) Investors can also consider company size, net cash flow from business activities, debt ratio,
State ownership, Big4 auditing to make investment decisions to protect capital. Its used effectively.
(3) Investors can apply the Jones (1991), Roychowdhury models (2006) to preliminary estimate of
the earnings management to support investment decision making.
(4) Investors must improve their qualifications and knowledge in order to have a more complete
assessment of financial statements, assess the factors mentioned in the thesis that may affect
behavior of earnings management.
Ministry of Finance; Need to complete the legal framework for the Vietnamese accounting
The Ministry of Finance should update and improve the system of Vietnamese accounting
standards, particularly more stringent regulations on the use of accounting estimates and accounting
methods to limit judgment and impose will subjective of those who work in accounting, making
Auditing companies, in the planning stage, conduct preliminary analysis of the effectiveness of the
Board as a basis for determining the overall importance as well as the item importance, thereby
designing the inspection procedures. necessary math.
Auditing companies in general and auditors must comply with professional ethical rules, always
improve professional qualifications and improve moral values to minimize risks to the lowest level.
, ensuring the reliability of the honesty and reasonableness of the audited financial statements.
Securities companies and stock exchanges: It is necessary to strictly handle violations of
information disclosure on the stock market
The author recommends that the State Securities Commission should issue regulations with strict
penalties for cases where the profit level is changed after the audit exceeds the permitted rate.
Units and agencies operating the market should strengthen the analysis and evaluation of the market
with more effective tools to help investors as well as those who need to use information with more
information. To make a decision, at the same time also give early warnings about the financial
situation of companies that are struggling to avoid abrupt listing cancellation.
The State Securities Commission needs to issue regulations on providing information as well as
enforcing strict sanctions to deter the provision of incomplete information and false information.
5.4. Limitations and future research directions
First: The research sample of the thesis includes only 290 observations of manufacturing companies
listed on the HOSE and HNX stock exchanges in the period of 2012 to 2016. Therefore, in the
study, the thesis cannot compare the differences in the quality management among different sectors
Secondly: The multivariate regression model of the thesis with the dependent variable DA is only
calculated according to Jones model (1991), while there are currently many models to identify DA
such as Dechow et al. et al (2005) .... Therefore, the dissertation has not yet conducted the testing to
compare the model of identifying the DA which is most suitable for Vietnam stock market.
Thirdly: The dissertation only studies 2 independent variables and 7 control variables, while there
are many factors affecting the Behavior of earnings management principles such as using
derivatives, options to buy / sell stocks, political factors, culture ... Therefore, this is also the
limitation of the thesis is not studied the factors of derivatives, options, political factors ...
5.4.2. Future research directions
(1) In the future, the scope of this study should be extended to all non-financial companies listed on
HOSE and HNX; (2) In the future, studies should use multiple models to identify earnings
managements to measure dependent behavior of behavioral representation as Dechow et al. The
study should explore more cultural, political, and geographical factors that represent Vietnam in
particular as an independent variable in the research model of earnings management.
LIST OF WORKS OF THE AUTHOR
Ngo Nhat Phuong Diem (2017). Study the factors affecting the behavior of accounting profit
control of enterprises - empirical evidence in Vietnam. Scientific research topic at the school
level in 2017, University of Finance – Marketting, editor.
Ngo Nhat Phuong Diem (2018). Corporate governance efficiency and profit adjustment:
Overview and expected research model. Journal of Economics - Technical University Technical
Economics Binh Duong, 21, 3-2018Journal of Economics - Engineering, Kinh University
Ngo Nhat Phuong Diem (2018). Experimental study of factors affecting the adjustment of
accounting profit of listed companies on Vietnam stock market. Journal of Accounting &
Le Dinh Truc and Ngo Nhat Phuong Diem (2018). The factor of corporate governance
representative impacted on the quality of corporate governance of listed manufacturing
companies in Vietnam. Proceedings of international scientific conference, 10/2018.