Influence of financial indicators on earnings management behavior: evidence from Vietnamese commercial banks
-
DOIhttp://dx.doi.org/10.21511/bbs.15(2).2020.15
-
Article InfoVolume 15 2020, Issue #2, pp. 167-176
- Cited by
- 822 Views
-
232 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The quality of financial disclosures is of great importance than ever, as Vietnam’s international economic integration has been accelerating recently. This issue is currently particularly worrying for the banking sector in Vietnam, as banks play a vital role in economic development. However, there is a growing concern that managers tend to manipulate financial information using earnings management techniques to meet analyst expectations and to enhance the firm value in the short term. Such behavior can lead to inappropriateness in the decision-making process of financial statement users, as well as impair firm value in the long term. Therefore, this study examines the impact of factors related to financial indicators on earnings management of Vietnamese commercial banks to give more insight into the issue. The data of this study was collected from a sample of 30 Vietnamese commercial banks during a 5-year period from 2015 to 2019. By using the Ordinary Least Square (OLS) regression method through Eviews 10.0, the findings revealed that financial leverage and loan loss provision have a positive and significant impact on earnings management. Also, bank size and profitability were negatively associated with earnings management. Based on these findings, in the context of Vietnam, the study proposed policy suggestions to improve the quality of accounting information and to assist users of financial statements in recognizing and restricting earnings management in commercial banks.
- Keywords
-
JEL Classification (Paper profile tab)G21, G40, M41
-
References21
-
Tables8
-
Figures0
-
- Table 1. Variable definition and measurement
- Table 2. Descriptive statistics for variables included in the model
- Table 3. Correlation matrix for variables included in the model
- Table 4. The overall model significance
- Table 5. Regression results of the model
- Table A1. List of Vietnamese commercial banks for the period of 2015–2019
- Table B1. Descriptive statistics for variables included in the model
- Table B2. Regression results and overall significance of the model
-
- Akerlof, G. A. (1970). The market for lemons: Quality uncertainty and the market mechanism. The Quarterly Journal of Economics, 84(3), 488-500.
- Alhadab, M., & Al-Own, B. E. (2017). Earnings Management and Banks Performance: Evidence from Europe. International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(4), 134-145.
- Brigham, E. F., & Ehrhardt, M. C. (2005). Financial Management: Theory and Practice (11 ed.). USA: Thomson South-Western.
- Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting Earnings Management. The Accounting Review, 70(2), 193-225.
- Foster, G. (1978). Financial Statement Analysis. New Jersey: Prentice-Hall Inc.
- Gitman, L. J. (2009). Principal of Managerial Finance. New Jersey: Pearson Prentice Hall.
- Godfrey, J., Mather, P., & Ramsay, A. (2003). Earnings and impression management in financial reports: the case of CEO changes. Abacus, 39(1), 95-123.
- Gombola, M. J., Ho, A. Y.-F., & Huang, C.-C. (2016). The effect of leverage and liquidity on earnings and capital management: Evidence from U.S. Commercial banks. International Review of Economics and Finance, 43, 35-58.
- Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365-383.
- Jesen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.
- Khan, M. I., Riaz, S., & Iqbal, A. (2019). Re-Classification of Financial Ratio. Proceedings from The 2018 International Conference on Business Sustainability and Innovation.
- Leuz, C., Nanda, D., & Wysocky, P. D. (2003). Earnings management and investor protection: an international comparison. Journal of Financial Economics, 69(3), 505-527.
- Levitt, A. J. (1998). The Numbers Game. The CPA Journal, 68(12), 14-15.
- Moghaddam, A., & Abbaspour, N. (2017). The Effect of Leverage and Liquidity Ratios on Earnings Management and Capital of Banks Listed on the Tehran Stock Exchange. International Review of Management and Marketing, 7(4), 99-107.
- Rahman, M., Moniruzzaman, M., & Sharif, J. (2013). Techniques, Motives and Controls of Earnings Management. International Journal of Information Technology and Business Management, 11(1), 22-34.
- Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 3(4), 91-102.
- Shen, L. (2016). Research on Industry Competition, Ownership Structure and Earnings Management: Empirical Analysis based on Listed Bank. International Journal of Smart Home, 10(3), 221-230.
- State Bank of Vietnam. (2019). Annual Report 2018.
- Staubus, G. (2000). The Decision Usefulness Theory of Accounting. A Limited History. New York: Routledge.
- Tran, Q. T., & Nguyen, D. P. (2018). Testing the relationship between ownership structure and profit management behavior at Vietnamese commercial banks. Journal of Accounting and Auditing, 178, 35-40.
- Watts. R. L., & Zimmerman, J. L. (1978). Towards a Positive Theory of the Determination of Accounting Standards. The Accounting Review, 53(1), 112-134.