Corporate governance reform, board independence and earnings management: Evidence from Vietnam

Truc Tran*, Rezaul Kabir, Xiaohong Huang

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contributionAcademic

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Abstract

For an emerging economy with a relatively short history of private capital market, corporate governance is a critical area of improvement in Vietnam. Following international best practices, the Circular 121 of 2012 introduced stricter corporate governance regulations. Among them is the requirement that independent directors should make up at least one-third of a firm’s board of directors. In this study, we examine whether this mandatory requirement of board independence succeeds in reducing earnings management. Analyzing a large sample of 523 non-financial listed Vietnamese firms from 2009–2016, we do not find a significant relationship between earnings management and the proportion of independent directors on the board, nor any evidence that Circular 121 has an impact on this relationship. The results are consistent across different regression models and various robustness tests. Overall, the findings of the study suggest that corporate governance reform to increase board independence may not be an effective tool in mitigating earnings management.
Original languageEnglish
Title of host publicationICECH2020 - International Conference on Emerging Challenges
Subtitle of host publicationContemporary Issues in Innovation and Management
Publication statusPublished - 2 Nov 2020
Event8th International Conference on Emerging Challenges, ICECH 2020: Contemporary Issues in Innovation and Management - Ha Long, Viet Nam
Duration: 2 Nov 20203 Nov 2020
Conference number: 8

Conference

Conference8th International Conference on Emerging Challenges, ICECH 2020
Abbreviated titleICECH
CountryViet Nam
CityHa Long
Period2/11/203/11/20

Keywords

  • Earnings management
  • Corporate governance reform
  • Board independence
  • Vietnam

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