Economics & Sociology

ISSN: 2071-789X eISSN: 2306-3459 DOI: 10.14254/2071-789X
Index PUBMS: f5512f57-a601-11e7-8f0e-080027f4daa0
Article information
Title: The effect of financial leverage on real and accrual-based earnings management in Vietnamese firms
Issue: Vol. 12, No 4, 2019
Published date: 12-2019 (print) / 12-2019 (online)
Journal: Economics & Sociology
ISSN: 2071-789X, eISSN: 2306-3459
Authors: Mai Thi Hoang Khanh
University of Economics and Law, Ho Chi Minh City, Vietnam, Vietnam National University, Ho Chi Minh City, VietnamCity, Vietnam

Thu Anh Phung
Nguyen Tat Thanh University, Ho Chi Minh City, Vietnam
Keywords: firm leverage, accrual-based earnings management, real earnings management, Vietnam
DOI: 10.14254/2071-789X.2019/12-4/18
Index PUBMS: da55eb98-3717-11ea-b360-fa163e0fa1a0
Language: English
Pages: 299-312 (14)
JEL classification: M40, M41
This research is funded by University of Economics and Law, Vietnam National University Ho Chi Minh City, Vietnam.

Our research examines the effect of leverage on the form and extent of earnings management in Vietnamese listed firms. We use panel data of 241 companies on Vietnam stock markets in the period from 2010 to 2016 (1687 firm-years) and conduct GMM regression. Four models are employed to estimate the level of discretional accruals and real earnings management. Our research finds a positive relationship between leverage and earnings management, which is consistent to “debt hypothesis”. Furthermore, a preference for real earnings management over accrual-based earnings management is observed among highly leverage firms. The findings notice the substitution between these two forms of earnings management and reinforce full attention to both accrual-based earnings management and real activities manipulations rather than to separated earnings management strategy.


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