Ownership Structure, Board Characteristics and Earnings Management in Vietnam

TranThiThanhThao TV pdf Master Thesis Master Program, Department of Global Business College of Business Chinese Culture University Ownership Structure, Board Characteristics and Earnings Management in[.]

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Master Thesis Master Program, Department of Global Business

College of Business Chinese Culture University

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Ownership Structure, Board Characteristics and

Earnings Management in Vietnam

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Advisor: Jia-Jiann Chuang, Ph.D

Graduate Student: Tran Thi Thanh Thao

June 2016

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Ownership Structure, Board Characteristics and Earnings Management in Vietnam

Student: Tran Thi Thanh Thao Advisor: Prof Jia-Jiann Chuang

Chinese Culture University

ABSTRACT

This study examines the effect of ownership structure and board characteristics on earnings management for Vietnamese listed firms during the period 2010-2014 Earnings management is measured by the absolute value of discretionary accruals that are estimated from the Modified Jones Model Four types of ownership are investigated including state ownership, managerial ownership, foreign ownership and blockholder ownership The board characteristics examined are board independence, board size, CEO duality, financial expertise and board meetings The multiple linear regression is used in this study to test the hypotheses After controlling for firm size, leverage and performance, we found that earnings management is negatively related to state ownership, managerial ownership and foreign ownership The findings of this study reveals that the positive relationship between the presence of CEO duality and the level

of earnings management Also, examination of the data shows that board meetings frequency is associated with a lower likelihood of earnings management

Keywords: earnings management, ownership structure, board characteristics

ACKNOWLEDGEMENT

Completion of thesis has been my ultimate goal in master degree During all my studying and researching, without support from others, the huge dream in my life couldn’t come true First of all, I would like to express my deepest gratitude to my advisor Professor Jia-Jian Chuang for his expertise, exceptional guidance and valuable suggestion I have been fortunate to have an advisor who gave me the freedom to explore on my own, and is always willing to support for every step of my research when

I am in need Also, I would like to thank Professor Jinn-Yang Uang for his comments for my three chapters

In addition, I would like to express my sincerely thanks to Chinese Culture Uinversity for offering me the scholarship to pursuit Master Degree in Taiwan I also would like to deliver my thanks to all professors at Department of Global Business, Department of Finance and Banking, Department of Accounting, Department of International Trade who kindly share knowledge during my studying Besides, I would like to say thank all staffs at Office of International Affairs for assistance during my stay in Taiwan

Moreover, I would like to thank my beloved friends, Annie, Katie, Lenna, Katy, Emily, Summer, Ivy, for being my companions and sharing fun memories in Taiwan Last but not least, I would like say thank to my family for spiritual supports and being always beside me in both good time and hard time

Tran Thi Thanh Thao

15 May 2016

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CONTENTS

ABSTRACT iii

ACKNOWLEDGEMENT iv

LIST OF TABLES vii

LIST OF FIGURES viii

CHAPTER ONE INTRODUCTION 1

1.1 Research Background and Motivations 1

1.2 Research Purposes 3

1.3 Research Framework and Procedures 3

1.4 Scope of the Study 4

1.5 The Structure of the Study 5

CHAPTER TWO LITERATURE REVIEW 6

2.1 Earnings Management 6

2.2 Ownership Structure and Earnings Management 8

2.2.1 State Ownership 8

2.2.2 Managerial Ownership 9

2.2.3 Foreign Ownership 10

2.2.4 Blockholder Ownership 11

2.3 Board Characteristics and Earnings Management 12

2.3.1 Board Independence 12

2.3.2 Board Size 14

2.3.3 CEO Duality 15

2.3.4 Financial Expertise 16

2.3.5 Board Meetings 17

CHAPTER THREE RESEARCH DESIGN AND METHODOLOGY 19

3.1 Data and Sample Selection 19

3.2 Definition of Research Variables 20

3.2.1 Dependent Variable 20

3.2.1.1 Development of Discretionary-Accruals Models 20

3.2.1.2 Measurement of Earnings Management 23

3.2.2 Explanatory Variables 24

3.2.2.1 Measurement of Ownership Structure 24

3.2.2.2 Measurement of Board Characteristics 25

3.2.3 Control Variables 26

3.3 Statistical Analysis Method 29

CHAPTER FOUR RESEARCH RESULT AND ANALYSIS 30

4.1 Descriptive Statistic 30

4.2 Correlation Analysis 31

4.3 Multiple Regression Analysis 33

4.4 Additional Test 37

CHAPTER FIVE CONCLUSION AND SUGGESTION 39

5.1 Research Conclusion 39

5.2 Research Limitations and Suggestions for Further Research 39

REFERENCE 41

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LIST OF TABLES

Table 3-1 Sample Selection 19

Table 3-2 Sample Distribution 20

Table 3-3 Definition of Variables 27

Table 4-1 Descriptive Statistic 30

Table 4-2 Corelation Matix 32

Table 4-3 Regression Result 34

Table 4-4 Regression Results Using Discretionary Accruals Estimated by

Alternative Models 37

LIST OF FIGURES

Figure 1-1 Research Framework and Procedures 4