The relationship between corporate governance, earnings management and stock price informativenes

General conclusion...268 6.1 Summary of results...268 6.2 Limitation and future studies...270 6.2.1 Limitations...270 6.2.2 Future studies...271 Abstract ...288 Résumé ...288 List of tab

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Université Grenoble Alpes

THESE

Pour obtenir le grade de

DOCTEUR DE L’UNIVERSITE GRENOBLE ALPES

Spécialité : Sciences de Gestion

Arrêté ministériel: 25 mai 2016

Presentee par

Phuong-Thuy VUONG

These dirigée par Isabelle GIRERD-POTIN, Professeur des Universités à l’Universite Grenoble Alpes, et

Co dirigée par Nathalie GONTHIER-BESACIER, Professeur des Universités à l’Universite Grenoble Alpes

préparée au sein du Laboratoire Centre d’Etudes et de Recherches Appliquées à

la Gestion dans PEcole Doctorale Sciences de Gestion (ED 275)

The relationship between corporate governance,

earnings management and stock price informativeness

These soutenue publiquement le 8 mars 2021 devant lejury compose de :

Madame Geraldine BROYE

Professeur des Universités à l’Universite de Strasbourg (Rapporteur)

Monsieur Yves MARD

Professeur des Universités à l’Universite Clermont Auvergne (Rapporteur)

Monsieur Radu BURLACU

Professeur des Universités à l’Universite Grenoble Alpes (Examinateur)

Monsieur Jean-Franẹois GAJEWSKI

Professeur des Universités à l’Universite de Lyon (Examinateur) Professeur des Universités à l’Universite Grenoble Alpes, Directrice de these Professeur des Universités à l’Universite Grenoble Alpes, Co-Directrice de these

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There are no words able to explain my feeling when writing these acknowledgements Doing Ph.D was a hard choice because I had to trade off many valuables things Thus, I deeply understand that I wouldn’t have been able to finish this thesis without the support of a number of people, both from an academic and a mental perspective I would like to take here the opportunity to express my gratitude to all those supporters

Foremost, I would like to thank the Vietnam International Education Development (VIED) and Campus France who granted me a scholarship for this PhD time I also highly appreciated the supports of the different members of the VIED and Campus France who took care of me from my arrival in France until now Those supports made my life in France easier and brighter

This thesis wouldn’t have been done without the support of my supervisors, Prof Isabelle

Girerd-Potin and Prof Nathalie Gonthier Besacier and their invaluable guidance, patience and

academic support You have inspired me during my Ph.D years and made them smooth Thank you for listening to me when my feelings went down and for your help in solving my Ph.D troubles There are no words to show my appreciation

I would like to give special thank my home university : the University of Economics-the University of Danang, which has been in particularly very helpful in buying some data for this thesis

This thesis is dedicated to my two kids and my husband, who I have been apart from during most of my PhD time Your love and sharing have been the greatest motivation throughout

my Ph.D study I would also wish to express my deepest love and gratitude to my parents and parents-in-law, who have looked after my kids and taken care of them in my absence

Finally, I would like to thank all of the staff and my friends in the CERAG and Grenoble Alpes University, as well as the PhD community in Grenoble for making all of this possible

Table of contents

Acknowledgements 1

Chapter 1 Introduction 11

1.1 Overview of corporate governance and earnings management in Asia and Vietnam 11

1.1.1 Overview on corporate governance in Asia and Vietnam 11

1.1.2 Overview of earnings management in Asia and Vietnam 17

1.2 Research motivations and questions 19

1.3 Outline of the dissertation 21

1.3.1 Chapter 2: Ownership structure and earnings management 23

1.3.2 Chapter 3: Board gender diversity and earnings management 24

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1.3.3 Chapter 4: Linking corporate governance and earnings management: insider

trading as a mediator 24

1.3.4 Chapter 5: Linking corporate governance and stock price informativeness in Vietnam: earnings management as a mediator 26

Chapter 2 Ownership structure and earnings management An empirical study in a Vietnamese context 28

2.1 Introduction 29

2.2 Overview of the Vietnamese economy in transition 31

2.3 Literature review and hypothesis development 32

2.3.1 State ownership (SO) and earnings management 32

2.3.2 Foreign ownership (FO) andearnings management 34

2.4 Variable measurement and research design 35

2.4.1 Data and sample selection 35

2.4.2 Measuring earnings management-dependent variables 35

2.4.3 Measuring independent variables and control variables 40

2.4.4 Research model 44

2.5 Empirical results 44

2.5.1 Descriptive statistics 44

2.5.2 Empirical results and analysis of the impact of state ownership on both accrual based earning management and real activities manipulation 48

2.5.3 Empirical results and analysis of the impact of foreign ownership on both accrual based earning management and real activities manipulation 55

2.6 Conclusion 61

2.7 References 63

Chapter 3 Board gender diversity and earnings management An empirical study in the Vietnamese context 75

3.1 Introduction 76

3.2 Overview of internal governance structure and board gender diversity in Vietnamese listed firm 77

3.2.1 Corporate governancestructure in Vietnam 77

3.2.2 Corporate gender diversityin Vietnam 79

3.3 Linkage between gender diversity and earnings management: literature review and hypothesis development 79

3.3.1 Women on boards and earnings management 79

3.3.2 Women as corporate leaders and earnings management 83

3.4 Variables measurement and research design 84

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3.4.2 Measures for dependent variable: earningsmanagement 85

3.4.3 Measures for independent variable: gender diversity 90

3.4.4 Measures for control variables 90

3.5.2 Empirical results and analysis: impact of “women on boards” on earnings management 100

3.5.3 Empirical results and analysis of “women as corporate leaders” on earnings management 116

3.6 Conclusion 122

3.7 References 125

Chapter 4 Linking corporate governance and earnings management in Vietnam: insider trading as a mediator 160

4.1 Introduction 161

4.2 Background for the study 162

4.3 Linkage between earnings management, corporate governance and insider trading: literature review and hypothesis development 164

4.3.1 Linkage between insider trading and earnings management 164

4.3.2 Corporate governance and earnings management 165

4.3.3 The mediating role of insider trading between board gender diversity, ownership structure and earnings management 168

4.5.2 Regression results 186

4.6 Conclusion 191

4.7 Reference 194

Chapter 5 Linking corporate governance and stock price informativeness in Vietnam: the mediating effect of earnings management 208

5.1 Introduction 209

5.2 Linkage between stock price informativeness, corporate governance and earnings management: literature review and hypotheses development 211

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5.2.1 Linkage between earnings management andstock price informativeness 211

5.2.2 Corporate governance and stock price informativeness 213

5.2.3 The mediating role of earnings management betweencorporate governance andSPI 216

5.3.2 Measure of stock price informativeness 221

5.3.3 Measuring mediator variable and control variables 222

5.4.1 Descriptive Statistics 234

5.4.2 Regression results 234

5.5 Conclusion 243

5.6 References 247

Chapter 6 General conclusion 268

6.1 Summary of results 268

6.2 Limitation and future studies 270

6.2.1 Limitations 270

6.2.2 Future studies 271

Abstract 288

Résumé 288

List of tables Chapter 2 Table 1: Variables definition 43

Table 2: Descriptive statistics for State and Foreign Ownership 45

Table 3: Descriptive Statistics for the full sample 46

Table 4a: Correlation matrix- Accruals based earnings management 47

Table 4b: Correlation matrix-Real activities manipulation activities 47

Table 5a: State ownership and Accrual based earnings management 49

Table 5b: State ownership and Real Activities Manipulation 50

Table 6a: State ownership and Real activities manipulation-Robustness check 53

Table 6b: State ownership and Real activities manipulation-Robustnesscheck 54

Table 7a: Foreign ownership and Accruals based earnings management (main results and robustness tests) 56

Table 7b: Foreign ownership and Real activities manipulation 57

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Table 8a: Foreign ownership and Real activities manipulation-Robustness check (for

stock-exchange place effect) 59

Table 8b: Foreign ownership and Real activities manipulation-Robustness check 60

Chapter 3 Table 1: Variables definition 94

Table 4-la: Level and percentage of women on boards in sample firms 98

Table 4-lb: Descriptive statistics of women on boards and earnings management 99

Table 4.2.1a: Correlation matrix for women on boards (Shannon index) and accrual based earnings management 102

Table 4.2.1b: Correlation matrix for women on boards (Shannon index) and real activities manipulation 103

Table 4.2.1-1: Regression with Shannon index for women on boards and accrual based earnings management (and robustness tests) 105

Table 4.2.1-2: Regression with Shannon index for women on boards and real activities manipulations 106

Table 4.2.1-3: Shannon index for women on Boards and real activities manipulation Robustness check 109

Table 4.2.1-4: Shannon index for women on Boards and real activities manipulation-Robustness check(using lag dependent variables) 110

Table 4.2.2a: Correlation matrix for women on boards (FBOE level) and accrual based earnings management Ill Table 4.2.2b: Correlation matrix for women on boards (FBOE level) and real activities manipulation 112

Table 4.2.2-1: Number of women on board of executives and accruals based earnings management (and robustness tests) 114

Table 4.2.2-2: Number of women on board of executives and real activities manipulation 115 Table 4.3.1-a: Correlation matrix for Chairwomen and accrual based earnings management 117

Table 4.3.1-b: Correlation matrix for Chairwomen and real activities manipulation 118

Table 4.3.2-1: Chairwomen and accrual based earning management (and robustness tests) 120

Table 4.3.2-2: Chairwomen and real activities manipulation 121

Table 2: Summary of the empirical results 122

Table 1-1: Percentage of women on boards and accruals based earnings management 132

Table 1-2: Percentage women on boards and real activities manipulation 133

Table 1-3: Number of women on boards and accruals based earnings management 134

Table 1-4: Number of women on boards and real activities manipulation 135

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Table 1-5: Presence of women on boards and accruals based earnings management 136 Table 1-6: Presence of women on boards and real activities manipulation 137 Table 2-1: Percentage women on boards of directors and accruals based earnings management 138

Table 2-2: Percentage women on boards of directors and real activities manipulation 139 Table 2-3: Number of women on boards of directors and real activities manipulation 140 Table 2-4: Presence and number of women on boards of directors and accruals based earnings management 141 Table 2-5: Presence of women on boards of directors and real activities manipulation 142 Table 2-6: Number of women on boards of directors and real activities manipulation 143 Table 3-1: Percentage women on boards of executives and accruals based earnings management .144 Table 3-2: Percentage women on boards of executives sand real activities manipulation 145 Table 3-3: The presence of women on boards of executives and accruals based earnings management 146 Table 3-4: Presence of women on boards of executives and real activities manipulation 147 Table 4.1-The number women on supervisory boards and accrual based earnings management .148

Table 4.2-The number women on supervisory boards and real activities manipulation 149 Table 4.3-The presence women on supervisory boards and accrual based earnings management .150 Table 4.4-The presence women on supervisory boards and real activities manipulation 151 Table 4.5-The percentage women on supervisory boards and accrual based earnings management .152 Table 4-6-The percentage women on supervisory boards and real activities manipulation 153 Table 1-1: Female CEOs and accrual based earnings management 154 Table 1-2: Female CEOs and real activities manipulation 155 Table 1-1: Difference number of women on boards and accrual based earnings management 156 Table 1-2: One woman on boards and real activities manipulation 157 Table 1-3: Two women on boards and real activities manipulation 158 Table 1-4: Three women on boards and real activities manipulation 159

Chapter 4

Table 1: Synthesis of the hypotheses 170 Table 2: Variables definition 180 Table 3a: Descriptive statistics for full sample 182

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Table 3b-Correlation matrix among variables 183 Table 3c-Correlation matrix among variables 184 Table 4: Direct effects, indirect effects and total effect of women on boards (dFOB) and abnormal discretionary expenses (REMDIS) through insider trading 188 Table 5: Direct effects, indirect effects and total effects of State ownership and abnormal discretionary expenses (REMDIS) through insider trading 189 Table 6- Direct effects, indirect effects and total effects of Foreign ownership and abnormal discretionary expenses (REMDIS) through insider trading 191 Table 7: Direct effects, indirect effects and total effects of woman on board (dFOB) and accrual based earnings management using Modified Jone model through insider trading 201

Table 8: Direct effects, indirect effects and total effects of woman on board (dFOB) and accrual based earnings management using Kothari model through insider trading 201 Table 9: Direct effects, indirect effects and total effects of woman on board (dFOB) and abnormal cash flow through insider trading 202 Table 10: Direct effects, indirect effects and total effects of woman on board (dFOB) and abnormal over production through insider trading 202 Table 11: Direct effects, indirect effects and total effects of state ownership (Sown) and

accrual based earnings management using modified Jones model through insider trading 203 Table 12: Direct effects, indirect effects and total effects of state ownership (Sown) and accrual based earnings management using Kothari model through insider trading 203 Table 13: Direct effects, indirect effects and total effects of state ownership (Sown) and abnormal overproduction cost through insider trading 204 Table 14: Direct effects, indirect effects and total effects of state ownership (Sown) and abnormal cash flow through insider trading 204 Table 15: Direct effects, indirect effects and total effects of Foreign ownership (Fown) and accrual based earnings management using modified Jones model through insider trading 205 Table 16: Direct effects, indirect effects and total effects of Foreign ownership (Fown) and accrual based earnings management using Kothari model through insider trading 205 Table 17: Direct effects, indirect effects and total effects of foreign ownership (Fown) and abnormal cash flow through insider trading 206 Table 18: Direct effects, indirect effects and total effects of Foreign ownership (Fown) and abnormal over production through insider trading 206

Chapter 5

Table 1: Synthesis of the hypotheses 220 Table 2: Variables definition 227

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Table 3a: Descriptive Statistics for the full sample 231 Table 3b: Correlation matrix among variables 232 Table 3c: Correlation matrix among variables 233 Table 3.2.1- The relationship between women on board, state and foreign ownership and SPI 235

Table 4: Direct effects, indirect effects and total effect of Women on boards (dFOB) and stock

price informativeness through accrual based earnings management (Kothari model) 236

price informativeness through abnormal discretionary expense (REMDIS) 237 Table 6: Direct effect, indirect effect and total effect of State ownership and stock price informativeness through accrual based earnings management 239 Table 7- Direct effects, indirect effects and total effects of state ownership and stock price informativeness through abnormal discretionary expense 241 Table 8- Direct effects, indirect effects and total effects of Foreign ownership and stock price informativeness through accrual based earnings management 242 Table 9- Direct effects, indirect effects and total effects of Foreign ownership and stock price informativeness through abnormal discretionary expenses (REMDIS) 243 Table 7: Direct effects, indirect effects and total effects of woman on board (dFOB) and accrual based earnings management using modified Jones model through insider trading 202 Table 10:

Direct effects, indirect effects and total effect of Women on boards (dFOB) and stock price

informativeness through accrual based earnings management (modified Jones model) 263

price informativeness through abnormal cash flow 263

price informativeness through abnormal overproduction cost 264

Table 13: Direct effects, indirect effects and total effect of State Ownership (Sown) and stock

price informativeness through accrual based earnings management (modified Jones

model) 264 Table 14: Direct effect, indirect effect and total effect of State ownership and stock price informativeness through abnormal cash flow 265 Table 15-Direct effects, indirect effects and total effects of state ownership and stock price informativeness through abnormal overproduction cost 265

Table 16: Direct effects, indirect effects and total effect of Foreign Ownership and stock price

informativeness through accrual based earnings management (modified Jones model) 266 Table 17- Direct effects, indirect effects and total effects of Foreign ownership and stock price informativeness through abnormal cash flow 266

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Table 18- Direct effects, indirect effects and total effects of Foreign ownership and stock price informativeness through abnormal overproduction cost 267

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