Provincial Governance Quality and Earnings Management: Empirical Evidence from Vietnam

Abstract

The paper investigates the mechanism through which corporate credit ratings affect dividend payments by decomposing the mean difference of dividends into a part that is explained by the determinants of dividends and a residual part that is contributed by the pure credit group effect, in the framework of the traditional dividend model of Fama and French (2001). Historically, better credit rated firms have shown consistently higher propensity to pay dividends especially during the economic crisis period. According to the counter-factual decomposition technique of Jann ( 2008), better rated firms are more responsive to the firm characteristics that have positive impact on dividends and poor rated firms are more responsive to the negative dividend predictors. As a result, good (bad) credit ratings make corporate managers become more bold (timid) in their dividend payments and they tend to pay more (less) dividends than what their firm characteristics prescribe. The degree of information asymmetry increases for the poor group firms during crisis periods and they attempt to reserve more cash in preparation for future investments. The decomposition results suggest that the credit group effect can potentially exceed the effect of firm characteristics because firms of different credit ratings can respond to the very same firm characteristics in a different manner.

Earnings management under a global magnifier

“…[9] analyze various points of view of the role of the Bulgarian leader and his/her efficiency in the accomplishment of earnings objectives of the enterprises in the Bulgarian and world reality and guidelines for its sustainability and successful application in contemporary economics. [10] investigate the mechanism through which corporate credit ratings affect dividend payments by decomposing the mean difference of dividends into a part that is explained by the determinants of dividends and a residual part that is contributed by the pure credit group effect. [11] theoretically clarify the problems related to the business environment, and to assess its condition in Bulgaria and its impact on the earnings management.…”

A Comparison of Models for Predicting Discretionary Accruals: A Cross-Country Analysis

“…Total accruals are derived in two ways: the cash flow approach and the balance sheet approach. In the cash flow approach (Cohen & Zarowin, 2010;Kuo, Ning, & Song, 2014;Zang, 2012;Doukakis, 2014;Nguyen & Duong, 2019), total accruals are computed as the difference between income before extraordinary items and operating cash flows. In the balance sheet approach (Healy, 1985;Jones,1991;Kothari et al, 2005;Dang & Tran, 2019;Dang, Nguyen, & Tran, 2020), total accruals are calculated using the current assets and current liabilities.…”

Corporate Governance and Earnings Management: A Study of Vietnamese Listed Banks

“…In Vietnam, the study of factors affecting EMB is of interest to some authors, but most studies focus on enterprises (Huynh & Nguyen, 2019;Huynh, 2020;Nguyen & Duong, 2020). The research on EMB of banking sector is limited.…”