The Impact of Ownership Structure on Earnings Management: The Case of Vietnam

Abstract

This study is conducted to investigate the impact of ownership structure on earnings management in emerging countries and Vietnam as the case study. In this research, we explore how three components of ownership structure, including ownership concentration of managers, foreign ownership ratio, and state ownership ratio, influence earnings management. In addition, we also consider whether ownership structure influences profit management during financial constraints. REM, FEM, GLS, and GMM regression methods are employed for processing data. The results show that ownership structure with foreign ownership has a positive effect on earnings management, whereas one with a proportion of state ownership has a contradicting effect. While the degree of ownership concentration does not affect the profit management, in the context of financial restrictions, the ownership ratio has an impact on the management of earnings. Control variables in the model such as firm size, financial leverage, growth rate, profitability, and audit quality, all have an impact on earnings management. The results could, potentially, be the basis to help firms in restricting earnings management behavior.