Capital structure and practices of accrual-based earnings management among non-financial Vietnamese listed firms

This study examines the relationship between corporate social responsibility (CSR) and earnings management after controlling for endogeneity of CSR. Using a sample of non-financial firms listed on Korean Securities Market between 2002 and 2010, this study finds that ignoring endogeneity biases the estimated relation between CSR and earnings management. Specifically, the results show that the negative and significant relation between CSR commitment and discretionary accruals reported in the previous studies becomes insignificant. However, the negative and significant relation between CSR commitment and real activities manipulation remains significant even when the endogeneity of CSR commitment is taken into account. Therefore, this study provides evidence that proactive CSR engagement significantly affects firm’s practice of real activities manipulation, while it does not affect its practice of discretionary accruals. These results indicate that CSR commitment leads managers to be more responsible in management of operational activities than in accruals management.

This study examines the effect of foreign directors in the board of directors on the monitoring function by analyzing the association between foreign directors and opportunistic financial reporting. The authors address this question by examining the effect of the foreign directors in the board on firms’ discretionary accruals and book-tax difference. The researchers analyze by using Korean firm data for the years 2001–2014 as Korea is one of the few countries that nepotism is strong within the board, providing the ideal setting to analyze the effect of foreign directors on the monitoring function of the board. The authors find that foreign directors have a positive effect on the monitoring function of the board, as discretionary accruals and book-tax differences of firms with foreign directors are lower than those without foreign directors. Further, the researchers find that the positive effect of foreign directors on the monitoring function is more pronounced if foreign directors are independent directors or expertise in accounting or finance. Overall, the findings support the view that foreign directors in the board increase the board diversity, which increases the independence of the board and so the monitoring function.

Due to the uniqueness of the services sector in terms of its characteristics and profitability, as well as the lack of studies on this sector, this study is considered to be the first to improve the knowledge of the key factors that play an important role in the profitability of the Jordanian services sector. This study investigates the effect of financial characteristics and capital structure on the profitability of all 46 services companies listed on the Amman Stock Exchange over the period 2014–2018. This study applies fixed and random effects models to panel data variables, namely, size, tangible assets, growth, business risk, debt to equity ratio and debt to assets ratio as independent variables. At the same time, profitability was measured by operating profits (earnings before interest and tax divided by total assets), return on assets (ROA), and return on equity (ROE), which acted as the dependent variables. This study reveals the first evidence that the debt to assets ratio has a negative and significant impact on the profitability of services companies in Jordan. In line with the pecking order theory, this finding suggests that more profitable services companies tend to prioritize the use of retained earnings in financing business activities rather than in financing debt. This study shows that profitability is significantly and positively affected by size and business risk, while ROA is negatively affected by business risk. It also shows that tangible assets have a negative and significant effect on profitability, while growth has a positive and significant effect on operating profits.