Influence of financial indicators on earnings management behavior: evidence from Vietnamese commercial banks

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The quality of financial disclosures is of great importance than ever, as Vietnam’s international economic integration has been accelerating recently. This issue is currently particularly worrying for the banking sector in Vietnam, as banks play a vital role in economic development. However, there is a growing concern that managers tend to manipulate financial information using earnings management techniques to meet analyst expectations and to enhance the firm value in the short term. Such behavior can lead to inappropriateness in the decision-making process of financial statement users, as well as impair firm value in the long term. Therefore, this study examines the impact of factors related to financial indicators on earnings management of Vietnamese commercial banks to give more insight into the issue. The data of this study was collected from a sample of 30 Vietnamese commercial banks during a 5-year period from 2015 to 2019. By using the Ordinary Least Square (OLS) regression method through Eviews 10.0, the findings revealed that financial leverage and loan loss provision have a positive and significant impact on earnings management. Also, bank size and profitability were negatively associated with earnings management. Based on these findings, in the context of Vietnam, the study proposed policy suggestions to improve the quality of accounting information and to assist users of financial statements in recognizing and restricting earnings management in commercial banks.

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    • Table 1. Variable definition and measurement
    • Table 2. Descriptive statistics for variables included in the model
    • Table 3. Correlation matrix for variables included in the model
    • Table 4. The overall model significance
    • Table 5. Regression results of the model
    • Table A1. List of Vietnamese commercial banks for the period of 2015–2019
    • Table B1. Descriptive statistics for variables included in the model
    • Table B2. Regression results and overall significance of the model
    • Formal Analysis
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