Is modified Jones model effective in detecting earnings management? Evidence from IPO company on HOSE

Abstract

This study aims to evaluate the effectiveness of Modified Jones model in Vietnam through the IPO firms in Ho Chi Minh stock exchange during the period from 2007-2009. Furthermore, the comparison between this model and the extended model developed by Yoon & Miller is conducted because prior researches showed that the Yoon and Miller is far better than Modified Jones model and is said to be well fitted for Korean as well as Asian firms. After research, we conclude that Modified Jones model encounters poor goodness of fit as well as misspecification errors in Vietnam situation while Yoon & Miller model proposes a better explanatory power even though the adjusted R-square of the two models is nearly the same.