Are jones model and modified jones model effective to detect earning management of listed companies on HOSE?
Abstract
The goal of this study is to evaluate the effectiveness of Jones model in Vietnam market through the listed companies in Ho Chi Minh Stock Exchange during the period from 2013-2015. Furthermore, the comparison between Jones model and the Modified Jones model developed by Dechow et al. (1995) is conducted because of the result from prior researches which show that Jones model has lower standard error in detecting accruals based earning management, when compared with other detecting earning management model such as a models of DeAngelo, Healy or the industry model, hence proposing that model of Jones provides more significant outcome at estimating the nondiscretionary component of accruals and thus less exposed to misspecifications error from absent variables (Dechow et al., 1995)
After research, we conclude that the ability to detect earning management of Jones Model and Modified Jones Model by Dechow and Kothari is not very significant but Jones Model illustrates a better explainable ability even though the adjusted R-square of the three models is closely similar with each other.