The Relationship Between Ownership And Earnings Management: A Case Of Ho Chi Minh Stock Exchange

Abstract

The dispersed ownership in modern corporations has created the issue of misalignment in management and shareholders’ interests. As different owners have posed different points of view, and simultaneously, different approaches toward how to manage the company, this research explores the degree of influence of the concentration of different types of owners in corporate environments: management, the state and foreign ownership, on firm’s profit management. The sample covers 2019 firms listed on Ho Chi Minh stock exchange over the six-year period from 2016 to 2021. The study finds that firms with more foreign investors holding at least 5% of total common equity constrain the degree of firm’s earnings management. Additionally, the State and the board of directors with the equivalent amount of ownership in the corporations are also capable of limiting manipulation when the capital structure of the firm is highly leveraged. The results may provide additional knowledge in the current field of earnings manipulation and support validating hypothesized literature, and further improve the conflicts of interest existing in corporations.