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INISTRY OF EDUCATION UNIVERSITY OF ECONOMICS HO CHI MINH CITY NGO NHAT PHUONG DIEM REPRESENTATIVE SYNTHESIS FACTORS FOR CORPORATE GOVERNANCE WITH IMFACT ON EARNINGS MANAGEMENT OF THE LISTED MANUFACTURE COMPANIES IN VIETNAM SUMMARY OF PHD THESIS HO CHI MINH CITY This thesis ia made at: University of Economics Ho Chi Minh City Professional advisor: PhD LE DINH TRUC PhD TRAN VAN THAO Reviewer 1: Reviewer 2: Reviewer 3: This thesis will be presented to the Thesis Committee at: This thesis can be found in library: the day month day INTRODUCTION Reason for research Thesis “Representative synthesis factors for corporate governance with impact on earnings management of the listed manufacture companies in Vietnam” has been selected by the author as a doctoral thesis for the following reasons: Firstly, the behavior of earnings management causes loss of investment value Fraud scandals of accounting data have shocked the financial world about the extent of their impact on society such as Enron, Worldcom, Xerox Enron - global energy group, ranked by Fortune as "public America's most innovative company "- filed for bankruptcy in 2001, became the biggest bankruptcy at the time with losses of about $ 70 billion for investors with stock prices from $ 90 plunging without braking less than US $ for a stock and more than 80,000 unemployed employees made the world financial market wobble Nearly the following year Worldcom went bankrupt with nearly double losses of Enron, such as causing losses to its 180-billion-dollar shareholders, US economic losses of about 10 billion US dollars and 20,000 job losses Or as in Vietnam, Truong Thanh Wood Industry JSC has the result of auditing in 2017, reducing 91% of profit compared to the independent report In particular, the scandals all shared the same reason that the manager with its power used accounting policies, economic transactions to inflate profits, conceal losses to serve fish interests Such behaviors and behaviors are behavioral violations Therefore, it is necessary to research on earnings management, to consider the impact of the factors affecting the management board and from that, propose appropriate measures of earnings management restriction of listed companies Secondly, there are many researches on corporate governance, research on individual characteristics of corporate governance (CG) to earnings management, but there are very few studies mentioning the elements of corporate governance representation impacted on earnings management Stemming from the above problem, over the past 30 years in the world, there are many studies on behavioral identification models of earnings management (Healy, 1985; Jones, 1991; Dechow, Sloan and Sweeney, 1995, Kothari and colleagues, 2005; Roychowhury, 2006 ) as well as, there have been many studies examining the impact of individual characteristics of corporate governances (scale, independence, qualification, ownership rate, number of meetings ) to behavior of earnings management but the results of studies are very different (Chtourou et al., 2001; Klein, 2002; Xie et al., 2003, Abbott et al., 2004; Ebramhim, 2007; Osma, 2008; Lin, 2011; Swasika, 2013; Susanto and Pradipta, 2016 ) Therefore, in order to provide a unified view of the impact of corporate governance on the behavior of corporate governance, a number of authors who study the corporate governance representation synthetic factors impact on earnings management such as Carcello et al (2006) said that corporate governance practices are good restricting behaviors of integrated management with general corporate governance factors including characteristics: (1) size of the Board, (2) the independence of the Board, (3) the size of the Audit Committee, (4) the independence of the Audit Committee, (5) the rights of shareholders and (6) organizational ownership Hay Kang and Kim (2012) also believe that good corporate governance limits the behavior of corporate governance with the general corporate governance element including characteristics: (1) Scale of Board, (2) Number of meetings of Board, (3) Independent member ratio, (4) Ratio of independent members attending meetings and (5) Members with financial expertise In Vietnam, there are quite a number of studies on individual characteristics of corporate governances to Behavior of earnings management, but the results in the studies are not the same as independent members of the Board not affect the earnings management (Ngo Hoang Diep and Bui Van Duong, 2017) but (Nguyen Thi Phuong Hong, 2016) said that independent members limit the behavior of financial statements, improve the quality of financial statements At the same time, according to the author's own research, when conducting regression of single individual characteristics of the Board and the Audit Committee, all these characteristics have no correlation with earnings management, or when multivariate regression all The characteristics of the Board and the Audit Committee, most of the individual characteristics also have no correlation with the management board through the accrued variable, except for the characteristics of the Audit Committee's professional qualifications, which increase the behavior of corporate governance According to the critical theory (Critical mass theory), along with the research results of the author, the author thinks that in Vietnam, the individual characteristics of the Board and the Audit Committee may not reach the value large enough to be sufficient impacting on earnings management and maybe when aggregating individual characteristics into a synthetic factor, it will reach a large enough value, so it will affect the QTSC At the same time, inheriting the research idea of Hoang (2014) on the synthesis factor representing the diversity of the BD impacting on the quality of profit, the author thinks that it is necessary to have a research on corporate governance with a result homogeneous expression of corporate governances impacting on the behaviors of earnings management Therefore, in the study, the author examines the factors of summing up the Board (summing up characteristics: scale, independent membership rate, professional qualifications, concurrent positions, number of meetings), factor of Audit Committee (synthesizing characteristics: The size, the proportion of independent members, the professional qualifications, the number of meetings) represent the corporate governance to limit the behavior of corporate governance Thirdly, there has been scientific research on earnings management of the manufacture companies in Viet Nam According to information from the General Statistics Office in 2018, the total GDP (total national product value) of the first quarter of 2018 increased by 7.38% over the same period last year, of which the public sector manufacturing increased by 9.7%, contributing 3.39 points and being the highest contributor and the highest increase in other regions This shows that the role of the manufacturing company in the development of the economy is very large and its diversity in the manufacturing sector increases competitiveness, attracting investment However, Nguyen Thi Phuong Hong (2016) stated that this is also the industry with the lowest financial reporting quality Typical series of scandals in the announcement of profit information at listed manufacture company: Hoang Anh Gia Lai Joint Stock Company (HAG) has a significant decline in profit after auditing, reducing VND 661 billion; Vietnam Steel Corporation (TVN - Upcom) reduced 108 billion dong, Hung Vuong Joint Stock Company had an additional loss after auditing of 642 billion dong, An Giang Seafood Import-Export Joint Stock Company from billion profit to loss 187 billion after auditing, Fisheries Trading Investment Joint Stock Company (ICF) made a loss of 21.42 billion to make a loss of 29.04 billion after auditing or GTN Foods Joint Stock Company increased profit after auditing nearly 20 billion dong, PetroVietnam Transportation Joint Stock Company increased nearly 37 billion dong after auditing However, up to now, there has not been any research on earnings management of the listed manufacture companies, thus proposing the suggesting to improve the quality of financial statements for this sector Therefore, for the above reasons, the author of the study "Representative synthesis factors for corporate governance with impact on earnings management of the listed manufacture companies in Vietnam" for the doctoral thesis Research objectives - research questions Research objectives Research objective 1: Discovering the general factors of corporate governance representation impact on the behavior of corporate governance at listed manufacture company in Vietnam Research objective 2: Measurement of the impact level of the general agent of corporate governance behavior affects the behavior of quality management at listed manufacture company in Vietnam Research question Research question (RQ1): What is the factor of corporate governance representation affecting the behavior of corporate governance in listed manufacturing companies in Vietnam? Research question (RQ2): How does the impact of the corporate governance representative factor affect the behavior of corporate governance in the production companies listed in Vietnam? Research objects, research scope Research subjects The research object of the thesis is a factor to synthesize corporate governance representation, affecting earnings management of listed manufacturing companies in Vietnam Research scope: Manufacturing company listed on Hose and Hnx Research period : From 2012 to 2016 Research methods: The dissertation implementing mixed research method includes: Research on qualitative research through in-depth interviews with experts to explore the general factors of BD and Audit Committee Quantitative research to test the reliability of the factor of synthesizing BD and Audit Committee through multivariate regression model Contributions of the thesis About theory: Contributing to the treasure of knowledge about the factors of synthesis of the Board Director and the Audit Committee to represent corporate governance impacts on the earnings management; About practice: (1) Provide a comprehensive picture of earnings management behavior, thereby assisting the competent authorities in issuing sanctions and binding regulations for listed companies, corporate governance regulations for listed company (2) Contribute a basis for listed manufacture companies to develop effective corporate governance frameworks to limit the earnings management (3) Contributing useful tools for auditing companies, auditors have a preliminary assessment of the earnings management through the assessment of the synthesis factors of the Board Director and Audit Committee for effective auditing planning Some terms used in the thesis The dissertation uses two terms "synthesis of Board Director" and "synthesis of Audit Committee " representing corporate governance to affect the behavior of corporate governance, this term only applies to this research - Factor: According to the Vietnamese dictionary, the factors are the conditions that combine to create results - Synthetic: According to the Vietnamese dictionary, the synthesis is composed of many components that are related to each other into a whole BD - Synthesis factor of Board Director : is a whole BD including individual characteristics of the Board (independent members, experience, scale, number of meetings, concurrently holding two titles) combine together to form - Synthesis factors of Audit Commitee : Similar to the above definition, synthesizing Audit Committee is also a whole BD including individual characteristics of the Audit Committee (independent members, scale, experience, number of meetings) combine together to form Structure of the thesis The thesis has structure including: introduction, chapter 1: Research overview, chapter 2: theoretical basis, chapter 3: Research method, chapter 4: Research results and chapter 5: conclusions and policy implications 4 CHAPTER 1: LITERATURE REVIEW 1.1 Literature review on the World 1.1.1 The researches of earnings management 1.1.1.1 The research model of measuring real earnings management through Roychowdhury's model (2006) Roychowdhury (2006) argues that when there is one of three abnormal signs such as abnormal cash flow, abnormal production or abnormal cost, there exists a behavioral problem 1.1.1.2.The research the model of Accruals-based Earnings Management There are many studies on this measurement model, typically: Healy model (1985): Healy (1986) assumes that NDA value is constant over time, not affected by manager or means that NDA has zero expected value Thus, the total accrual (Total Accruals -TA) is also NDA and if TA-NDA is not different or is the project different, does the enterprise have the behavior of the earnings management? Model DeAngelo (1986): DeAngelo (1986) argued that if the company is in stable normal operation over the years with no changes, the total NDA in year t must be equal to the total NDA in year t-1 If there is a difference between the unregulated cumulative sum of the year t and the total unregulated cumulative amount in the t-1 year, then there is a behavioral bias Jones model (1991): Jones (1991) argues that when revenue changes, business capital will change and make changes accumulate, and depreciation of fixed assets reduces cumulative performance So with those changes (Revenue, capital, accumulation) make the profit decrease so Jones used two independent variables that are changes in revenue and fixed assets to predict the DA variable Thus in the Jones model (1991) used assets and changes in revenue to control the change of NDA, overcome the limitations of Healy (1985) and DeAngelo (1986) models with assumptions business situation does not change over time Adjustment models of Jone (1991) Models of Dechow, Sloan and Sweeney (1995): Dechow et al (1995) overcame the weakness of the original Jones model (1991) by using "non-cash revenue difference" to replace revenue difference Models Kothari, Leone, Wasley (2005 ): Kothari et al (2005) developed a new measurementcapable model of the DA associated with performance -matched discretionary accrual measure based on two basic original models, Jones (1991) and Adjusted Jones model (1995) Other models Models of Jeter and Shivakumar (1999) Jeter and Shivakumar (1999) used to change the cash flow of business activities every quarter and every year to measure the project The research results show that the CFO model is more effective than the Jones model (1991) Model Yoon (2006) Although the improved Jones model (Dechow et al., 1995) has been very effectively used in previous studies to identify the behavior of earnings management but recently Yoon and Miller (2002) and Yoon et al (2006 ) said that the model is no longer suitable for Asian companies (Korean companies) Yoon et al (2006) have shown that TA usually depends on changes in sales revenue in cash, cash costs and depreciation, provisioning 1.1.2 Research on factors affecting on the earnings management 1.1.2.1.Corporate governance studies affect the earnings management 1.1.2.1.1 Studying the individual characteristics of corporate governance affecting the earnings management Case studies in this direction are very common, such as those of Chtourou et al (2001), Klein (2002), Xie et al (2003), Ebrahim (2007), Murhadi (2010), Swaskita (2013) However, the results of the authors are not uniform when considering the effects of individual characteristics of the Board and the Audit Committee on the behavior of business promotion For example, the characteristics of the independent members in the study of Xie et al (2003), Ebrahim (2007) reduced the behavior of earnings management, while this characteristic did not affect the earnings management in studies (Murhadi, 2010; Gulzar and Wang, 2011; Swastika, 2013; Soliman and Ragab, 2013) Thus, with heterogeneous results among authors, it is difficult to draw a conclusion about how the corporate governance impacts on earnings management behaviors and also cause difficulties when using foundation theories the explanation Therefore, in order to limit the inconsistencies in the study, some authors did not study in the direction of using individual characteristics to consider the impact of corporate governance on the earnings management but using an aggregate factor of The number of characteristics of corporate governances affects the behavior of earnings management such as Carcello et al (2006), Kang and Kim (2012) 1.1.2.1.2 Researching corporate governance factors affecting the earnings management Research Joseph V Carcello, April Klein, Terry L Neal (2006) This study aims to examine the impact of the financial expertise of the AC, the corporate governance effectively and the earnings management of 283 US-listed domestic non-financial companies The study using OLS least squares regression with the dependent variable is the earnings management behavioral representation project measured by the adjusted Jones model (1995) In research, strong corporate governance is a measure of aggregate of (six) quality characteristics with characteristics of equal weight (1) Scale of the Board (receive a value of if the scale is smaller than the average of the data sample, on the contrary is 0), (2) Independent of the Board (binary variable receives a value of if over 60% of the city members are independent, vice versa is 0), (3) Audit Committee size (binary variable value is if the percentage of members of the Audit Committee / member of the Board is greater than the sample average value, otherwise 0), (4) Independent Audit Committee (binary value is if 100% of the members are independent, otherwise 0), (5) Shareholder rights (binary variables receive a value of if the corporate governance card score is large more than the opposite sample value is 0), (6) owned organization (binary variable receives the value of if the organization ownership ratio is greater than the reverse sample value of 0) With the result of showing strong corporate governance, the financial expertise of the Audit Committee has an inverse correlation with the corporate governance Research of Kang and Kim (2012) This study aims to assess the impact of corporate governance on operations through the actual economic activities of listed companies of manufacturing industry in Korea The study of corporate governance measurement in this study is the corporate governance performance index represented by the BD composite index, in which the BD includes all the components: Board size, number of meetings, ratio of auditing, membership of financial expertise Research results of individual factors in multivariate regression equation make the scale of Board and independent members have an inverse correlation with the behavior of corporate governance The remaining variables: the number of meetings of the Board, the activities of independent members, professional qualifications of non-profit organizations did not affect the Behavior of earnings management through technical activities The research results in the direction of the synthesis of corporate governance representation have a negative correlation with the level of abnormality through technical activities At the same time, the research results also acknowledge that when there is an effective combination of the Audit Committee in the Board, it will reduce the behavior of wrongdoing Research by Hassan and Ahmed (2012) The author conducted this study to examine the impact of corporate governance on the behavior of human resources at the listed manufacture companies with a sample of 60 observations in the period of 2008-2010 in the Nigierian market The research results recognize that two characteristics of corporate governance representation have an impact on specific earnings management: The proportion of independent and organizational members has a negative correlation with the management and general variables of the Audit Committee (including individual characteristics, independent members, number of meetings) that not have any correlation with the QE 1.1.2.2 Studies on the impact of company characteristics on earnings management 1.1.2.2.1 Capital Structure An et al (2013), Akbari (2013), Waweru and Riro (2013), Bassiouny (2016) argue that debt ratio is positively correlated with the behavior of corporate governance Meanwhile, some other studies acknowledge that the higher the debt ratio, the more restrictive the behavior of Liabilities such as Jelinek (2007), Naz et al Lin (2011) shows that the state ownership ratio has an inverse correlation with the behavior of job creation 1.1.2.2.2 Company size: Some studies have suggested that the company size has a negative correlation with the behavior of corporate governance like Iskandar et al (2006), Akbari et al (2013), Soliman and Ragab (2013), Swastika (2013) In contrast, Alves (2012), Ali et al (2015) have demonstrated that the company size increases the behavior of corporate governance Whereas Waweru and Rio (2013), Bassiouny (2016) believe that the company size has no correlation with the behavior of corporate governance 1.1.2.3.Studies on earnings management and operational efficiency Lee et al (2005) found a positive correlation between profitability, market capitalization and behavioral assessment and this result is similar to that of Moradi et al (2012) But Cohen (2008) admits that market capitalization has a negative correlation with earnings management Peasnell et al (2005); Bowen et al (2008), Moradi et al (2012) in the study have suggested that cash flow of BOFs has a negative correlation with earnings management In the meantime, Gulzar and Wang (2011), Soliman and Ragab (2014) acknowledge that cash flow of business activity increases the behavior of corporate governance Research by Olhson (1995), Jordan et al (2010) showed that the manager has many reasons to conduct a earnings management for the purpose of changing EPS, so the research results show that EPS has a positive correlation with earnings management To assess the impact of auditing firms earnings management, Zhou and Elder (2001), Chen et al (2005), Alzoubi (2016) conducted research and acknowledged the quality of auditing firms as limited Institutional behavior management 1.2 Overview of studies in Vietnam 1.2.1 Study corporate governance characteristics affecting the behavior of earnings management Researching corporate governance general factors affecting the behavior of earnings management : Hoang (2014) with a sample of 150 listed companies data on two HOSE and HNX from 2005-2011, to assess the diversity of the Board to the quality of profits, corporate social responsibility for information disclosure General variables representing diverse functions of the BD include characteristics (concurrently holding two positions, non-executive members holding more than 5% voting rights, State ownership, number of members) Foundation); Synthetic variable representing diversity Board of structure consists of characteristics (gender, age, expertise and nationality of members) The research results acknowledge that the general factor representing the diversity of functions of the Board has the effect of increasing the quality of profits, while the Board' diversity on structure does not affect the quality of benefits profit Studying the individual characteristics of corporate governances affecting the behavior of corporate governance, quality of profit, financial efficiency : Nguyen Tri Tri (2013) re-codified the factors affecting earnings management behavior as a foundation for future studies Nguyen Trong Nguyen (2015) said that the ratio of the Board of the BD increased the quality of financial statements; Board members with financial expertise, many members of the Board meeting, members of the Audit Committee with a level of financial expertise, and corporate governance have existed an internal audit committee to increase the quality of financial statements and the research also acknowledges that the Board of Management in the Audit Committee and concurrently concurrently holding two positions of Chairman of the Board and CEO of the Board have no impact on corporate governance Research by Nguyen Manh Ha (2016) argued that the scale of BD and State ownership had an impact on operational efficiency Nguyen Thi Phuong Hong (2016) uses the adjusted Jones model (1995) to identify the impact of individual corporate governance characteristics on financial statement quality The research results acknowledged the rate of accreditation, members with professional finance and accounting, organizational ownership, the non-dual position of the Board to increase the quality of financial statements Essa et al (2016) used data of 570 listed companies in Vietnam stock market with research results that said: The larger the scale of the Board, the less the behavior of earnings management, the State ownership and foreign ownership have a negative correlation with the behavior of corporate governance Following the above studies, Bui Van Duong and Ngo Hoang Diep (2017) with the results of the size of the Board, financial expertise, the proportion of female members in the Board is positively correlated with the behavior of corporate governance and characteristics The remainder of corporate governance is not correlated with the behavior of quality management (the ratio of independent members, frequency of meetings of the Board, concurrently holding two titles) Nguyen Ha Linh (2017) in the doctoral thesis concludes the scale of the Board, foreign ownership, turning Big4 auditing firm to reduce the behavior of corporate governance; The independent members in the BD, concurrently hold two positions that not affect the Quality Management Or as Pham Thi Kieu Trang (2017) acknowledged the size of the Board, independent members of the Board, the percentage of ownership by major shareholders (State, foreign and private) increases financial efficiency and the remaining features corporate governance does not affect financial performance like concurrently holding two titles, professional qualifications, and female members 1.2.2 Other studies on earnings management Research on optimal earnings management measurement model Pham Thi Bich Van (2012) identifies the Jones model (1991) which is not suitable to measure the behavior of job creation Nguyen Ha Trang (2014) recognizes the adjusted Jones model (2005) as the best DA measurement model in Jones (1991) models, adjusted Jones model (1995) and adjusted Jones model (2005) Meanwhile, Nguyen Anh Hien and Pham Thanh Trung (2015) prove that the adjusted Jones model (2005) is most suitable for measuring projects for listed companies in Vietnam Finally, Vo and Duong (2017) acknowledge that the model Jones (1991) and the adjusted Jones model (2005) are the most suitable DA measurement model Research on motivation to implement earnings management behavior Bui Thi Mai Hoai and Nguyen Thi Tuyet Hoa (2015) stated that enterprises enjoying tax incentives will adjust their profits to increase payable CIT in order to enjoy the highest incentives In addition, the study also acknowledges that enterprises have recognized the revenue received in advance, revenue according to the progress in the fiscal year, the implementation of business management is higher than that of enterprises not recognized; The more enterprises have recorded the provisions, the greater the possibility that enterprises implement their business management and the end result is that enterprises have recorded deferred CIT expenses, the probability of adjusting taxable income reduces high CIT than other businesses Dang Ngoc Hung (2015) said that listed companies has adjusted to reduce taxable income in 2013 in order to save corporate income tax and adjust profit growth regardless of enterprise size 1.3.Research gap and problem to study Firstly , the research before the corporate governance study impacts on the management of the majority of studies in the aspects of individual characteristics of the Board and the Audit Committee (independence, financial qualifications, scale, frequency, meeting rates, etc.) impact on earnings management behavior and research results are not consistent among authors While the research towards the factor of corporate governance representation has impact on the quality of management with the result of effective corporate governance synthesis factors to reduce the behavior of sexual behavior At the same time, according to the understanding of the author, there are currently no studies mentioning the general factors of corporate governance representation as a factor of summing up the Board and the general factors of the Audit Committee affecting the management of corporate governance in Vietnam stock market except Hoang's study (2014) refers to a synthetic factor representing the Board's diversity that affects the quality of profits Secondly , most of the researches in Vietnam use the sample of all non-financial listed companies on the HOSE and HNX in Vietnam, and no authors mentioned the data sample as listed manufacture company although this The industry contributes a large proportion to GDP, the highest growth rate and the industry with financial reporting quality is proven to be the lowest in other sectors (Nguyen Thi Phuong Hong, 2016) Therefore, the author's study examines the impact of the factor of corporate governance representation to earnings management for the sample of manufacturing industry which is suitable for the current situation Therefore, this study is really necessary in the current context because: (1) Firstly, this is the first study in Vietnam on the collection of all the individual characteristics of the Board and the Audit Committee into one of the elements of general representation of corporate governance to affect the behavior of corporate governance Therefore, this study provides fascinating knowledge in corporate governance theory, which impacts on the quality management; (2) secondly, the study focused on the data sample of all listed manufacture company; (3) Thirdly, in terms of auditing, auditors can apply the general factors of BD and AC as a tool to assess whether there are critical errors in financial statements? With all the reasons mentioned above, the author conducts research on general factors of corporate governance representation for the dissertation: " Representative synthesis factors for corporate governance with impact on earnings management of the listed manufacture companies in Vietnam" CHAPTER 2: THEORETICAL FRAMEWORK 1.1 Corporate governance and earnings management 1.1.1 Corporate governance 1.1.1.1 Definition of corporate governance Currently there are many definitions of corporate governance and these definitions depend entirely on the author, the institution as well as the legal provisions of a country These are (1) corporate governance for the purpose of maximizing profits for shareholders (Cadbury, 1992; Shleifer and Vishny, 1997) governed by representation theory; (2) corporate governance in addition to maximizing the wealth of shareholders, corporate governance also cares about social and environmental issues (Solomon, 2007) In this study, the Ministry of Finance's definition is used because of its availability and widespread use throughout the territory of Vietnam, specifically the corporate governance is "a system of rules to ensure the company operating direction and being effectively controlled for the benefit of shareholders and people related to the company ” 1.1.1.2 Principles and content of corporate governance corporate governance principles are presented in the Circular 121/2012/TT-BTC and are now stipulated in Decree 71/2017 / ND-CP, with corporate governance targets in practice: (first) Ensure the establishment of a reasonable governance structure; (2) Ensuring fair treatment of shareholders; (3) Ensuring transparency in the operation of the company; (4) Ensure the rights of shareholders and related people; (5) Assurance of operational efficiency of the Board and the Audit Committee And The corporate governance model in each country is developed differently in accordance with the specific characteristics of the economy, each nation's specific characteristics In Vietnam, corporate governance contents include:(1) Issues related to shareholders and shareholders' meeting;(2) Issues of BD members (candidates, nomination of members of the Board, membership of the Board, members of the Board, remuneration, meetings ); (3) Issues related to the Audit Committee and Audit Committee members; (4) Issues related to preventing conflicts of interest; (5) Issues related to corporate governance training; (6) Issues related to reporting and information disclosure According to the OECD corporate governance principles, corporate governance is only assessed as effective when encouraging and encouraging the Board of Directors and the Board to work for the objectives and benefits of shareholders and the company, as well as the corporate governance to create the best conditions for the Board and the Audit Committee perform the task of monitoring activities of the Board of Management and the corporate governance, and are also evaluated effectively when encouraging the company to use the resources for the most optimal production and business process 1.1.1.3 Corporate governance model Currently, there are two corporate governance models, one-level model and two-level model Vietnam organizes corporate governance according to a two-level model with a structure consisting of: General Meeting of Shareholders, Chairman, Board, Audit Committee, Executive Board 1.1.1.4 The relationship between corporate governance and earnings management The Board plays the highest role in the management decentralization of the corporate governance mechanism, responsible for all activities, strategies, financial efficiency, including data on financial statements Therefore, the Board effectively works to increase the quality of financial statements, limit the behavior of financial statements (Carcello et al, 2006) The AC is also a mechanism in corporate governance that is directly related to the quality of financial statements, Menon and Williams (1994) proposed two very important roles of the Audit Committee, which are to improve quality and preserve the integrity of the company and increase the transparency of financial statements, limit the behavior of financial statements, maintain investor confidence (The Blue Ribbon Committee, 1999, p 19) Therefore, in this thesis, the author only focuses on studying the role as well as the impact of the Board and the Audit Committee on the management of accountability of managers 1.1.2 earnings management 1.1.2.1 Definition of earnings management Schipper (1989) argued that "earnings management behavior is considered to be a purposeful action for the process of making and presenting financial statements in order to achieve personal benefits." Or Healy and Wahlen (1999) have defined broader scope of earnings management behaviors "Behavior of earnings management practices appear when the managers uses its judgments on the financial statements and in the structure of economic transaction events born in order to change financial statements, make related subjects misunderstand about the operational status of enterprises ” However, the study uses the definition of Ronen and Yaari (2008, page 27) because this is the most complete definition of earnings management " is a set of management decisions that result in not reflecting benefits Net profit in the short term, is the nature of maximizing business value that manager has known about them The behavior of earnings management can be beneficial (providing signals on long-term value), harm (hiding short-term or long-term value) or neutral (hiding short-term or long-term value)" 1.1.2.2 Motivation to implement the behavior of earnings management The motivation of earnings management of the manager is often formed when there are some special conditions in the enterprise in view of subjective or self-interest Gumanti (1996), Yue (2004) argued that the economic context in enterprises was an incentive for manager to implement the earnings management practices such as earnings management in the first time that enterprises offered public shares, earnings management in the conditions that the government has issued a tax incentive policy or subsidy policy, aid and assistance from the government Likewise, in the study of Phan Thi Thuy Duong (2015) mentioned three manager motivations to implement earnings management: The purpose of attracting capital flows into the company from outside, the purpose of remuneration, promotion opportunities for the manager and the motivation to enjoy the incentives of the tax on taxes 1.1.2.3 Classify earnings management behavior 1.1.2.3.1 Accrual earnings management The term "QTLN sở dồn tích" in English is Accrual earnings management (sometimes also meaning Accrual management - abbreviated as AEM) as "The earnings management behavior based on accumulation is the manager selects and flexibly uses regulations on accounting policies to influence income ” 1.1.2.3.2 Real earnings management The term "Real earnings management" is Real Activities Manipulation or Real Earning Management (REM) According to Ronen and Yaari (2008), "Behavior of earnings management through events and economic transactions is how manager organizes and arranges economic activities to influence income and profit information of enterprises ” 1.2 The theoretical foundation that governs the behavior of earnings management 1.2.1 Signal Theory Spence (1973) has proposed the theory of signals with the assumption of the existence of information asymmetry, the signal theory will provide an equilibrium in which the object has a better advantage of information provide some signals (such as appropriate information) to other objects According to research by Healy and Palepu (2001), it is very clear about the losses that the financial market suffers when information is held by the manager and the capital investors are different And asymmetric information is the cause of the earnings management activities of the Management Boards for their own goals In order to reduce this situation, the listed company BOM must provide useful information to investors and on the other hand must establish a monitoring mechanism through shareholder representatives as BD and Audit Committee 1.2.2 Representative theory Jensen & Meckling (1976) mentioned that in a joint stock company, it is the separation between the owner and the manager and manager of the company that forms the representative relationship in which the representative is the shareholders and the representative is the director Representative theory that, derived from the separation and the conflict of interests between the owner and the Board is the person who has the right to issue executive decisions, in the supervisory mechanism of shareholders to the Board of Management, the Board accountability must be provided through the provision of financial and accounting information shown on the financial statements to shareholders with the supervision of the BD and the Audit Committee (Jensen and Mecking, 1976) The Board performs the task of overseeing all decisions and activities of manager, maximally protecting the interests of shareholders (Ragothaman and Gollakota, 2009) Representation theory also suggests that the supervisory effectiveness of the Board is higher when independent members become more and more (Nicholson and Kiel, 2007), reducing conflicts of interest, reducing agency costs Epstein and Roy (2010) concede that the Board should meet regularly, dynamically as well as have many skills and knowledge to maintain operations before increasing pressure of conflict Thus, the author uses the theory of representation to explain the role of the Board and the Audit Committee in dealing with the costs of representation arising between the owner and the managers in the proxy contract, as well as using the role of the Board, The Audit Committee reduces the conflict between owners and manager about related benefits At the same time, using this theory, the author thinks that corporate governance is good when fully complying with the requirements of 10 the OECD's governance principles and the Board and the Audit Committee effectively reduce the behavior of earnings management as well as improving the quality of financial statements 1.2.3 Theory of related parties The theory of related parties introduced by Freeman in 1984 opened up a different perspective on related parties such as: employees, customers, suppliers, sponsors, regulatory organizations, even corporate rivals According to this theory, businesses operate based on the interests, needs and views of many stakeholders John and Senbet (1998) said that the more the Board with number of members, the more diverse the structure of gender, the diversity of professional qualifications is appropriate and facilitates the increase in the linkage between components to increase efficiency monitoring At the same time, research by Baker and Wurgler (2002) also applied the relevant theory to explain the monitoring role of external auditors to ensure the interests of all parties involved 1.2.4 Theory depends on resources Pfeffer and Salancik (1978) introduced this theory and used to explain the structure of the Board and the Audit Committee This theory argues that the relationships between divisions and efficient use of resources increase the function of an organization Xie et al (2003) suggested that a BD with number of members is much; The structure of gender and professional diversity has the advantage of taking advantage of all the advantages that the structure brings, such as taking advantage of experience, social understanding and capital An ideal BD should consist of members with a deep understanding to be able to access a useful and necessary resource for the company (Hillman and Dalziel, 2003) Resource dependence theory also said that a BD is diversified in structure, many channels contribute to increase monitoring effectiveness and improve the company's operations Alzoubi & Selamat (2012) argued that effective BD and AC depends on the components: independent members, number of members, professional qualifications, and in frequency of meetings In this study, the author used Resource dependence theory to explain the impact of the BD and the AC on the behavior of business promotion At the same time, the thesis expects the Board and the Audit Committee with the ability to adjust resources (how many sizes, how many independent members, how many members have professional qualifications, how many times in a year, take part or not) respond well to your supervisory role 1.2.5 Behavior theory The theory of human nature Doughlas Gregor This theory holds that governance decisions and management strategies are greatly influenced by the viewpoint of human nature He proposed two theories of X theory and Y theory So follow Mc Gregor, which operates effectively, needs a mechanism to monitor behavior through labor regulations, procedures and disciplines in parallel with policies of policies that encourage creativity, enhance self-worth workers Theory of management behavior of Herbert A Simon Simon's management behavior theory mainly refers to making decisions that affect performance All management decisions are only considered valuable when they contain practical and feasible elements and depending on the organizational structure, the authority should be delegated or centralized to motivate work at grassroots levels According to representative theory, listed joint stock companies always have a conflict between the interests of shareholders and manager, so with the theory of Mc Gregor to limit manager behavior, listed companies should establish an effective monitoring mechanism such as the BD, the Audit Committee and According to Simon's behavioral theory, the responsibilities of the Board, the Audit Committee and the Internal Audit must be separate from each other and ensure a structure with all the components of the corporate governance rules mentioned 1.3 Theoretical basis of factors affecting earnings management behavior 1.3.1 Group of internal factors of the business 1.3.1.1 Salary of managers Salary is the basic salary that executives receive, which is very little changed According to Murphy (1999), wages are closely related to firm size Gao and Shrieves (2002) concede that wages have a negative impact on the level of corporate governance Bonus: The bonus has an impact on the management of the Management Board in the management of enterprises, specifically the study of Healy (1985) that the manager will use accruals to increase and decrease profits in order to reach the maximum level of reward Holthausen et al (1995); Pengjie Gao and Ronald E.Shrieves (2002), Gu and Hu (2015) also acknowledge that bonuses increase the level of earnings management 11 Stock options: The managers have the right to buy stocks that tend to accounting for financial management to increase their own benefits according to Healy (1985) The study by Cheng and Wafield (2005) also suggests that the manager has a stock-based bonus regime or owning stock tends to increase the risk of EM 1.3.1.2 Capital mobilization activities There are two capital mobilization activities: through issuing shares and through credit operations There are two views related to debt ratio: - The first view is that debt ratio increases the level of corporate governance Dichev and Skinner (2002) argue that debts are often accompanied by terms in the loan agreement that the company must meet or that Richardson et al (2002) argue that the company implements earnings management due to pressure and expectations big from the market Similar to the results of Klein (2002), Davidson et al (2005), it is found that the more leveraged enterprises use financial leverage, the more the trend of increasing EM - The second view is that maintaining the debt ratio with appropriate ratio will help maximize the value of the company, reduce agency costs and limit earnings management behavior (Jensen, 1986) Lee et al (2007), Jelinek (2007), Alsharairi and Salama (2012), Zamri et al (2013) also acknowledge the debt ratio to reduce EM 2.3.1.3 Type of business ownership Research by Chen et al (2010) suggests that the managers of most state-owned enterprises have remuneration regimes defined by many political and social objectives such as improving employment rates, Financial conditions of the region are under their jurisdiction, building relationships with peers and superiors by other income, in addition to securing executive and financial results (Fan et al., 2007) They will be less likely to implement the earnings management or to reduce the behaviors to stabilize the profits over the years and avoid the failure to meet the targets of the future years 2.3.1.4 Company management characteristics 2.3.1.4.1 The Board of Directors Carcello et al (2006) stated that the effectiveness of corporate governance practices reduces the behavior of corporate governance Whether a unit's corporate governance is effective depends entirely on the BD and the AC (Alzoubi & Selamat, 2012) Fama (1980); Fama and Jensen (1983) argued that Board is an important feature of corporate governance architecture and they argue that establishing an effective BD depends on its composition Therefore, the monitoring function of the BD and the Audit Committee is highly effective, depending on number of members, professional qualifications, frequency of meetings (Abbott et al, 2004; Carcello et al, 2006; Chen & Zhou, 2007; Ronen & Yaari, 2008) Some studies of Zahra & Pearce (1989); Alzoubi & Selamat (2012), said that the effectiveness of the Board depends on the number of independent members, number of members, professional qualifications and frequency of meetings in the year The number of members of the Board is significant in the effectiveness of manager supervision as well as increasing the business performance of enterprises (Persons, 2006) The larger the scale of the Board, the more diversity of experience, the diversity of expertise increases the monitoring function (Dalton et al., 1998; Pearce and Zahra, 1992; and John and Senbet, 1998) and restricts earnings management than small size (Xie et al., 2003; Soliman and Ragab, 2013; Daghsni et al, 2016) Meanwhile, the views of Lipton and Lorsch (1992) suggest that the company size should not be greater than or members; view of Jensen (1993), the size of the Board should not exceed members In this study, with the data model of listed companies combined with the characteristics of Vietnam, the author is in line with the research's point of view that the size of the Board of Management should not be too large, so it is less than the average of the data sample (cut-off point according to Carcello et al., 2006) Independent members of the BD are more appreciated than other members of the Board, who are dedicated to supervising the management and management behavior of the Board, so (Jonson et al., 1996; Peasnell et al., 2005; Shah et al., 2009) argue that these DLs have the potential to detect earnings management behaviors, all of which lead to a reduction in the level of earnings management in the presence of surname in the BD Beasley (1996) argues that the BD's e-Government is necessary to monitor activities, to maintain investor interest, protect investors' interests and also prevent abuse of power manager (Roe, 1991) A number of studies acknowledge that independent memberss limit the behavior of earnings management such as Beasley (1996), Carcello et al (2002), Xie et al (2003), Peasnell (2005), Davidson et al 2006), Osma (2008), Siregar and Utama (2008) Meanwhile Hsu and Wen 12 (2005), Mulgrew and Forker (2006), Murhadi (2009), Lin (2011), Gulzar and Wang (2011), Abed et al (2012), Seng and Findlay (2013 ) no evidence of lumbar spondylitis was found to affect earnings management In this study, the author believes that the independent member restricts the quality control The expertise of members of the Board makes the monitoring function of the Board more effective when the Board members have CMTC (Carcello et al, 2002; Xie et al., 2003; Agrawal and Chadha, 2005) Because one of the roles and responsibilities of the Board is to control the process of preparing financial statements to publicize to the public Therefore, to be able to fulfill this role, the Board must have professional qualifications in finance, accounting, as a basis for them to be able to understand the basis of the information presented in the financial statements, therefore, they have performed well their supervisory role in the quality of financial statements, limiting the behaviors of financial statements (Abbadi et al., 2016) In this study, the author agrees with the research when determining the monitoring effectiveness of the Board increases when there are members with financial expertise Frequency of Board meetings: One of the responsibilities of the Board is to participate in the general meeting of shareholders, the Board meeting and receive the opinions of shareholders about business operations of the company (Ronen and Yaari, 2008) According to Conger et al (1998); Ronen and Yaari (2008) believe that the Board meets regularly, the supervisory effectiveness of the Board increases Carcello et al (2002), Ebrahim (2007), Krishnan and Visvanathan (2009), when the Board meets more and more, it shows that the company has more problems to solve, so the audit fee is higher, the quality requirement is also high, therefore, the ability to implement the earnings management is lower The author agrees with the research when admitting that the more the Board meets, the more the conflict will be reduced, the quality of financial statements, limiting the behavior of financial statements and division is the average of the data sample (according to Carcello research et al, 2006; Ebrahim, 2007) The Director Duality of the Chairman of the Board: According to research by Shleifer and Vishny (1997), the supervision, management and operation of the Board are very important to avoid the situation of manager for the sake of causing damages to businesses Dechow et al (1996) provided an important evidence when the Chairman of the Board concurrently held the role of executive director, who tends to violate the accounting law, generate conflicts of interest and cause business risks The study of Chaganti et al (1985) suggested that, to achieve the highest monitoring efficiency, the function of the Board must be independent, who is the Chairman of the Board and CEO must be two independent individuals At the same time, the studies acknowledge the concurrent assignment of two titles that increase the behavior of earnings management (Klein, 2002; Gulzar and Wang, 2011; Nugroho and Eko, 2011; Lin, 2011; Soliman and Ragab, 2013; Daghsni et al, 2016) Therefore, the author thinks that for the Board to be highly effective in supervising and limiting conflicts of interests, the two titles of Chairman and CEO / CEO must be separated 2.3.1.4.2 Board of Supervisors; A key function of the Audit Committee is to effectively monitor the process of preparing financial statements, quality assurance, financial statement Therefore, with its roles and functions, the Audit Committee effectively prevents the illegal behaviors According to the study (Dezoort et al., 2002; Walker, 2004; Siregar and Utama, 2008; Alzoubi and Selamat, 2012; Metawee, 2013), it is shown that the Audit Committee with size, independence, and financial accounting expertise and the frequency of meetings during the year is good for the monitoring role, increasing the monitoring effectiveness of the Audit Committee The size of the Audit Committee: Vefeas (2005) said that the size of being too small or too large of the Audit Committee is also not good, and the most perfect members are or (Jensen, 1993), which increases monitoring effectiveness Yang and Krishnan (2005), Lin et al (2006), Chen and Zhou (2007) argue that the size of the Audit Committee has the opposite effect to the level of earnings management However, there are some studies that show that the size of the IC does not have an impact on the level of earnings management such as Bédard et al (2004) Soliman and Ragab (2014) However, in this study, the author views consensus when the Audit Committee has a number of members from to 4, the monitoring effectiveness of the Audit Committee increases, limiting the behaviors of reinsurance 13 The independence of the Audit Committee: Abbott et al (2004) argued that the independent IC is less relevant to financial fraud and has a very low rate in relation to financial statements adjustment (Agrawal & Chadha, 2005) Xie et al (2003) agree with the conclusions in the SEC report that the members of the IC are highly independent of management activities, which will limit the behaviors of earnings management At the same time, other studies also acknowledge that the IC of the Audit Committee has increased the role of supervision, reducing the level of abnormal accumulation, limiting the behaviors of LBP (Klein, 2002; Ebrahim, 2007; Iqbal et al, 2015) Klein (2002) in his study found that a CC with 100% independent members who had no correlation with earnings management and Klein (2002), Bronson et al (2006) also found the independence of the IC impact on the level of accountability when only need more than 50% of independent members So in this thesis, based on the research of Klein (2002), Bronson et al (2006), the author agrees that the Audit Committee increases supervisory roles, works more effectively when the proportion of independent members is greater than 50% Experience of the Audit Committee: The Audit Committee members with financial expertise will understand the financial and accounting decisions of manager, ensure the reliability of financial statements, increase the quality of financial statements (Carcello et al, 2002; Abbott et al., 2003; Bédard et al, 2004; Xie et al., 2003) supposed that earnings management will be lesser when the members of Audit Committee had financial expertise, which is an effective method of controlling personal interests of manager and increasing corporate governance effectiveness Defond et al (2005), Krishnan and Visvannathan (2008), Soliman and Ragab (2014) stated that the Audit Committee has a professional level of finance that increases the effectiveness of controlling and preventing illegal behaviors Abbott et al (2004), Bédard et al (2004); Dhaliwal and colleagues (2010) believe that only one member with financial experience in the Audit Committee will increase the quality of financial statements Therefore, in this study, the author agrees with the view that the Audit Committee in listed companies only needs one member with technical expertise to increase the role of monitoring and limiting the behavior of earnings management Frequency of meeting: Abbott et al (2004) said that the Audit Committee had a large frequency of meetings, the risk of re-reporting the financial statements is lesser, not related to the penalties of frauds and the restriction of illegal legal actions (Xie et al, 2003) Ebrahim (2007), Krishnan and Visvannathan (2008) in their research has demonstrated that when the IC is active, regular meetings will improve the effectiveness of supervision, increase the quality of financial statements to limit the behaviors of corporate governance In ng In this study, the author agrees that the meeting of the Audit Committee is more and more limited, thus limiting the behaviors of earnings management 1.3.2 Group of external factors 1.3.2.1 Regulatory environment Chen et al (2010) for policies and legal environments that affect the behavior of job creation The protected industries often tend to reduce their profitability (Jones, 1991) and enterprises that violate the competition law that are being investigated also tend to conceal their profits by recording multiple items deducted or recorded many provisions (Cahan, 1992) 1.3.2.2 Quality of auditing financial statements Chen et al (2005) demonstrated the impact of audit quality (represented by big4 or non - big4 variables) and the audit opinion has a negative impact on CG Therefore, improving the quality of auditing will contribute to reducing the quality of operations 1.3.2.3 Fluctuation of market return rate, stock price According to Burgstahler and Dichev (1997), the manager tends to hide losses because this affects investors greatly, investor sentiment always likes to make the company profitable Indicators of profit or loss on financial statements tend to affect market price (Hayn, 1995) In addition, if the business fails to meet the market's expectation, it may cause negative impacts on the price of the main stock so the profit may be managed to achieve the desired direction that the financial analyst has forecast (Kinney et al., 2002) 14 CHAPTER 3: RESEARCH METHODS 3.1/ research process In order to answer the objectives as well as the proposed questions, the research conducted qualitative research and quantitative research with the process is done through the following steps: Step 1: The author codified relevant studies to find gaps and identify research problems Step 2: Determining new factors included in the formal research model, the dissertation conducts qualitative research with expert insights After the interview, the author analyzes and refines comparison with background theory to identify the new factor representing corporate governance Step 3: With the proposed research model identified in step 2, the author conducts quantitative research through collecting information and data for calculating variables in the research model from financial statements, annual reports, and international reports on vietstock.vn The thesis regression, perform testing to select the appropriate estimation model, perform disease testing of the model and then accept or reject the hypothesis that the thesis has set With the results of the regression model, the thesis satisfies the objective as well as to answer question in the research Step 4: From the analysis of the results of step 3, the thesis has a basis to propose policy implications for listed manufacture company and related agencies to promulgate regulations to increase corporate governance effectiveness and increase transparency and honesty of Financial statements 3.2/ research design 3.2/1 Qualitative research methods 3.2.1.1 Process of qualitative research The process of qualitative research is the steps to collect new points in the study, so the author of Creswel (2013), Corbin & Strauss (2015) establishes the steps: (1) Determine the interview outline and the intended interview sample, (2) Formal interview, (3) Analyze and screen the topics into new topics 3.2.1.2 Sample and interview characteristics Experts selected for the interview process include groups: specialized accounting and auditing lecturers; Managers and chief accountants of unlisted and listed companies (In the research sample for in-depth interviews, the author chooses the majority of chief accountants of unlisted companies because the author wants to diversify views of companies on research issues) 3.2.1.3 Sample size Creswel (2007) suggested that the sample size in qualitative research must range from 20-30, Guest et al (2006), only need samples from to 12; (Corbin and Strauss, 2015) suggest that only about or interviews are needed if there is no new information collected during the interview, so the sample size in this study is to 12 3.2.1.4 Data collection and data analysis To get a new topic in qualitative research, the study takes steps: (first) Read carefully and summarize each interview table and store according to each specialist , (2) Based on each summary, similar contents of the same topic are grouped into a new research issue , (3) the topic group has been gathered (step 2) will be compared against the current background theory to identify new factors 3.2/2 Quantitative research 3.2.2.1 Quantitative research process The quantitative research process is carried out through the following steps: Step 1: Identify research samples and data collection sources The sample is 223 listed manufacturing companies in the period of 2012 - 2016 with an estimated total of 1,115 observations - years and official samples of 290 observations of 58 companies Collected data sources are taken on the cafef.vn www page; specialized finance page wwwfinance.vietstock.vn Step 2: Data is collected through the secondary market (available data) so the data processing tool is the regression equation so it is necessary to have the help of stata statistics software 12 The analysis steps are taken: First: identify the project according to the model Jones (1991) and the criteria for calculating anomalies through economic activities according to Roychowdhury model (2006) Secondly: Correlation analysis is used to consider the relationship between independent variables and dependent variables, between variables Thirdly: After analyzing the correlation between the variables, the thesis builds the regression equation to show the relationship between the dependent variable, the independent variable and perform the tests to select the appropriate estimation model 15 Fourthly: The thesis continues to test the autocorrelation diseases, the change of residual variance, the phenomenon of multicollinearity 3.2.2.2 Research models The research model consists of the dependent variable of earnings management representative according to Jones (1991) and measured according to Roychowdhury (2006), two independent variables are synthesized factors of the Board, Audit Committee and control variables to show the company characteristics , performance 3.2.2.3 Research hypothesis 3.2.2.3.1 Research hypothesis on the factor of board synthesis Carcello et al (2006) argued that the BD effectively limited the earnings management's behaviors; Fama and Jensen (1983) admit that the Board is an important feature of corporate governance architecture and they argue that establishing an effective Board depends on its components such as TVTV, professional qualification, frequency of meetings (Abbott and partner, 2004; Carcello et al, 2006; Chen & Zhou, 2007; Ronen & Yaari, 2008) At the same time, in the qualitative research phase, the experts interviewed said that the Board had all the following characteristics: the number of members, the independence of members, financial and accounting expertise, the number of meetings and the non-duality of positions increases the effectiveness of monitoring and affecting the behavior of accountability Therefore, the author considers that the factor of Board increases the quality of financial statements and restricts the behavior of earnings management Therefore, the author expects research hypothesis: H1: Synthesis factor the Board has a negative correlation with the behavior of corporate governance 3.2.2.3.2 Research hypothesis on the factor of Audit Committee Research by Dezoort et al (2002), Walker (2004), the monitoring effectiveness of the Audit Committee depends on the characteristics: size, number of members, professional experience and number of meetings per year At the same time, in the qualitative research phase, the experts participating in the in-depth interviews shared the Audit Committee, which had an impact on the behaviors of human rights management with full characteristics: number of members, qualifications, number of meetings and independence of the Audit Committee Therefore, according to the sharing point of experts in the qualitative research phase, the author thinks that the Audit Committee may affect the earnings management's behavior and expect the research hypothesis as follows: H2: Synthesis factor The control committee has a negative correlation with the behavior of sexual activity 3.2.2.4 Regression The author establishes two regression equations to test the reliability of two factors of synthesis of the Board and the synthesis factor of the BOS that was discovered at the qualitative stage : Regression model first SKIN it = α + β BD it + β AC it + β SIZE it + β CFO it + OW OWNER it + β LEV it + β EPS it + β MKTVAL it + AUD AUDIT + £ it Regression model REM it = α + β BD it + β AC it + β SIZE it + β CFO it + OW OWNER it + β LEV it + β EPS it + β MKVAL it + AUD AUDIT + £ it With: - REM it : The dependent variable reflects the earnings management calculation based on Roychowdhury model (2006) - DA it : Dependent variable reflects earnings management calculated by Jones model (1991) 3.2.2.5 Describe and measure variables 3.2.2.5.1 Describe and measure dependent variables Measure dependent variable according to Jones model (1991) According to Jones model (1991) to identify the project, the author performs the following steps: Step 1: Use the formula (1) to calculate the total cumulative value for each firm: Total cumulative value (TA it ) = LNKT after tax it - Operating cash flow it (1) Step 2: Then based on the formula (2) calculate the parameters α, β (parameters must be statistically significant) of the model through regression equation: REVit PPEit TAit i 1i 2i it (2) Ait 1 Ait 1 Ait 1 Ait 1 16 Step 3: Calculate the accrued value without adjusting by the parameters just calculated in step into formula (3) REVit PPEit NDAit (3) i 1i 2i Ait 1 A A A it 1 it 1 it 1 Step 4: Calculate the DTCDC amount DA it = TA it - NDA it Measurement of dependent variables according to Roychowdhury model (2006) Dependent variable of earnings management representative through economic activities is measured according to Roychowdhury model (2006) with: (1) the level of cash flow abnormality (REMCFO); (2) The level of production cost abnormality (REM –PROD), and (3) unusually useful cost level (REM-DISEXP) The order to calculate the level of anomaly represents the dependent variable in the regression model as follows :: First: The author calculates three levels of normalization according to the formulas of numbers (5) (6) and (7): operating cash flow Salesit Salesit CFOit 1 2 3 it (5) Ait 1 Ait 1 Ait 1 Ait 1 Production expense Salesit Salesit Salesit 1 PRODit 1 2 3 4 it (6) Ait 1 Ait 1 Ait 1 Ait 1 Ait 1 Useful costs Salesit 1 DISEXPit 1 2 it Ait 1 Ait 1 Ait 1 (7) Secondly: After collecting the above data, the author uses the least squares regression tool to calculate the coeffearnings managementients of equations (5), (6), (7) Thirdly: The estimated regression results have determined the coefficients calculated separately for each equation The author then substitutes the coefficients calculated into each corresponding equation (8), (9), (10) to calculate the normal, specific level Salesit Salesit CFOit 1 2 3 Ait 1 Ait 1 Ait 1 Ait 1 (8) Sales it Sales it Sales it 1 PRODit 1 2 3 4 (9) Ait 1 A A A Ait 1 it 1 it 1 it 1 Salesit 1 DISEXPit 1 2 (10) Ait 1 Ait 1 Ait 1 Fourthly: The author continues to calculate the level of cash flow abnormality, the degree of abnormal production and the level of useful cost anomaly by calculating the difference in book value and the normal level obtained from equations ( 8), (9) and (10) by equation (11) (12) and (13): The abnormal level of cash flow CFOit Salesit Sales RM _ CFOit 1 2 3 (11) Ait 1 Ait 1 Ati 1 Ait 1 The abnormal level of production costs RM _ PROBit PROBit 1 Ait 1 Ati 1 2 Salesit Ati 1 3 Salesit Salesit 1 4 (12) Ait 1 Ait 1 17 The abnormal level of useful costs DISEXPit Salesit 1 RM _ DISEXPit 1 2 (13) Ait 1 Ait 1 Ati 1 Finally, determining the level of abnormality includes: REM = RM_CFO * (- 1) + RM_PROD + RM_DISEXP * (- 1) 3.2.2.5.2 Measurement of independent variables and control variables The board variable (BD) is an aggregate variable representing the Board The factor of summing up the Board is the sum of corporate governance characteristics (scale of Board, independent members, technical expertise, number of meetings and non-concurrently) and the BD reaches the value from to 5, The variable of Audit Committee (AC) is also the general variable representing the Audit Committee to operate effectively and the general factor of the Audit Committee includes above characteristics: scale, independence, expertise and meeting frequency and get values from to For board variables (BD) BDit = BSIZEit + BINDit+ BEXPit + BMEETit + CEODUALit In which: BSIZE it : is a binary variable representing the size of the Board receiving a value of if the size of the Board is smaller than the average of the data sample, otherwise it receives a value of BIND it : is a binary variable that expresses the independence of the Board, receives a value of if the ratio of LDR from at least 1/3 number of members of the Board, otherwise, the value is It is a binary variable BEXP expressed qualified financial board members, the value is if the Board has members financial expertise exist, otherwise the value is BMEET it : is a binary variable that represents the number of meetings in the year of the Board , The value is if the number of meetings in the year of the Board is at least equal to the average value of the reverse research sample, the value is CEODUAL it : is a binary variable that represents the independence of the Chairman of the Executive Council, receiving a value of if the Chairman of the Board and the Director General of the Board are two independent individuals, on the contrary, the value of AC it = ACSIZE it + ACIND it + ACEXP it + ACMEET it In which: ACSIZE it : is a binary variable representing the size of the Audit Committee, taking a value of if number of members Audit Committee is a minimum of or members, otherwise ACIND it : is a binary variable, representing the independence of the Audit Committee, taking a value of if the proportion of independent members is greater than 50% of the members of the Audit Committee The opposite is ACEXP it : is a binary variable representing the level of financial expertise of the Audit Committee, receiving a value of if there is a member in the Audit Committee with a financial expertise; ACMEET it : is a binary variable representing the frequency of meetings in the year of the Audit Committee, receiving a value of if the minimum number of meetings of the Audit Committee in the year is the average of the research sample, otherwise Control variable Company size (Size) uses the base 10 log criteria total TS value to determine company size The cash flow of the BOF (CFO) is measured according to the ratio of cash flow to business / total assets State Ownership (OWNER): is a binary variable that receives a value of if there is a minimum state ownership rate of 20%, otherwise Debt ratio (LEV), measured by the ratio between total liabilities on total assets The average earnings per share (EPS) is a variable that continuously receives value according to the EPS indicator on the business result report The market capitalization value (MKVAL), measured according to the ten basis log of market capitalization Auditing company (AUDIT) is a binary variable that receives a value of audited by Big or vice versa 18 CHAPTER 4: RESEARCH RESULTS AND DISCUSSION 4.1 Results of qualitative research Based on the summary content through the interview with the experts, the views of the experts on the management and review are summarized by the author: There are topics (new factors) that experts believe have impact on the behavior of corporate governance in Vietnam stock market, which is a factor of summing up the Board and the synthesis factor of the Audit Committee with individual characteristics in the general factor : number of members, independence, expertise, number of meetings and non-duality (for the Board) 4.2 Quantitative research results 4.2/1 Descriptive statistics Descriptive statistical results show that there are behaviors of earnings management at listed manufacture companies based on cumulative basis and through technical testing in all years of research, but the level of corporate governance in REM is much higher than that of Project The majority of enterprises in the sample observed an increase in earnings management for REM, but the trend of earnings management increased and decreased relatively equally for the project The average level of earnings management for adjustment increases and decreases is not different, typical for the project, the average level of the whole management increased or decreased about 8% compared to the total value of assets at the beginning of the year, while for REM, on average, the quality of management both increases and decreases by about 19% And in 2014, the highest level of management and financial management was achieved, according to REM of 19.2%, the quality of management according to the project was 3.03% compared to the beginning of the year 4.2/2 Correlation between variables The variables in the regression equation and the regression equation have a correlation coefficient of less than 0.8, so it is difficult to exist the multicollinearity phenomenon 4.2/3 Multivariate regression analysis For regression equation : The study performed regression of Pooled OLS estimates, FEM and REM and the most suitable model was Pooled OLS At the same time, the model of OLS Pooled estimation is violated, assuming the variance change but does not exist the phenomenon of selfcorrelation and multicollinearity The result of Pooled OLS - Robust regression with adjusted R is 72.62%, acknowledging the variables BD, SIZE, CFO, OWNER, EPS, MKVAL are correlated and statistically significant with the behavior based on quality management based on For regression equation : The study performed regression of Pooled OLS estimates, FEM and REM and the most suitable model was FEM At the same time, the model estimates that FEM does not violate the assumptions of variance variance, autocorrelation, multicollinearity Multivariate regression results with R is 18.23%, reflecting the variable BD, SIZE, CFO, AUDIT correlation and statistical significance with earnings management behavior through economic activity 19 CHAPTER 5: CONCLUSION AND IMPLICATIONS FOR POLICY 5.1 Conclusion The basic thesis has solved two very important goals as well as answered two questions - Income: The dissertation through the qualitative research process along with the verification process through multivariate regression has basically solved the research goal as well as the research question that has identified the general synthesis factor corporate governance aspect impacts on specific earnings management behavior, which is a factor of general BD - Monday: The dissertation through multivariate regression model with related statistical techniques, the thesis answers the second goal as well as answers the second question is the factor of synthesizing BD effectively increases quality information on financial statements, limiting the quality of corporate governance behavior of the Management Boards in Vietnam 5.2 Contribution of the thesis 5.2/1 In theory This research has contributed to the treasure of scientific knowledge about the synthesis factor of the Board influencing the behavior of earnings management, as a solid theoretical foundation for other researches in the field of corporate governance research and corporate governance 5.2/2 About practice The dissertation provides a basis for CTSPs to see the role of corporate governance effectively, thereby perfecting the corporate governance system The thesis has evidence to suggest policy implications and is a basis for the relevant agencies to issue regulations related to the non-compliance of listed companies on information disclosure regulations and regulations on establishment corporate governance model to protect investors, improve competitiveness through management point cards The thesis also contributed more useful tools for auditing companies and auditors in the preliminary assessment of the earnings management behavior through assessing the factors of the Board, thereby serving the planning of auditing effective, limiting audit risks 5.3 Policy implications 5.3/1 For listed manufacturing companies (1) listed manufacture company needs to improve and have a deep understanding of the role of corporate governance especially the role of the Board in the quality of financial statements Specifically, the listed company must complete the corporate governance model according to OECD, according to corporate governance regulations of Decree 71/2017 / ND - CP; structure of the Board to meet the requirements as mentioned in the study (2) listed manufacture company should provide more information related to the models of measuring quality management, supporting investors and analysts with more information in decision making (3) listed manufacture company should consider the selection of large and reputable auditing units to ensure the best quality of information provided, increasing the interest of investors and restrictions on earnings management 5.3/2 For related units For investors (1) Investors who choose investment should choose enterprises with sufficient signs of an effective BD with all the characteristics mentioned by the dissertation Investors can base on the information provided on the annual report to calculate the factor of the Board and the factor of the Board with greater value, the more effective the Board's monitoring activities and the lower the level of management (2) Investors can also consider company size, net cash flow from business activities, debt ratio, State ownership, Big4 auditing to make investment decisions to protect capital Its used effectively (3) Investors can apply the Jones (1991), Roychowdhury models (2006) to preliminary estimate of the earnings management to support investment decision making (4) Investors must improve their qualifications and knowledge in order to have a more complete assessment of financial statements, assess the factors mentioned in the thesis that may affect behavior of earnings management Ministry of Finance; Need to complete the legal framework for the Vietnamese accounting system The Ministry of Finance should update and improve the system of Vietnamese accounting standards, particularly more stringent regulations on the use of accounting estimates and accounting methods to limit judgment and impose will subjective of those who work in accounting, making financial statements 20 Auditing agency Auditing companies, in the planning stage, conduct preliminary analysis of the effectiveness of the Board as a basis for determining the overall importance as well as the item importance, thereby designing the inspection procedures necessary math Auditing companies in general and auditors must comply with professional ethical rules, always improve professional qualifications and improve moral values to minimize risks to the lowest level , ensuring the reliability of the honesty and reasonableness of the audited financial statements Securities companies and stock exchanges: It is necessary to strictly handle violations of information disclosure on the stock market The author recommends that the State Securities Commission should issue regulations with strict penalties for cases where the profit level is changed after the audit exceeds the permitted rate Units and agencies operating the market should strengthen the analysis and evaluation of the market with more effective tools to help investors as well as those who need to use information with more information To make a decision, at the same time also give early warnings about the financial situation of companies that are struggling to avoid abrupt listing cancellation The State Securities Commission needs to issue regulations on providing information as well as enforcing strict sanctions to deter the provision of incomplete information and false information 5.4 Limitations and future research directions 5.4.1 Limit First: The research sample of the thesis includes only 290 observations of manufacturing companies listed on the HOSE and HNX stock exchanges in the period of 2012 to 2016 Therefore, in the study, the thesis cannot compare the differences in the quality management among different sectors Secondly: The multivariate regression model of the thesis with the dependent variable DA is only calculated according to Jones model (1991), while there are currently many models to identify DA such as Dechow et al et al (2005) Therefore, the dissertation has not yet conducted the testing to compare the model of identifying the DA which is most suitable for Vietnam stock market Thirdly: The dissertation only studies independent variables and control variables, while there are many factors affecting the Behavior of earnings management principles such as using derivatives, options to buy / sell stocks, political factors, culture Therefore, this is also the limitation of the thesis is not studied the factors of derivatives, options, political factors 5.4.2 Future research directions (1) In the future, the scope of this study should be extended to all non-financial companies listed on HOSE and HNX; (2) In the future, studies should use multiple models to identify earnings managements to measure dependent behavior of behavioral representation as Dechow et al The study should explore more cultural, political, and geographical factors that represent Vietnam in particular as an independent variable in the research model of earnings management 21 LIST OF WORKS OF THE AUTHOR Ngo Nhat Phuong Diem (2017) Study the factors affecting the behavior of accounting profit control of enterprises - empirical evidence in Vietnam Scientific research topic at the school level in 2017, University of Finance – Marketting, editor Ngo Nhat Phuong Diem (2018) Corporate governance efficiency and profit adjustment: Overview and expected research model Journal of Economics - Technical University Technical Economics Binh Duong, 21, 3-2018Journal of Economics - Engineering, Kinh University Ngo Nhat Phuong Diem (2018) Experimental study of factors affecting the adjustment of accounting profit of listed companies on Vietnam stock market Journal of Accounting & Audit,No 3/2018 Le Dinh Truc and Ngo Nhat Phuong Diem (2018) The factor of corporate governance representative impacted on the quality of corporate governance of listed manufacturing companies in Vietnam Proceedings of international scientific conference, 10/2018 ... University of Economics Ho Chi Minh City Professional advisor: PhD LE DINH TRUC PhD TRAN VAN THAO Reviewer 1: Reviewer 2: Reviewer 3: This thesis will be presented to the Thesis Committee at:... acknowledged the quality of auditing firms as limited Institutional behavior management 1.2 Overview of studies in Vietnam 1.2.1 Study corporate governance characteristics affecting the behavior of earnings... affecting the behavior of accounting profit control of enterprises - empirical evidence in Vietnam Scientific research topic at the school level in 2017, University of Finance – Marketting, editor
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