Board characteristics, ownership structure, and their effects on real earnings management: Evidence from Vietnamese listed firms

Type of the article: Research Article AbstractThis study investigates the relevance of corporate governance mechanisms and ownership structure in shaping real earnings management behavior in an emerging market context. The objective of this investigation is to evaluate whether board characteristics and ownership types influence firms’ engagement in real earnings management. A balanced panel dataset comprising 434 non-financial firms listed in Vietnam over the period 2020–2024, totaling 2,170 firm-year observations, is utilized. The empirical analysis employs ordinary least squares, fixed-effects, random-effects, and feasible generalized least squares models to address heteroskedasticity and serial correlation, thereby ensuring robust estimates of the relationships. The results reveal systematic and statistically significant associations between governance attributes and real earnings management. Notably, larger boards are associated with lower levels of real earnings management, suggesting that expanded board structures enhance monitoring capacity and curb opportunistic managerial behavior. Additionally, institutional ownership and state ownership exhibit an inverse relationship with real earnings management, implying that these ownership structures bolster external oversight and discipline managerial discretion. Conversely, increased board independence, financial expertise among board members, and managerial ownership are associated with greater engagement in real earnings management, suggesting that formal governance frameworks do not invariably translate into effective substantive monitoring in emerging markets. Overall, these findings support the view that governance and ownership mechanisms operate asymmetrically in emerging markets, underscoring that strengthening the effectiveness of monitoring structures – beyond their mere formal adoption – is vital to improving financial reporting quality and promoting the sustainability of corporate performance. AcknowledgmentsThis research is partly funded by University of Finance – Marketing.