Do board friendliness and economic development affect firm’s abnormal earnings? An evidence of quantile regression

Abstract

This study delves into the intricate impact of board social networks and local economic development on abnormal earnings within the financial statements of listed companies in Vietnam. The unique focus lies in internal board linkages, differentiating it from external engagements with other firms. Employing quantile regression, from a dataset encompassing 4449 observations from 241 listed companies in Vietnam, our findings reveal that firms with educational-professional linked managers tend to have low earnings quality at quantiles 0.05 and 0.10 but exhibit better earnings quality at quantiles 0.90 and 0.95. Executives sharing professional ties contribute to more accurate profit reporting at quantiles 0.05 and 0.10, whereas lower quality is observed at quantiles 0.25, 0.50, and 0.75. Executives sharing educational ties contribute to more accurate profit reporting at quantile 0.05 only, whereas lower quality is evident at quantiles 0.75, 0.90, and 0.95. Furthermore, the development of local GDP can enhance corporate financial reporting accuracy at quantiles 0.05, 0.20, and 0.25 but diminishes the quality of financial statements at quantile 0.10. These findings offer valuable insights into the complex interplay between board networks, economic development, and financial reporting quality in the Vietnamese corporate landscape.

Keywords

• Earnings management
• Board friendliness
• Economic development
• GDP Growth
• Emerging market
• Vietnam