This paper examines the effect of corporate governance mechanism on earnings management of 130 enterprises traded on Ho Chi Minh Stock Exchange (HOSE), Vietnam in 2014. Earnings management is measured by discretionary accruals and corporate governance is characterized by the CEO duality, board size and board independence. | Hue University Journal of Science ISSN 1859-1388 Vol. 113, No. 14, 2015, pp. 5-15 THE EFFECT OF CORPORATE GOVERNANCE ON EARNINGS MANAGEMENT OF ENTERPRISES LISTED ON HOCHIMINH STOCK EXCHANGE, VIETNAM Le Thi Hoai Anh*, Le Thi Nhat Linh, Vu Thanh Huy College of Economics, Hue University Abstract: This paper examines the effect of corporate governance mechanism on earnings management of 130 enterprises traded on Ho Chi Minh Stock Exchange (HOSE), Vietnam in 2014. Earnings management is measured by discretionary accruals, and corporate governance is characterized by the CEO duality, board size and board independence. Based on this study, recommendations are made to the policy-makers and standard setters to contribute to limiting this practice in Vietnamese context. To achieve this objective, an empirical analysis is conducted by using the multivariate regression model. The results indicate that while CEO duality and board size are positively correlated with the extent of earnings manipulation, there is no association between board independence and this variable. Keywords: Earnings management; corporate governance; discretionary accruals; HOSE 1 Introduction Earnings difference before and after auditing is a typical issue reflecting earnings management practices of Vietnamese listed firms [4]. In the 2014 season of auditing report release, this issue was getting more serious and made investors upset when reported earnings of many companies dramatically increased or decreased after auditing, from loss to profit or vice versa [6]. Typically, Petro Vietnam Construction Joint Stock Corporation (PVX) shocked the market by announcing the audited consolidated earnings after tax dropped nearly VND 70 billion, from VND billion to VND billion; or Construction Joint-stock Company No. 5 (VC 5) reported a loss of VND 17,235 billion instead of a profit of VND 268 million [6]. Earnings manipulation, regardless of underestimation or overestimation, can mislead users of .
