Factors affecting earnings persistence: Research in emerging markets

Abstract

The paper examines the influence of business characteristics on earnings persistence in Vietnam because earnings persistence is also one of the earnings quality assessment factors that attract the attention of investors and financial analysts. The study used regression methods of OLS, REM, FEM, and GLS, and research data at enterprises listed on the stock market in Vietnam from 2010 to 2018, with 3 677 observations. The results have identified factors such as firm size, revenue growth rate, accruals and dividend policy that positively affect earnings persistence while the financial structure has the opposite effect on the persistence of earnings. Besides, the liquidity only has an unclear influence on the persistence of earnings. The results of this study help businesses identify, improve earnings persistence and transparency of financial statements, accurately reflect business reality, and build the trust of shareholders.

Financial Leverage, Firm Size, Company Age, and Earning Persistence: Evidence From Indonesia

“…Associated with the effect of the firm size on profits persistence, Adegbie et al (2019), Abdillah et al (2021), Lasrya et al (2021), Sabila et al (2021), Dang and Vu (2022), and Khuong et al (2022) demonstrate a positive sign; however, Canina and Porter (2019), Gunawan et al (2020), Nurdiniah et al (2021), and exhibit an insignificant effect. In addition to financial leverage, Ha et al (2020) construct three models of earnings persistence (EP) with company size (CS) as another determinant.…”

“…In this study, earnings persistence (EP) becomes the dependent variable. The measurement of earnings persistence denotes Dang and Vu (2022) by utilizing the coefficient of θ 1 from the autoregressive regression model of return on assets (ROA) in the first equation, where the next year of ROA becomes the dependent variable, and the current ROA becomes the independent, as the first equation displays. Based on this equation, if this study wants to detect the earnings persistence: θ1 for 2019, ROA in 2020 and 2019 must exist to be the dependent and independent variables, respectively, and so on.…”

“…Several researchers attempted to associate profits persistence with financial leverage by utilizing the capital market data from China (Gong et al, 2021), Indonesia (Gunawan et al, 2020;Lestari & Harymawan, 2020;Nurdiniah et al, 2021;Sabila et al, 2021), Malaysia (Ha et al, 2020), Malaysia and Indonesia (Rokhmania & Kartika, 2021), the United States (Karim & Sarkar, 2020), and Vietnam (Dang & Vu, 2022;Khuong et al, 2022). Unfortunately, the research evidence to prove the relationship between financial leverage and earnings persistence still conflicts.…”

“…Unfortunately, the research evidence to prove the relationship between financial leverage and earnings persistence still conflicts. According to Gunawan et al (2020), Ha et al (2020), Gong et al (2021), Dang and Vu (2022), and Khuong et al (2022), financial leverage negatively affects earnings persistence. However, Nurdiniah et al (2021) and Rokhmania and Dewi (2021) demonstrate a positive association.…”

“…Besides focusing on the effect of financial leverage on earning persistence, these scholars also highlight the association of this persistence with firm size (Abdillah et al, 2021;Adegbie et al, 2019;Canina & Potter, 2019;Dang & Vu, 2022;Gong et al, 2021;Gunawan et al, 2020;Ha et al, 2020;Karim & Sarkar, 2020;Khuong et al, 2022;Lasrya et al, 2021;Lestari & Harymawan, 2020;Nurdiniah et al, 2021;Sabila et al, 2021) and company age (Adegbie et al, 2019;Gunawan et al, 2020;Karim & Sarkar, 2020). However, their result is still contradictory.…”