The mediating mechanism of earnings management on the relationship between life cycle and financial reporting quality: Finding from MRA and fsQCA

Abstract

The study examined the relationship between organization life cycle (OLC) and financial reporting quality (FRQ) in the Vietnamese context with the mediating role of earnings management (EM). We used estimation OLS, fixed effects model, and other robustness tests to validate the results on a sample of 408 Vietnamese listed companies over the period 2010–2017. In addition, we compare the regression results with a recently established approach is, fuzzy‐set qualitative comparative analysis (fsQCA). The multiple regression analysis results suggest that firms with low profits or poor financial performance have low‐quality financial statements. On the other hand, when firms mature or have significant retained earnings, the quality of financial information improves and peaks. Besides, throughout the OLC, real earnings management behaviors are less likely to be used than accruals earnings management. Finally, because of the mediating effect of EM, the influence of OLC on FRQ is increased. The fsQCA findings indicate complex configurations between OLC, EM and other controls factors to the outcome of FRQ. This research contributes empirical evidence to the scientific literature on accounting and corporate governance. Next, the main contribution of our study is the examination of mediating role of EM on OLC‐FRQ association through both regression analysis and the fsQCA approach. Additionally, we conducted this study in Vietnam, where the legal framework in protecting the investors is still not complete; this will significantly contribute to the literature overview of OLC and FRQ.

Accrual-based earnings management and organizational life cycles: Two-dimensional analysis

“…More specifically, they discovered that enterprises in the introduction or decline stages strive to intensify activities in the field of AEM while mature firms are less involved with this practice. Khuong and Anh (2022) examined public companies in Vietnam and discovered that during a downturn, listed enterprises show deterioration in accrual quality. In general, company executives prefer to reduce the AEM practices in the developing or mature OLC stages, which is explained by the fact that in this stage, firms tend to improve production processes, so the accounting earnings management s behaviour can decrease.…”

A configural model of analytics capabilities, ambidexterity, co‐opetition, and firm performance in the supply chain context

“…These combinatorial routes will provide more insight and understanding with respect to how the determinants interact and which of the determinants are more relevant, necessary, or sufficient to generate a desired firm outcome (e.g., firm performance), as shown in past business strategy development studies (Khuong & Anh, 2022;Thu & Minh, 2022). By drawing on expert fsQCA suggestions (Pappas et al, 2020) and extant empirical and theoretical discussions, we developed the configural model presented in Figure 1.…”

The Effect of IFRS Adoption on the Business Climate: A Country Perspective

“…This method is also particularly pertinent for the examination of small samples (Greckhamer et al 2013), which is what is being done in the current study. This is a growing methodology in terms of application in the accounting and economic context; however, it has produced some relevant manuscripts, e.g., Foli et al (2022), Khuong and Anh (2022), Boratyńska (2021), andBedford et al (2016). The fsQCA methodology has also been used in several prior studies on finance and entrepreneurship (Bedford et al 2016;Cervelló-Royo et al 2020;Devece et al 2016;Estevão et al 2020) to analyze the several multivariable configurations leading to some event/value of a certain economic indicator (Park et al 2017).…”