Factors affecting earning managements of construction firms: Evidence from Vietnam

The objective of this study is to analyze the factors that influence earnings management behavior among listed construction companies in Vietnam. This study uses data from 29 listed construction firms from 2019 to 2023. To measure the extent of earnings management, the study employs the Modified Jones Model (1995) and further applies the Feasible Generalized Least Squares (FGLS) method to evaluate the impact of various factors on the level of such behavior. Regression results generated using STATA 17 indicate that four out of the six tested variables— firm size, profitability, board size, and audit quality—along with two control variables, operating cash flow and revenue growth–significantly influence the degree of earnings management within the sample. Specifically, firm size, profitability, board size, and revenue growth exhibit positive relationships with earnings management, whereas audit quality and operating cash flow have negative effects. Based on these findings, this study offers several policy implications for regulatory authorities, audit firms, construction enterprises, and investors to mitigate opportunistic earnings management practices and improve financial reporting reliability.