Year

2014

Degree Name

Doctor of Philosophy

Department

School of Accounting, Economics and Finance

Abstract

Vietnam is a newly emerging nation that is transitioning from a planned economy to a market oriented economy. There are very few previous investigations into the Vietnamese economy found in the literature. This thesis intends to be among the pioneers by examining, first, the effect of board diversity on earnings quality; second, the effect of board diversity on corporate social disclosure (CSD); third, the relationship between CSD and earnings quality of Vietnamese listed firms. It will also examine whether the relationship between CSD and earnings quality is moderated by state ownership and foreign ownership.

Board diversity is identified in two dimensions covering a wide range of attributes. One dimension covers structural attributes and the other dimension covers demographic attributes of the board of directors. Those attributes are then used to construct a diversity-of-boards index (structural dissimilarities among firm boards) and a diversity-in-boards index (demographic dissimilarities among directors within a board). These dimensions are considered as two scenarios. One scenario considers that attributes are equally important, (i.e. unweighted diversity-of-boards and diversity-in-boards indices), while the other scenario considers that attributes are not equally important (i.e. weighted diversity-of-boards and diversity-in-boards indices). The relative importance of attributes is measured using a survey questionnaire from the executives of listed firms that inquire into the relative importance of the attributes of the board of directors. This study then uses these two scenarios to examine the effect of board diversity on earnings quality and on CSD. In this study, earnings quality is a standardised aggregate measure compiled from four accounting-based measures of earnings quality: accruals quality, earnings persistence, earnings predictability, and earnings smoothness.

CSD is measured as perceived by stakeholders. This study constructs a three dimensional CSD index where one dimension is the quantity of CSD, and other two relate to disclosure type quality and disclosure item quality. A content analysis of annual reports is used to measure the quantity of CSD. The two aspects of disclosure quality in this CSD index are measured by surveying four stakeholder groups (employees, lawyers and regulators, local communities, and customers) to obtain their perceptions on disclosure type preference (i.e., narrative; monetary quantification; numerical quantification; both monetary and numerical), and about disclosure reporting items (i.e., items in the social indicators of the Global Reporting Initiative 3.1).

Based on agency theory in hypothesis testing, this study finds a significant and positive linear relationship about the effect of diversity-of-boards (using weighted and unweighted indices) on earnings quality. Based on resource dependence theory in hypothesis testing, this study finds a non-linear U-shaped association about the effect of diversity-in-boards (using weighted and unweighted indices) on earnings quality. The results also show that the weighted and unweighted board diversity indices have a similar effect on earnings quality.

According to agency theory in hypothesis testing, this study finds that diversity-ofboards (both unweighted and weighted indices) does not have a significant impact on CSD, thus these findings do not support agency theory. According to resource dependence theory in hypothesis testing, this study finds diversity-in-boards (both unweighted and weighted indices) has a positive effect on CSD. The weighted and unweighted board diversity indices also have a similar effect on CSD.

In terms of stakeholder theory and agency theory in hypothesis testing, this thesis finds that earnings quality has a significant and positive effect on CSD, which suggests that stakeholder theory (long term perspective argument) explains better than agency theory (managers‟ opportunistic incentives argument) about the effect of earnings quality on CSD of Vietnamese listed firms. Furthermore, the effect of earnings quality on CSD is weakened when the percentage of shares held by government increases. The percentage of foreign ownership does not impact on the relationship between earnings quality and CSD.

Overall, the empirical results of this thesis contribute on three fronts: theory, methodology, and practice. The theoretical front is advanced by testing theoretical propositions in the Vietnamese context; the methodological front is advanced by showing a design and measurement of board diversity indices as well as a design and measurement of CSD instrument. The findings benefit policymakers in better understanding firms‟ CSD practices and stakeholders‟ expectations to improve the current guidelines on the CSD as well as in reviewing the implications of the current corporate governance codes in the context of Vietnam to increase firms‟ reporting transparency and accountability to investors.

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