Related party transactions, accrual-based earnings management and real activities earnings management in emerging market
ISSN: 0114-0582
Article publication date: 3 November 2023
Issue publication date: 29 April 2024
Abstract
Purpose
The purpose of this study is to examine the association between related party transactions (RPTs) in terms of sales and purchases and earnings management (EM).
Design/methodology/approach
The authors use the estimation method of system generalized method of moments (Sys-GMM) on a sample of 413 non-financial firms in Vietnam in the period from 2015 to 2019, totaling 1,638 firm-year observations. Multiple proxies for RPTs and EM are used to provide a comprehensive assessment of the relationship between the two factors.
Findings
There is a positive association between RPTs and EM, suggesting that both types of RPTs could reduce financial reporting quality and allow firms to be more engaged in earnings manipulation.
Originality/value
There are a number of studies investigating the above link, but they tend to use aggregate values (the sum of both sales and purchases with related parties) or just either accruals-based earnings or real EM. This study is the first to extend the literature on the relationship between RPTs and EM by examining both sales-based and purchases-based RPTs on both real and accruals-based earnings manipulation. This approach helps uncover the differences in the effect of the two types of RPTs on both types of upward EM.
Keywords
Acknowledgements
We thank Thu Phuong Truong (editor) and three anonymous reviewers for their helpful comments and suggestions on our paper.
Funding: This research is funded by University of Economics and Law, Vietnam National University Ho Chi Minh City, Vietnam.
Data availability statement: Data of present study will be available on request from corresponding author.
Conflict of interest disclosure: The authors declare no conflict of interest.
Ethics approval statement: The author adheres to the ethical guidelines required by the journal.
Citation
Khuong, N.V., Liem, N.T., Anh, L.H.T. and Dung, B.T.N. (2024), "Related party transactions, accrual-based earnings management and real activities earnings management in emerging market", Pacific Accounting Review, Vol. 36 No. 1, pp. 60-76. https://doi.org/10.1108/PAR-08-2022-0112
Publisher
:Emerald Publishing Limited
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