Tóm tắt Luận án The impact of corporate governance on the quality of financial reporting information of listed companies in Vietnam

1 INTRODUCTION 1. Research motivations Financial reporting information (FRI) is one of the information channels that listed companies be required to publish on the stock market. In the stock market, the listed company supply information, the investor is primarily subject to receive and use this information in making their decisions. The quality of FRI depends on the quality of the set of procedures: preparing, presentation and disclosure of the listed company, these procedures are influenced by internal and external factors of the enterprise. FRI quality is influenced by many factors in which corporate governance (CG) is concerned over recent decades. CG includes internal and external mechanisms. Internal mechanisms are setting up structures to control behavior preparing, presentation and disclosure. The effectiveness of the mechanism will help high quality financial reporting. Academic research has found an association between weaknesses in governance and poor financial reporting quality (Cohen, 2004). According to the author's knowledge, in Vietnam there are few studies measuring the quality of FRI as well as an assessment of the impact of CG on the quality of comprehensive FRI. Therefore, the study chooses subject: “The impact of corporate governance on the quality of financial reporting information of listed companies in Vietnam”. 2. Research objectives - The first research objective is to determine the factors of measurement quality of FRI of listed companies in Vietnam. 2 - The second research objective is aimed at determining the impact of CG characteristics on the quality of FRI. - The last research objective is to assess the reality of quality of FRI and the impact of CG on the quality of FRI of listed companies in Vietnam. 3. Research questions To achieve these objectives, there are three study questions which are set out as follows: The first question: What level of quality of FRI of listed companies in Vietnam is assessed? The second question: How is the CG impact on the quality of Vietnamese FRI? The third question: What is orientation to strengthen CG and thus enhance the quality of FRI of listed companies in Vietnam? 4. Research subjects and scope of research Research subjects The study subject of this thesis is the quality of FRI and the impact of CG on the quality of FRI. Scope of research - Investigated subjects were FRI and characteristics of the CG of listed companies on HOSE and HNX in fiscal year 2012. - FRI including financial and non-financial information is now published in the reports, namely: annual reports, corporate governance reports, 4th quarter’s financial statements. - The corporate governance factors are limited in the thesis include: Board of Directors (BOD), Supervisory Board (SB) and Internal Audit (IA). 5. Research methodology 3 The author employed mixed research approach (embedded design and explanatory design) including qualitative research and quantitative research. 6. Novel contributions of the thesis The thesis’ results have created new scientific and factual contributions as follows: Scientific - Systemize and clarify general reasoning aspects in terms of the quality of FRI and CG from previous studies in Vietnam and the world. This content includes systematizing theoretical background on the quality of FRI and CG, as well as, the impact of CG on the quality of FRI. These results help future research approach to theory on quality of FRI and CG in a systematic and easier. - In terms of methodology, the thesis has built the scale which is tested conformity and reliability as well as their values. The scale measure the quality of FRI towards useful for economic decision making. These results help academic researchers in Vietnam and subsequent studies used, adjust and supplement to incrementally scale the value and reliability to assess the quality of FRI of the listed companies in Vietnam on a more complete. Factual The study results analyzed and evaluated the factors of FRI quality and the characteristics of CG help policy makers, legislators have insight in developing relevant legislation to improve better on quality of FRI and CG, thereby, suited to the requirements of international integration. Besides, the 4 recommendations in the thesis helps listed companies themselves complete contents of the information on financial reporting to shareholders and perfecting corporate governance to ensure quality of published financial reporting information. 7. Structure of the thesis Except for the Introduction, the thesis consists of five chapters, presenting in orders and including main contents as follows: Chapter 1: Literature review on FRI and CG; Chapter 2: Theory of FRI and CG; Chapter 3: Research Methodology; Chapter 4: Results and Discussion, Chapter 5: Conclusions and Recommendations. CHAPTER 1: LITERATURE REVIEW ON FRI AND CG 1.1 The domestic studies related to FRI and CG - Financial reporting is not only the output of a set of procedures, but the set of procedures themselves. The quality of the output depends on the quality of each step taken to produce it. Most of domestic studies focus various aspects of FRI in the traditional sense. The authors study the current status of Vietnamese accounting procedures and accounting standards, through improve accounting procedures and to perfect accounting standards towards integration of international accounting standards. Research and approaches methods were done mainly by qualitative methods. - Regarding the impact on CG to FRI quality, as of the present time, Vietnamese studies have little research the relationship between the quality of FRI and CG, which only studied under different aspects related FRI and CG. 1.2 The foreign studies related to FRI and CG 5 The foreign studies have evaluated the quality of financial reports in a variety of measures. The different measures that are contemplated as: Earnings management, Financial Restatement, Financial Statement Fraud, focus on information disclosed in financial statements to assess the financial reporting quality. Most of foreign studies investigated the CG characteristics as: BOD, audit Committee (AC) and IA on the specific factors of the quality of financial reporting, as: Earnings management, Financial Restatement, Financial Statement Fraud, Voluntary Disclosure... CG characteristics, namely: - BOD: board side, Board Independence, Board Accounting - Financial Expertise, CEO Duality, Meetings’ Frequency - AC: AC Independence, AC Accounting - Financial Expertise, Meetings’ Frequency - IA: The presence of the IA. Research methods of foreign studies mostly used regression analysis to assess the impact of CG on the quality of FRI. 1.3 The gap in research Firstly, in Vietnam, there is no study of the impact of CG on the quality of FRI, while the foreign studies only investigate the impact of CG on the quality of FRI in other aspects. Secondly, to assess the quality of FRI, the Vietnamese studies focused on review accounting procedures and quality accounting standards are set in Vietnam, through improve accounting procedures and to perfect accounting standards towards integration of international accounting standards. There 6 is no any study the quality FRI in the direction of the useful economic decision making. Thirdly, while the domestic research mainly use qualitative methods to measure the quality of FRI, the foreign studies using quantitative methods to assess the impact of CG on the quality of FRI. From these gaps in the above research, in view of inheritance and combining the previous research models, the thesis will study the impact of CG on the quality of FRI in the stock market in Vietnam. Summary of chapter 1 CHAPTER 2: THEORY OF FRI AND CG To answer the research question, the content of the chapter 2 presents the foundational theories and the conceptual framework related to CG and FRI, particularly in this chapter will present the following: - Thesis presents 4 the foundational theories: decision- usefulness theory, the theory of asymmetric information, agency theory and behavioral theory of management. - Besides, the thesis presents the concepts related to the quality of FRI, thereby it will be basis for assessing the quality of FRI, through to build scale the quality of FRI in chapter 3. To measure the quality of FRI, thesis use the fundamental and enhancing qualitative characteristics laid out in the conceptual framework of the IASB and FASB (2010). In addition, the thesis presents the concept and origin of CG and structure or CG, this is a basis to build hypotheses about the relationship between CG and FRI’ quality in the next chapter. 7 - From the above researching theories related to FRI and CG, the thesis build research model to answer the research questions. Figure 4: The research model Summary of chapter 1 CHAPTER 3: RESEARCH METHODOLOGY 3.1 Research methodology To achieve the research objectives and to answer the research question, the thesis use the group the following methods: 3.1.1 The general approach: The general approach of the thesis, the author employed mixed research approach (embedded design and explanatory design) including qualitative research and quantitative research. 3.1.2 Specific approach: Deductive approach, investigation approach, inductive approach. Board Accounting - Financial Expertise Board Independence CEO Duality BOD Meetings’ Frequency Quality of FRI SB Independence SB Accounting - Financial Expertise IA presence 8 3.1.3 Framework of thesis: The combination of research methods, as described, to achieve the research objectives, the steps of the thesis can be summarized as the following major steps: Step 1: Constructing scale of quality of FRI To construct a measurement tool, we use Ferdy Van Beest literature (2009), which defines financial reporting quality in terms of the fundamental qualitative characteristics and the enhancing qualitative characteristics (underlying decision usefulness as defined in the IASB (2010). However, the scale of Ferdy Van Beest is done in the developed countries. To ensure construction of the scale is suitable for Vietnamese environmental, the thesis using qualitative methods to interview experts about the need of scale. Step 2: Measuring quality of FRI and hypothesis Testing This step, the thesis mainly uses quantitative methods to measure the quality of FRI and investigates the level of impact of these variables CG on the quality of FRI, in particular: - Since the scale is built in step 1, thesis survey of 195 annual reports of listed companies based on Likert five point rating scales to determine the total score of each company. The original scale includes a conceptually-based 10 item index laid out in the conceptual framework of the FASB (2010) and IASB (2010). After the data is collected, the thesis assesses reliability (Cronbach alpha) and value of scale (analysis EFA). Final results showed that the official scale includes 16 elements. Step 3: Using qualitative methods explain the results of the regression model 9 After obtaining the results from the regression model of step 2 on the impact of CG variables on the quality FRI variable, thesis will interview experts on corporate governance in order to explain and comment from results of regression models. 3.2 Study Design 3.2.1 Measurement of the quality of FRI of the listed companies. To construct a measurement tool, we use prior literature which defines financial reporting quality in terms of the fundamental and enhancing qualitative characteristics underlying decision usefulness as defined in the FASB and IASB, 2010. The fundamental qualitative characteristics (i.e. relevance and faithful representation) are most important and determine the content of financial reporting information. The enhancing qualitative characteristics (i.e. understandability, comparability and timeliness) can improve decision usefulness when the fundamental qualitative characteristics are established. The list of 19 items to measure, as follows: Relevance is operationalized using five items referring to predictive and confirmatory value: We measure predictive value using three items: the extent to which annual reports provide forward-looking statements (P1); the extent the annual reports discloses information in terms of business opportunities and risks (P2); company’s use of fair value (P3). Next to, information has confirmatory value “if it confirms or changes past (or present) expectations based on previous evaluations”. We measure confirmatory value using two items: the extent the reported results provide feedback to users of the annual report 10 as to how various market events and significant transactions affected the company (P4); the extent the annual report contain information concerning divisions (P5). Faithful representation: To faithfully represent economic phenomena that information purports to represent, annual reports must be complete, neutral, and free from material error (IASB, 2010: 18). We measure faithful representation using five items: the extent valid arguments provided to support the decision for certain assumptions and estimates in the annual report (T1); the extent the company base its choice for certain accounting principles on valid arguments (T2); the extent the company, in the discussion of the annual results, highlight the positive events as well as the negative events (T3); The disproportion in earning between before and after audit (T4); The type of auditors’ report is included in the annual report (T5); the extent the company provide information on CG. Understandability: 3 items: Classified and characterized information refers to how well-organized the information in the annual report is presented (H1); the amount of tabular or graphic formats (H2); the explanation of glossary (H3). Comparability: 4 items: To what extent do the notes to changes in accounting estimates explain the implications of the revision? (S1); to what extent do the notes to changes in accounting policies explain the implications of the change? (S2); to what extent does the company provide a comparison of the results of current accounting period with previous accounting periods? (S3); to what extent does the company 11 presents financial index numbers and ratios in the annual report? (S4). Timeliness: 1 item: The amount of days from the end of the financial year to the date of announcement (K). The thesis use a five point rating scales to assess the scores on the items. This process results in a score between 1 and 5 for all items: 1 indicating a poor score, while an outcome of 5 implies excellence. 3.2.2 Hypotheses Development From the research model is described chapter 2, the thesis build hypotheses to consider the impact of the factors CG on the quality of FRI, as follows: H1: The independence of the board of directors is positively related to the quality of FRI among listed companies. H2: CEO duality is negatively related to the quality of FRI among listed companies. H3: The accounting-financial expertise of the board of directors is positively related to the quality of FRI among listed companies. H4: The number of board of directors meeting positively related to the quality of FRI among listed companies. H5: The independence of the Supervisory Board is positively related to the quality of FRI among listed companies. H6: The accounting-financial expertise of the Supervisory Board is positively related to the quality of FRI among listed companies. H7: The presence of the internal Audit is positively related to the quality of FRI. 12 Moderating variables: Besides examining the impact of the seven independent variables in CG on the quality of FRI, the thesis uses two moderating variables: the size of the company and the proportion of the state-owned capital in the charter capital of the company. Company size variable H8a: the bigger companies become, the more quality or FRI they are. H8b: The impact of CG on the quality of FRI is stronger in companies with larger size. The proportion of the state-owned capital in the charter capital H9a: The companies with higher proportion of the state-owned capital in the charter capital, the lower quality of FRI they are. H9b: The impact of CG on the quality of FRI is stronger in companies with lower proportion of the state-owned capital in the charter capital. 3.2.3 Regression Model In order to establish a correlation among the level of FRI and CG characteristics, this thesis uses regression analysis while the dependent variable is the quality of FRI and independent variables are seven the CG characteristics mentioned above. The model is built as follows: CLBCTC = ࢼ0 + ࢼ1ĐLHĐQT + ࢼ2KNCD + ࢼ3CGHĐQTĐL + ࢼ4SLCH + ࢼ5ĐLBKS + ࢼ6CGBKS + ࢼ7KTNB + ei. 13 3.2.4 Description of data and information collection methods The Source of data to collect is the listed company in HOSE and HNX. At 31st December, 2012, there are 297 enterprises in HOSE and 367 in HNX. However, in order to conform to conditions comparable data [S3], sample is limited companies established before 2008. There are 196 companies. In the process of collecting information, there is a company in HNX without collecting data. Thus, the final sample for the study is randomly selected from the 195 companies listed on the HOSE and HNX, namely: 107 companies in HOSE, 88 companies in HNX. Sources being used in this regard were the official data published by companies listed on the HOSE, namely: the Annual Report (2012), Corporate Governance Report (2012). The documents obtained from the website: www.vietstock.vn. 3.2.5 Methodology of the quality of FRI To evaluate quality of FRI base on 19 factors, the thesis did in two steps. Step 1, the author conducted observations of relevant documents (annual reports and 4th quarter financial statements) to score each factor under Appendix 3. To base on "Interpretation" and "Recognition" columns in Appendix 3, the author uses a five point rating scales to assess the scores on the items. To reduce the subjectivity in the process of scoring, the author proceeds to step 2. Step 2, the author scores the qualitative factors such as: P1, P2, P4, P5, T3, T6 and H1. Scoring of 2nd step is independent of 1st step, then, comparing with the 1st score. If there is a difference between the two steps, the authors will review each element to obtain the final score. 14 3.3 Testing the reliability and value of the quality of FRI scale. 3.3.1 Testing the reliability of the scale by Cronbach alpha In the proposed research model, to measure the factors that make up the quality of FRI, the authors have proposed 19 factors. The method of quantitative research is done in this research step. Using Cronbach alpha coefficient tests the reliability of the scales which measure the concepts in the research model. After assessing the reliability of scale by Cronbach alpha, the scale removed 3 variables: T4, S1 and S2. Thus, the official scale of the quality of FRI includes 16 factors. Using a five point rating scales, the total of score which company achieved is in distance of 16 to 80. From this scoring approach, the thesis proposed the level of quality of FRI according to 5 levels: Excellent: 68-80; Good: 55-67; Medi