EARNINGS MANAGEMENT, BUSINESS STRATEGY, AND BANKRUPTCY RISK: EVIDENCE FROM VIETNAM

Abstract

The purpose of this study is to examine the effect of accrual earnings management and business strategy to bankruptcy risk. Multiple Least Square (MLS) regression and M-Estimator regression are performed on financial data of 200 non-financial firms listed on the Ho Chi Minh City Stock Exchange (HoSE) and the Ha Noi Stock Exchange (HNX) from 2010 - 2020. The result indicates that earnings management and bankruptcy risk have a positive relationship with each other. When firms are actively engaging in earnings management, the level of financial strength will decrease, leading to experience higher bankruptcy risk in the future. Meanwhile, firms that implement either one of two generic business strategies of cost leadership or differentiation, significantly mitigate the risk of bankruptcy.