ECONOMIC SHOCKS AND THE EARNINGS MANAGEMENT-PERFORMANCE NEXUS: EVIDENCE FROM VIETNAM

Abstract

While the relationship between earnings management (EM) and firm performance (FP) has been widely examined, limited attention has been paid to how macroeconomic shocks condition this relationship, particularly in emerging markets. This study investigates the moderating effect of the COVID-19 pandemic on the EM-FP relationship among Vietnamese listed firms. Unlike prior studies that treat COVID-19 merely as an independent or control variable, this research is the first in Vietnam to explicitly model COVID-19 as a moderating variable and to employ the dynamic System GMM estimator to address endogeneity and capture adjustment dynamics. Using panel data from 80 non-financial firms (560 observations) during 2018-2024, the findings reveal that both EM and the COVID-19 pandemic exert a negative impact on FP. More importantly, the negative and significant interaction coefficient indicates that the pandemic acts as a “negative catalyst,” amplifying the adverse effect of EM on FP. These results provide new evidence on the context-dependent nature of managerial behavior and highlight the heightened vulnerability of FP under macroeconomic uncertainty.