Financial distress and earning management: Evidence from Vietnamese listed companies in Food and Beverage industry

Abstract

The study examines the relationship between financial distress and earnings management using data from food and beverage companies listed in Vietnam stock exchange. Both types of earnings management, including accrual-based earnings management and real earnings management, were utilized in this study during 2014-2022 period. By employing feasible generalized least squares methods, the study finds that financial distress increases accrual-based earnings management in the following year while it decreases real earnings management. Firms in the financial distress tend to apply earning management to obscure their financial health and provide a more positive picture to stakeholders. These empirical findings provide inferences and recommendations for F&B corporate managers, regulatory authorities, and investors when evaluating financial information.