The impact of earnings management on stock returns: The role of investor attention

Abstract

This study evaluates the moderating role of investor attention in the relationship between earnings management and stock returns in a sample of 179 listed stocks on the Vietnam stock market during the period from 2014 to 2024. Our empirical analysis indicates significant negative impacts of earnings management on firms' stock returns in the following year, with an amplifying role of investor attention, as reflected by the frequency of information searches for each stock. This finding highlights the low efficiency of the Vietnamese stock market, characterized by low transparency, a high proportion of individual investors, and the resulting amplification of earnings management effects on stock return due to high information sensitivity, spillover effects, and herd investment behavior. Based on these findings, the study provides several policy recommendations regarding to the disclosure requirements for listed companies, enhancing market discipline, as well as improving investor quality and using investor attention as a market indicator.