Earning management before ESOP issuance?

Abstract

Due to the increasing popularity of ESOP policies in the Vietnamese stock market, this article aims to answer whether there is a phenomenon of manipulating accounting earnings before issuing ESOPs. To address this question, we divided companies into two groups based on their transparency levels and used statistical and regression methods to assess accruals during the years surrounding the ESOP events. The results show that most companies embellish their earning reports in the year of ESOP issuance and one year preceding it to sway shareholders more easily. However, after ESOP issuance, only companies with low transparency persist in manipulating accounting earnings to augment assets for managers.