Innovation and Earnings Quality: A Bayesian Analysis of Listed Firms in Vietnam

19 Pages Posted: 18 Aug 2020

See all articles by Minh Le

Minh Le

Faculty of Finance and Banking, University of Economics and Law, VNU-HCM, Vietnam

Tam Tran

Faculty of Finance, Banking University of Ho Chi Minh City, HCMC, Vietnam

Thanh Ngo

Faculty of Finance and Banking, University of Economics and Law, VNU-HCM, Vietnam

Date Written: January 14, 2020

Abstract

Researchers have well documented the positive effects of innovation on growth and productivity. However, innovation might be associated with unexpected consequences, especially in term of earnings quality. In this paper, we employ the Bayesian linear regression to shed light on the relationship between innovation and earnings quality in the Vietnamese financial market. While other researches often use the Research and Development (R&D) expenditures, the number of patents and citations as measures of innovation, in this study, we use a new metric of innovation which is obtained from the Cobb-Douglas production function. Our research results indicate that firms with more innovations can lead to a decrease in earnings quality. Based on the findings, we recommend practitioners, especially investors and analysts should pay more attention to innovative firms when making investment decisions because these firms are more likely to participate in earnings management.

Keywords: Innovation; Earnings Quality; Bayesian Linear Regression

JEL Classification: G3

Suggested Citation

Le, Minh and Tam, Tran and Ngo, Thanh, Innovation and Earnings Quality: A Bayesian Analysis of Listed Firms in Vietnam (January 14, 2020). Available at SSRN: https://ssrn.com/abstract=3650257 or http://dx.doi.org/10.2139/ssrn.3650257

Minh Le (Contact Author)

Faculty of Finance and Banking, University of Economics and Law, VNU-HCM, Vietnam ( email )

Tran Tam

Faculty of Finance, Banking University of Ho Chi Minh City, HCMC, Vietnam ( email )

Thanh Ngo

Faculty of Finance and Banking, University of Economics and Law, VNU-HCM, Vietnam ( email )

Vietnam National University - Ho Chi Minh City
Linh Xuan Ward, Thu Duc
Ho Chi Minh City
Vietnam

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