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2

CHAPTER 1
INTRODUCTION OF THE THESIS TOPIC

efficiency of information users as well as the performance of the stock market.
However, in recent time, there are many frauds regarding the information quality in
FS which caused serious consequences and great losses for companies and investors.

1.1. Urgency of thesis topic
Currently, Vietnam is integrating deeper into the world market. The
development of Vietnamese stock market (SMVN) has played a significant role in the
development of the economy in general and created a borderless capital flow. SMVN
is one of young stock markets in the world; it was officially put into operation on July
20, 2000 via the Ho Chi Minh Stock Exchange (HOSE) and Hanoi Stock Exchange
(HNX). The development of the stock market during the period of 2000-2005 was
quite small with the value of market capitalization of just under 1% of GDP. The
market size had grown by leaps and bounds to 22.7% of Gross Domestic Product
(GDP) in 2006, over 43% of GDP in 2007 and by now to 78% of GDP, respectively.
This provides a channel for listed companies to mobilize capital and provides
opportunities for investors to seek reasonable investment methods on the stock
market. Financial statements (FS) are an important basis for providing information
for investors and related parties to make optimal decisions as financial information of
the company is provided on the financial statements.
From a theoretical perspective, the main objective of the financial statements is
to provide high-quality information but this is a complex multi-dimensional structure
that cannot be observed directly (Barth, Landsman and Lang, 2008). The
measurement outcome depends heavily on personal preferences, perceptions and the
context of the information (Schwedler, 2010). Quality of financial reporting

Objective No.3: To identify the influence level and direction of factors on the
quality of financial reporting information of listed companies on the SMVN.
Objective No.4: To present several recommendations to enhance the quality of
financial reporting information of listed companies on the SMVN
Objective No.5: To study the assessment of the makers and users of FS about
the quality of financial reporting information and factors affecting the quality of
financial reporting information of listed companies on the SMVN.
1.3. Research questions
Regarding the specific study objectives of the thesis, the following questions
are presented:
Question No.1: How is the quality of financial reporting information of listed
companies on the SMVN?
Question No.2: What are factors affecting the quality of financial reporting
information of listed companies on the SMVN? What are their influencing levels and
directions about the quality of financial reporting information of listed companies on
the SMVN?


3
Question No.3: What is the most influential factors of the quality of financial
reporting information of listed companies on the SMVN?
Question No.4: What are recommendations for influencing factors to enhance
the quality of financial reporting information of listed companies on the SMVN?
Question No.5: Are there any differences in the assessment of FS makers and
FS users regarding information quality and factors affecting the quality of financial
reporting information of listed companies on the SMVN?
1.4. Research objects and scopes
Research objects: Factors affecting the quality of financial reporting
information of listed companies on the SMVN
Research scope:

Some new indicators are developed in this study. The research results show that the
quality of financial reporting information of listed companies on the SMVN is at a
relatively good level of 3.4069/5 points. In general, the quality of financial reporting
information meets the requirements of information users when making decisions.
Secondly, the results of regression analysis of the topic have identified six
factors including five factors have the same impact directions: accounting staff,
efficiency of internal control, independent audit quality, application of International
Financial Reporting Standards (IFRS), regulatory role of the State Securities
Commission (SSC). In particular, the profit management behavior factor inversely
affects the explanation of 72.9% of quality of financial reporting information of listed
companies on the SMVN. There are two factors that are considered to be new in this
study: the application of IFRS and the regulatory role of the SSC. The accountant
factor have observed variables about accounting ethics (DD1, DD2, DD3, DD4,
DD5) and NL2 that are discovered in this study.
Thirdly, the research results show that there are different assessment of FS makers
and users about quality of financial reporting information. There are two factors, namely
independent auditing quality and the application of international financial statements
standards that do not display statistically significant differences.
Fourthly, based on the research results and discussion of the research results,
the thesis has proposed recommendations for six independent factors to enhance the
quality of financial reporting information of listed companies on the SMVN.
1.7. Structure of the thesis
The thesis includes 5 chapters:
Chapter 1: Introduction of the thesis topics
Chapter 2: Research overview and the theoretical basis of information quality
of the financial statement
Chapter 3: Research methodologies
Chapter 4: Research results
Chapter 5: Disussions of research results and recommendations
List of reference materials

response
Asses the profit
Consider the
Have in-depth
Examine the
adjustment level relationship between analysis of
usefulness of FS
of the executive
profit and response specific factors
decision through
(representative)
of the SM to
in the FS by
qualitative
measure quality of
conducting
characteristics
financial reporting
empirical
information
research
Easy to collect Relatively easy to
Focus on quality Focus on quality of
data to measure measure. Provides
of financial
financial reporting
profit adjustment. an insight into the
reporting
information .
economic value of

profit
profit and market
response
Healy &Wahlen Choi et al (1997);
(1999); Dechow Nichols & Wahlen
et al (1995); (2004);
Nelson
Radzi
et
al (1996).
(2011), Nguyen
Ha Linh (2017).

A specific
factor in the FS

Qualitative
characteristic

(2004); Beretta
&
Bozzolan
(2004); Cohen et
al
(2004),
Roudaki 2011,
Hirschey et al
(2012).

Schipper &Vicent

2. Study the impact of apply IFRS on quality of financial reporting
information of listed companies on the SMVN
3. Study the impact of the regulatory role of the SSC on quality of financial
reporting information of listed companies on the SMVN.


7
4. Do the FS makers and users have different assessments on the quality of
financial reporting information and its influencing factors on the SMVN?
5. What are recommendations from the research results to improve information
quality on the financial statements?
2.2. Financial statement and information quality of financial statement
2.2.1. Financial statement
2.2.1.1. Overview of financial statement
The thesis’s approach about FS is according to the concept of IASB (2018) as
Vietnam is currently on a roadmap to gradually integrate with international
accounting and step by step apply IFRS in listed companies with a view to
compulsory application for all listed companies by 2025. According to this approach,
financial statements are reports on the situation of assets, capital, revenue, expenses,
business results and financial relations of companies at a specific point of time after
an operation period.
2.2.1.2. Financial statement users
The thesis' viewpoint is to consider the users of financial statements according
to the approach of IFRS with priority given to investors and capital providers who
have less information on production, business and financial situation of companies.
2.2.2. Information quality of financial statement
2.2.2.1. Information quality
In brief, information includes signals that are received, perceived and useful for
users during the decision-making process.
Quality

are guaranteed, they will act entirely in the interests of the principal, disclose a lot
of information with high quality and reliability in the FS and vice versa. From
that, the author has realized that executives can perform earning management
activities to maximize their by providing information on the FS, especially for
listed companies in case the management rights and ownership rights are separate.
Or there is a relation between earning management behaviour and quality of
financial reporting information of listed companies on the SMVN. Therefore, the
thesis continues to explore the relationship of these two factors. Based on the
analysis of this theory, the author has studied the relation among the factors of the
effectiveness of internal control, independent audit quality, regulatory role of SSC,
dispersion level of shareholders, competency of accountants, professional ethics of
accountants, earning management behavior regarding quality of financial reporting
information of listed companies on the SMVN.
2.3.3. Stakeholder theory
This theory helped the author form the idea that the dispersion level of
shareholders has a negative impact on the quality of financial reporting information.
The SSC's regulatory role has a positive impact on the quality of financial reporting


9
information of listed companies on the SMVN. When regulators commit to business
ethics, it shows that the company wishes to treat all parties with related interests in a
fair manner. The regulatory role of the SSC is to ensure fairness for parties,
especially shareholders and capital providers who are provided with information that
are truthful, objective, accurate, transparent, easy to understand and timely in the FS.
Based on the application of this theory, the author has built the basis for
recommendation that the regulatory role of the SSC and the application of
international financial reporting standards affect quality of financial reporting
information of listed companies on the SMVN.



This factor is quantified as the mean value of 5 observed variables KS1 to KS5.
The IFRS is a set of accounting standards that are created and developed by
the IASB. This factor is quantified as the mean value of 5 observed variables AC1 to
AC5.
e. Earning management behaviour
This factor is quantified as the mean value of 5 observed variables HQ1 to

SUMMARY OF CHAPTER 2
CHAPTER 3
RESEARCH METHODOLOGIES
3.1. Research process
3.2. Qualitative research method
In the thesis, the author used the qualitative research method to accomplish the
main objectives of identifying factors affecting quality of financial reporting
information of listed companies on the SMVN and building a scale of factors
including independent and dependent variables. This is the first step in the
preliminary study of the thesis; qualitative research results serve as the scientific
basis for the author to build a questionnaire for the survey in quantitative research.
Based on the literature review of previous studies, the author then interviewed experts
and proposed research models and research hypotheses.
3.3. Quantitative research method
3.3.1. Building a measurement scale of variables

HQ5.
f. Independent audit quality
This factor is quantified as the mean value of 7 observed variables KT1 to
KT7.
g. Regulatory role of the State Securities Commission
This factor is quantified as the mean value of 3 observed variables UB1 to

Total Variance Explained
Factor loading
Pearson's Correlation Test and multiple linear regression analysis
Pearson's Correlation Test
Multiple linear regression analysis
SUMMARY OF CHAPTER 3
CHAPTER 4
RESEARCH RESULTS
4.1. Overview of listed companies in the Vietnamese stock market
4.1.1. The establishment and development of the Vietnamese stock market
4.1.2. Realiy of information quality of financial statements of listed
companies in the Vietnamese stock market
4.2. Impact levels of factors on the information quality of financial
statements of listed companies in the Vietnamese stock market
4.2.1. Qualitative research results
Based on the research data gathered from group discussions, the author has built a
theoretical research model including 7 factors affecting quality of financial reporting
information and developed observed variables to measure independent factors as
described in Chapter 3.

4.2.2. Quantitative research results
Descriptive results of the value of observed variables in dependent variable are
presented in Table 4.7 and Table 4.9, displaying the mean value of the observed
variables in dependent variables in the range of 2, 6 to 3.8. This shows the differences in
assessment level about quality of financial reporting information of listed companies on
the SMVN and the standard deviation of observed variables


13

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EFA analysis in Table 4.12 shows that KMO coefficient> 0.5, eligible to
conduct factor analysis, and sig is 0.000, indicating that the observed variables are
correlated with each other in the factor. The author then conducted the analysis via
perpendicular rotation.

H2: The effectiveness of internal control positively affects the quality of
financial reporting information of listed companies on the SMVN.
H3: The application of the IFRS positively affects the quality of financial
reporting information of listed companies on the SMVN

According to the results, it is possible to draw from 32 observations and the
total variance extracted is 73.999%. The results show that the observed variables
have factor loadings larger than the standard (0.40) and the difference in factor
loading of an observed variable among factors>0.3. No observed variable is removed.

H4: Earning management behaviour negatively affects the quality of financial
reporting information of listed companies on SMVN.

4.2.5. Checking the convergence of observed variables of the independent
variables by EFA analysis

H6: The regulatory role of the SSC has the same impact direction on the
quality of financial reporting information of listed companies on the SMVN.


The variables are encrypted and renamed as follows:
NV: Accountant (Competency and ethics)
KT: Independent audit quality
HQ: Earning management behaviour
KS: Effectiveness of internal control
UB: Regulatory role of the SSC
AC: Applications of IFRS
The official research model is as follows:
H1

H4
Earning
management
behaviour

Accountant

+
H2
Effectiveness of
internal control

Quality of
financial
reporting
information

+

H5


4.2.6. Testing correlation coefficient
Table 4.14: Diagram of correlation coefficient of factors
Variable

NV

Correlation
coefficient r
Significance level

KT

Correlation
coefficient r
Significance level

NV

KT

HQ

KS

UB

AC CLBCTC

coefficient of 0.802; 0.664; 0.470; 0.445; 0.665; 0.681, respectively, showing a fair

,000

,000

1 ,219** ,396** ,502**

,470**

After several times of processing regression model by different methods,
the author chooses the Enter method (including all variables in the regression
equation) to give the best regression model results as below. The author uses
multivariate regression model that has the following form:
Quality of financial reporting information = bο + b1* NV + b2*KT + b3* HQ + b4*
AC + b5* KS + b6* UB + ε
Testing the suitability of the model

HQ

Correlation
coefficient r

Model
Significance level

KS

Correlation
coefficient r
Significance level



Correlation
CLBCTC coefficient r

a

Adjusted R Square

Std. Error of the Estimate

,734

,729

,38419

a. Predictors: (Constant), UB, KS, HQ, AC, KT, NV
Source: The thesis’s research

,000

Table 4.16. ANOVA table a
1 ,512**

,654**
Model

,000

,000

139,515

6

23,252

50,629

343

,148

190,143

349

157,531

Sig.
,000b

a. Dependent Variable: CLBCTC
b. Predictors: (Constant), UB, KS, HQ, AC, KT, NV
Source: The thesis’s research

Significance level
**. p
the groups of financial statement makers and users
According to the survey results, the group of FS makers has 243 people
including accounting staff, chief accountant, director, and financial director in listed
companies. The group of FS users consists of 107 investors, researchers and auditors.
ANOVA Independent Samples Test analysis results show that most of the
factors have differences between the two groups of FS makers and users. Only two
factors, namely KT and AC, have not shown a statistically significant difference.
SUMMARY OF CHAPTER 4

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Quality of financial reporting information of listed companies on the SMVN:
According to the descriptive analysis and EFA results for the measurement
scale of quality of financial reporting information, the value of quality of financial
reporting information is determined by the mean value of the observed variables and
this value is equal to 3.4/5. Based on the results of this study, the quality of financial
reporting information of listed companies on the SMVN is reliable. The calculation
of this mean value is done according to Beest et al (2013) and Pham Quoc Thuan
(2016).
Relevance
This component is measured by 8 observed variables with the value of 3,23/5
point, showing that the FS of listed companies on the SMVN ensure relevance at a
relatively fair level. The derminination of R value is done according to Beest et al (2009)
and Pham Quoc Thuan (2016).
Faithful representation
According to research results, FS of listed companies are created and presented
at a relatively fair level of 3,2/5 point. The determination of the mean value is done
according to Beest et al (2009) and Pham Quoc Thuan (2016).
Understandability
According to research results, FS of listed companies are considered
understandable at a relatively level of 3,60/5 point.

qualitative research have seven factors that are included in the expected research
model for quantitative research: Competence of accountant, professional ethics of
accountantKT, efficiency of internal control, application of IFRS, earning
management behavior, regulatory role of the SSC, independent audit quality.

and FS users. Analysis results of ANOVA Independent Samples Test show that there
are different assessments of these two target groups on the quality of financial
reporting information; however, two factors AC, KT do not show considerable
difference in terms of statistical significance.

When conducting EFA analysis, the regression model identified six factors
affecting the quality of financial reporting information of listed companies on
SMVN: efficiency of internal control, application of IFRS, earning management
behavior, regulatory role of the SSC, independent audit quality.
The test results of the research hypotheses show that there are five factors
affecting the quality of financial reporting information of listed companies on the
SMVN with observed significance levels less than 0.05 with decreasing impact
levels, namely: accountant, application of IFR, regulatory role of the SSC,
independent audit quality and earning management behaviour. The efficiency of
internal control and earning management behaviour factors have opposite impact with
significant level of less than 10%. The results of this research are completely
consistent with qualitative research as well as consistent with the objectives and
characteristics of the study. This shows that the choice of research method is
appropriate; the regression weight results of the independent variables are presented
in Table 4.25. The results show that these six independent variables explain 72.9% of
the dependent variables.
Two new factors affecting the quality of financial reporting information of
listed companies on the SMVN are confirmed from this study: the application of
IRFS is measured through 5 observed variables; the regulatory role of the SSC is
measured through three observed variables. The research results also show that for

This is considered a new factor for this research. Previous studies by the
authors in Nigeria showed that after applying the IRFS, the quality of financial
reporting information increased. In this study, the application of the IRFS improves
the quality of financial reporting information of listed companies on the SMVN
with a coefficient of 0.086 and sig of 0.000.
For the factor of earning management behaviour:
The author's research results in this thesis continue to confirm that earning
management behavior has a negative relationship with the quality of financial
reporting information but with p = 0.082. Earning management behavior causes
accountants to not have sufficient independence to perform work in accordance with
accounting standards and principles. The subjects who answered the survey


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questionnaire were accountants and chief accounts of list companies, accounting for
over 60% of the total number of survey questionnaires collected used in the research
of the topic. Because it is a sensitive issue during the accounting process, they tend to
evade the answer. Therefore, the author conducts group discussions with experts to
continue in-depth interviews and interpret the results of this research.

Secondly: listed companies need to prepare funds to invest in machinery
equipment, information technology, and accounting softwares.

5.2. Recommendations to improve the quality of information of financial
statements
5.2.1. Improving the competency and professional ethics of accountants
For accountants:

companies to apply IFRS soon.
5.2.4. Improving the quality of independent audit
Auditors need to gain experience and in-depth expertise.
Auditing companies and listed audited companies need to ensure the
independence of auditors in the audit process.
The auditing companies and listed auditing companies need to ensure the time of
the audit, comply with the audit process and procedures to ensure the quality of the
audit and the reliability of the audited FS.
The audit firm size affects the auditing financial statements, so the listed
companies need to choose large-scale audit companies. Usually with audit firms in top
4, the quality of the audited FS will be better as confirmed in previous studies. It is
because their auditors are highly qualified and experienced; also they pay attention to
the evaluation of audit quality.
For state management agencies: It is necessary to provide an audit price range
as a quantitative basis for evaluating and controlling the audit service activities of
independent auditing firms.
Strengthening the role of Vietnam Association of Certified Public
Accountants (VACPA)
The Ministry of Finance has assigned responsibility for quality control of audit
services to VACPA in accordance with Circular 157/2014 / TT-BTC. Therefore,
VACPA needs to develop quality control standards and procedures for audit services.
5.2.5. Strengthening the regulatory role of the State Securities Commission
State management agencies need to strengthen administrative sanctions for
violations of quality of financial reporting information of listed companies on the
SMVN. For serious violations, penalties need to be imposed strictly as examples for
other listed companies; this can lead to delisting or criminal prosecution for violators.
In addition, there are measures to publicly announce on the mass media about
violations of listed companies violating, to prevent and limit the violations of other




Firstly: based on the study overview, the thesis has summarized the criteria for
evaluating quality of financial reporting information of listed companies. Through
group discussion, appropriate criteria were identified and some new indicators were
developed from the qualitative research. These criteria are tested, analyzed for
reliability, suitability to evaluate quality of financial reporting information of listed
companies on the SMVN.
Secondly: The thesis has identified influencing factors and the level of
influence of these factors on quality of financial reporting information. Specifically,
the results of the regression model have identified six influential factors: accounting
staff, internal control effectiveness, independent audit quality, application of the
IFRS, the regulatory role of the SSC and earning management behavior. These six
factors explain 72.9% of the dependent variable. Among them, two factors are
considered to be new factors of this study: application of the IFRS and the regulatory
role of the SSC. The accountant factor has six new observed variables in this study.
However, the factor of earning management behavior affects the information
qualityof the FS with the significance level of 8.2%.

The state management agency should continue to improve the accounting
standards, regimes and other state regulations. Accounting standards should be
revised and improved to minimize the loopholes that enable earning management
behavior. It is necessary to approach to the IFRS closer and apply them to minimize
arguments and insistent accounting practices at listed companies, contributing to
improving information quality on the FS of listed companies on the SMVN.

Thirdly: In addition, the thesid studies quality of financial reporting
information from the perspectives of FS makers and users. The results show that
there is a difference in assessment about the quality of financial reporting information
and influencing factors from the two research subjects; however two factors, namely
independent audit quality and the application of IFRS do not show considerable