Board Characteristics and Firm Value in Emerging Markets: The Mediating Role of Earnings Management

Abstract

This study examines whether earnings management mediates the relationship between board characteristics and firm value in Vietnam. Using 4,196 firm-year observations from listed firms over 2016–2023, we construct a composite Board of Directors Index that captures key board attributes and explicitly incorporates director busyness (busy boards), a governance feature that remains relatively underexplored in the Vietnam and frontier/emerging market literature. Empirical analyses show that stronger board structures are associated with higher firm value and lower levels of both accrual-based and real earnings management. Mediation tests further indicate that earnings management transmits part of the effect of board structure on firm value, with real earnings management exhibiting a more pronounced mediating role than accrual-based earnings management. Overall, the findings provide new evidence on a key channel through which corporate governance is linked to firm value in a transitional-market context and offer practical implications for stakeholders concerned with board effectiveness and financial reporting quality. JEL Classification: G34, M41, G32