Effects of Earnings Management and CEO Characteristics on the Working Capital Management Efficiency?

This study investigates the relationship between earnings management and the effectiveness of working capital management, as well as the individual components of working capital management. The Beneish M-Score is used as a proxy for earnings management and data from 354 non-financial firms listed on the Ho Chi Minh Stock Exchange in Vietnam are analyzed. Unlike previous studies that have focused on the negative implications of earnings management, this research found a positive impact of earnings management on the efficiency of Vietnamese firms' working capital management. This finding aligns with the goal-setting theory, which suggests that clear objectives can lead to improved performance. The results indicate that managers who engage in earnings management tend to operate with shorter cash conversion cycles and manage their inventory, receivables, and payables in a suboptimal manner. The study also revealed that companies with female and dual-role CEOs exhibit more conservative working capital management. Additionally, it was discovered that firms with longer tenure CEOs typically have more efficient working capital strategies, which can lead to lower expenses and higher productivity.