1 CHAPTER Thirdly, to evaluate the impacts of characteristics of corporate governance on the implementation of conservatism in accounting of non-financial enterprises listed on Vietnam stock market INTRODUCTION 1.1 Rationales Conservatism is one of fundamental accounting principles Also, it is a commonly required criteria during the accounting process The performance of this principle puts an impact on the determination of value of items shown in the balance sheet, which, consequently affects honesty, reliability and usefulness of accounting information The importance of this principle was recognized by International Accounting Standards Board (IASB) through its inclusion of conservation in the conceptual framework as well as its requirement of huge conservation reflection in specific items of International Financial Reporting Standards (IFRS) A certain number of previous studies revealed the avantages of implementing conservatism in accounting such as allowing management board to early identify projects with negative present value (Ball, 2001), increasing future investment opportunities (Garcia Lara et al, 2009), mitigating managerial opportusim (Watts, 2003; Chen et al, 2007), decreasing earnings management (Watts, 2003), and improving enterprises’ value (Watts and Zuo, 2012), etc However, in reality, enterprises might take advantage of conservatism principle in accounting as an approach to make up subjective information in the balance sheet serving different aims like establishing sinking fund “on purpose”, exceeding reserves, and consciously delaying interest recognition, etc In addition, the imbalance in recording would influence the focus of accounting information, resulting in conflicts about the impact of implementing conservatism Therefore, IASB excluded conservatism from the conceptual framework in the edited version in 2010 However, this change caused controversies due to careless assessment of transactions and uncertain events of enterprises Noticeably, despite the non-existence of conservatism in the conceptual framework, the requirement for this criteria is still compulsory in recording, determining the value and announcing information (IAS 2, IAS16, IAS 19, IAS 36, IAS 37, IAS 39, IAS 40, IFRS 2, IFRS 4, IFRS 5, IFRS 7, IFRS 9) Thus, in the draft of IASB’s conceptual framework amendment in 2015, the principle of conservatism was reincluded Forthly, to propose recommendations for the implementation of conservatism in accounting non-financial enterprises listed on Vietnam stock market 1.3 Research questions Question 1: Which charactersitics of corporate governance have impacts on the implementation of conservatism in accounting of listed enterprises on Vietnam stock market? How to measure these characteristics? Question 2: What are models used to measure the implementation of conservatism in accounting? Question 3: How are results of measuring the implementation of conservatism in accounting of listed enterprises on Vietnam stock market under the model by Ahmed & Duellman (2007)? Question 4: How characteristics of corporate governance influence the implementation of conservatism in accounting of non-financial enterprises listed on Vietnam stock market? Question 5: What are recommendations for enteprises, investors, state authorities and institutions to implement conservatism in accounting? 1.4 Research subject and scope 1.4.1 1.4.2 Based on the importance of performing conservatism in accounting as well as its negative and positive impacts, it is essential to apply an observatory mechanism for enterprises’ internal and external implementation of this principle From the perspective of internal performance, corporate governance’s features are regarded as one of influencing factors on the implementation of conservatism in accounting Corporate governance is derived from the separation between corporate control and ownership as well as concentration on solutions to arising problems related to principle-agent, prevention and mitigation of owners’ abuse of position and power to use corporate assets and take business opportunities for personal/ others’ purposes or lose resources under the control of corporate Good corporate governance would help management board to make decisions and take actions compatible with mutual spirit and benefits of investors, shareholders and relevant stakeholders There have been numerous studies demonstrating that establishment of good corporate governance mechanism would have positive impact on the implementation of conservatism in accounting (Beekes et al (2004), Lim (2011), Lara et al, (2009), Ahmed and Duellman (2007)….) In Vietnam, characteristics of corporate governance are related to those of Board of Directors, Board of Supervisory, Board of Management and capital owning structure of relevant organizations and individuals, etc Each characteristic has its own influence on the observation of business activities, then, it would have an impact on the effectiveness of observing the implementation of conservatism in accounting Therefore, the impact of corporate governance characteristics on the implementation of conservatism in accounting is one of the huge concerns in this thesis, which is expected to be clearly explored Based on the above mentioned theories and practice, the thesis on “The impacts of characteristics of corporate governance on the implementation of conservatism in accounting of listed enterprises on Vietnam stock market” was carried out 1.2 Research objectives Firstly, to identify, determine and measure characteristics of corporate governance, which have impacts on the implementation of conservatism in accounting of listed enterprises on Vietnam stock market Secondly, to measure the implementation of conservatism in accounting of listed enterprises on Vietnam stock market, which is based on the model by Ahmed & Duellman (2007) Research subject The subject of this thesis is the impacts of characteristics of corporate governance on the implementation of accounting conservatism (ACC) in listed enterprises on Vientam stock market Research scope The thesis conducted an emperical study on database of listed enterprises on Vietnam stock market during the period of 2012 – 2016 (5 years) 1.5 Resesarch structure Chapter 1: Introduction Chapter 2: Literature review on the impacts of characteristics of corporate governance on accounting conservatism Chapter 3: Theoretical frame, hypothesis and research methods Chapter 4: Findings and reality of impacts of corporate governance characteristics on the implementation of accounting conservatism in listed enterprises on Vietnam stock market Chapter 5: Discussion, conclusions and recommendations CHAPTER THEORETICAL FRAME AND LITERATURE REVIEW ON IMPACTS OF CORPORATE GOVERNANCE CHARACTERISTICS ON THE IMPLEMENTATION OF ACCOUNTING CONSERVATISM 2.2 Overview on theories about corporate governance 2.2.1 The root and definition of corporate governance 2.1 General theories on accounting conservatism Corporate governance (CG) derived from the separation of ownership from control in public companies (joint stock companies) Currently, there is a quite large number of studies on CG and different concepts related to this issue Followings are some widely accepted concepts Prudence/conservatism is a common principle (convention), which appeared in accounting long time ago and has impacts on both theory and practice of accounting Sterling (1967) described accounting conservatism (ACC) as ‘the oldest and might be the most common principle in accounting pricing’ May (1943a) defined ACC as one of the oldest accounting practices ACC is has been a section and a part of accounting development for centuries In this thesis, CG is defined based on the concept given by Organization for Economic Co-operation and Development (OECD, 2004) In particular, CG covers a consistent establishment of internal measures to control and orient enterprise activities So, characteristics of CG are comprised of structures of Board of Directors, Board of Management, Board of Supervisory, that of ownership, etc in the enterprises 2.1.1 2.2.2 History of accounting conservatism ACC is an instruction for accountants and managers to estimate and record information in uncertain situations Level of ACC implementation depends on subjective purposes of managers and accountants As a consequence, there would be both negative and positive impacts of ACC implementation 2.1.2 Models for accounting conservatism measurement in enterprises 2.1.2.1 Model by Basu (1997) 2.1.2.2 Model by Khan & Watts (2009) 2.1.2.3 Model by Ball and Shivakumar (2005) 2.1.2.4 Model by Feltham & Ohlson (1995), Beaver and Ryan (2000) 2.1.2.5 Model by Givoly and Hayn (2000) 2.1.2.6 Model by Ahmed & Duellman (2007) Content and characteristics of corporate governance Currently, there are more than 200 sets of regulations for CG for more than 72 countries and territories (IFC, 2010), most of which focus on the role of Board of Supervisory or Board of Directors, some of which are internationally used In Vietnam, current valid law in CG in listed enterprises is the Decree 71/2017/NĐ-CP ‘Corporate governance instructions applied to public companies’, which is in place of the Circular 121/2012/TT-BTC ‘Corporate governance regulations applied to public companies’ 2.3 Literature review on impacts of gorporate governance characteristics on the implementation of accounting conservatism Worldwide studies on the impacts of CG characteristics on the implementation of ACC concentrated on chacracteristics of Board of Directors, Board of Supervisory and ownership (Beekes et al, (2004), Ahmed & Duellman (2007), Xia & Zhu (2009), Lim (2011), Ahmed & Henry (2012), Kootanaee et al, (2013), Jarboui (2013), Yunos et al, (2014), Boussaid et al, (2015), Mohammed et al, (2016), Nasr and Ntim (2017)…) Characteristics of Board of Directors cover: Scope of Board of Directors, double roles of chairman and CEO, independence of memners in the board, accounting and financial expertise of members in the board Characteristics of Board of Auditing, Board of Supervisory cover: the appearance of auditing committee, accounting and financial expertise of members of the committee Those of ownership cover: ownership of Management Board and that of the State In Vietnam, there has been no research on impacts of CG characteristics on the implementation of ACC 2.4 Background theories for research in the impacts of CG charactersitics on the implementation of accounting conservatism 2.4.1 Theory on Asymmetric Information According to asymmetric information, the failure between information provision and receipt would cause disadvantages Regarding the case of stock market, information supplier is the management board, representing for shareholders; information receiver includes shareholders, investors, credit organizations, state authorities, etc In fact, information failure is popular in Vietnam stock market in particular and other stock markets in general In order to reduce this asymmetric information in joint stock companies, it is necessary to build up an effective observation mechanism through enhancing the employment of corporate governance principles, and establishing characteristics of Board of Directors, Board of Supervisory and internal audit At the same time, the stock market’s management board should provide investors with adequate, useful and timely information Especially, there must be no supply of overpositive information about the company’s financial status through ACC application 2.4.2 Agency Theory Agency theory is one of significant and fundamental theories, which is related to different aspects of CG, especially responsibilities of parties The conflicts of benefits between principals and agents might be rooted from either differences in their objectives or information failure between managers and other parties Agency theory suggested that more independent the number of members of management board is, the higher effectiveness of observation is (Nicholson and Kiel, 2007) Then, the company would reduce agency cost, and benefits of shareholders would be greater According to this theory, creating and presenting financial statement have two different purposes: regarding shareholders, they reflect the observation of effectiveness of managers; regarding managers, they show managers’ persuasion for the best actions (Watson et a, 2002) Therefore, it is essential to establish a suitable observation system for management board in order to protect benefits of shareholders and ensure quality financial statement from suppliers Hypothesis 1: The scale of corporate governance positively affects the implementation of accounting conservatism concept (ACC) 2.4.3 Stakeholder theory Stakeholder theory stated that besides shareholders, there are other relevant parties to the operation of the enterprises, covering government agencies, political organizations, trade associations, trade union, community, related companies, potential customer, and public (including potentail investors) Acording to Zingales (2000), a company should not simply be a complex of available participants in the market, in fact, it should be a unique combination among paticipants Based on ethical perspective, enterprises are responsible for equality among relevant parties When there is any conflict of benefits among them, enterprises must try to obtain optimal balance 2.5 Research “gap” Firstly, at present, there are various studies on contents related to accounting conservatism However, in Vietnam, some authors only cover certain aspects of implementing accounting conservatism such as creating preserves, recording potential debt, etc So, this thesis provides a comprehensive research into accounting conservatism of non-financial companies listed on Vietnam stock market Secondly, in Vietnam, there has been no study measuring accounting conservatism as well as its implementation Then, based on advantages and disadvantages of each measuring model, and specific features of listed companies on Vietnam stock market; this thesis determines a suitable model to measure the implementation of accounting conservatism Hypothesis 2: The double position of CEO and Board Chairman negatively affects the implementation of ACC Hypothesis 3: The higher ratio of non-executive board members in the total number of board members, the more effective the implementation of ACC will be Hypothesis 4: The number of board members with accounting and finance expertise positively influences the implementation of ACC Hypothesis 5: The ratio of members in the supervisory board with accounting and finance expertise positively influence the implementation of ACC Hypothesis 6: Listed companies with Board of Directors being the majority shareholders negatively influence the implementation of ACC Hypothesis 7: Companies with capital ownership of Government being more than 50% has the lower rate of deploying ACC compared with firms with capital ownership of Government being below than 50% 3.1.2 Fifthly, in Vietnam, except for regulations on Board of Supervisory (Law on Enterprise, 2014, Circular 121/2012 on Corporate Governance) , there has not been any compulsory legislative document about the establishment of auditing committee in listed companies Regulations on Supervisory Board cover number of board members, accounting expertise of these members, and independence of these members Based on previous studies, most listed companies have followed regulations on the number of Supervisory board members (3 to people) However, regulations on specialization and independence of these members have not been strictly obeyed Due to limited data about independence of Supervisory board members, this thesis focuses on characteristics of members with accounting and finance specialization and determines the impact of these characteristics on ACC implementation CHAPTER 3: SCIENTIFIC HYPOTHESES AND RESEARCH METHOD 3.1 Development of scientific hypotheses regarding characteristics in Corporate Governance influencing the implementation of conservatism in accounting 3.1.1 Scientific hypotheses Members in the supervisory board with accounting and finance Scale of Board of Directors Thirdly, studies on impacts of CG characteristics on ACC implementation have been carried out developed countries like England, America, France, Australia or other developing ones with long-term, stable operation of stock market and complete legislation like Malaysia Moreover, research findings about influences of CG charactersitics on ACC implementation in the world have notreached an agreement in terms of impact of Board of Director size, double positions of both chairman and CEO, impact of ownership structure, etc So, it is essential to supplement empirical studies on these aspects This thesis is the first empirical research in Vietnam about impacts of CG characteristics on the implementation of ACC Forthly, based on the characteristics of joint stock companies and those of stock market in Vietnam, there must be addition to studies on impacts of state capital on the implementation of ACC This issue was discussed in the case of China, but, there was not statistical implication Therefore, this thesis looks into the impacts of state-owned capital on the implementation of ACC in listed companies on Vietnam stock market Research model Figure 3.1: Research model investigating the influence of corporate governance on the implementation of ACC in listed non-financial companies in Vietnam stock market Double position The implementat ion of ACC Ratio of nonexecutive board members Ownership of Board of Directors Ownership of the State Board members with accounting and finance expertise Control variable: - The scale of company - Financial Leverage - Business results - Profitability (Source: Author of the research) 3.2 Research method 3.2.1 Research Design 3.2.1.1 Model used to measure the implementation of ACC in listed companies On the basis of evaluating strengths and weaknesses of each model used by worldwide researchers as well as analyzing the status quo of Vietnamese stock market’s scale and operation, the model by Ahmed & Duellman (2007) is considered the most suitable This model was also used by many other previous authors including Donglin Xia & Song Zhu (2009) from China, Nasr M.A & Ntim C G (2017) from India… when researching the relationship between corporate governance and ACC 7 The degree of deploying ACC in listed companies in Vietnam Stock Market in this research is identified based on this formula: CONSit = Ai,t-1 + Ai,t + Ai,t+1 4.2.3 4.2.3.1 A = (LNhđkd + CFKH – CFO)/ TSBQ The value A is calculated for each company i in the period of year (t-1) to year (t+1), t is the fiscal year in the research year Descriptive statistics of independent variables Hypothesis testing of factors in corporate governance influencing the implementation of ACC OLS Regression results according to ordinary least squares (OLS) Table 4.7: ACC Estimated regression results according to OLS measuring the influence of factors in corporate governance on the implementation of ACC i: the company i in the research sample BO_SIZE -0,403 Standard error 0,144 LNhđkd : Profits from business activities DUAL -0,720 0,375 0,055 1,35 BO_NED 0,489 0,850 0,565 1,28 BO_EXPERT 0,815 0,665 0,221 1,1 CO_EXPERT 0,172 0,499 0,731 1,09 OWN_MAN -0,798 0,388 0,040 1,38 OWN_GOV -1,712 0,378 0,000 1,18 FSIZE -0,251 0,114 0,028 1,34 LEV 8,956 0,749 0,000 1,28 TSBQ: Total average asset (Assetaverage = (Assetbeginning of the year + Assetend of the year)/2) CFKH: Depreciation CFO: Operating Cash Flow 3.2.1.2 of ACC Establishment of regression equation regarding factors of coporate governance influencing the implementation Research sampe and data collection methods With the support of Vietstock company and State Securities Commission of Vietnam, the research sample includes 528 listed non-financial companies in the period of five years (from 2012 to 2016), in which there are 247 companies listed at HOSE (accounting for 47% with 988 observations) and 281 companies listed at HNX (taking up 53% with 1124 observations) 3.2.3 4.2.1 4.2.2 Correlation between variables in the research model x (-1) In which: 3.2.2 4.2 Descriptive statistics of independent variables and the correlation among variables in the research model Coefficient After collecting data, the author calculated the value of dependent variable CONS according to the formula stated in 3.2.1.1 Multicollinearity 1,16 LOSS -8,547 0,542 0,000 1,03 CFO_TA 33,535 1,144 0,000 1,06 Constant 7,661 2,802 0,006 Dependent variable: CONS Number of observations: 2.640 Data analyszing method Statistical significance 0,005 F(11,2628) = 108,65 Prob > F = 0,0000 R2 = 0,3126 R2 calibration = 0,3097 (Source: Author of the research) STATA ver.14 was used to analyze data and test the regression model regarding influence of factors in corporate governance on the implementation of ACC CHAPTER RESEARCH RESULTS AND STATUS QUO OF CORPORATE GOVERNANCE CHARACTIERISTICS’ INFLUENCE ON THE IMPLEMENTATION OF ACC IN COMPANIES LISTED IN VIETNAM STOCK MARKET 4.1 Evaluation of the implementation of ACC in companies listed on Vietnam Stock Market Table 4.1: Descriptive statistics of dependent variables CONS according to the research population CONS Number of observations Mean Standard Deviation Minimum Value Median Maximum Value 2.640 0,031 0,091 -0,475 -0,033 1,298 (Source: Author of the research) The mean of the implementation of ACC in companies listed in Vietnam Stock Market in the research sample is 0,031 The mean in research by Ahmed and partners (2002) is -0,003 and the mean in research by Ahmed and Duellman (2007) is 0.01 9 4.2.3.2 10 FEM Regression results according to Fixed Effect Model (FEM) 4.2.3.3 Table 4.8: Estimated regression results according to FEM measuring the influence of factors in corporate governance on the implementation of ACC Coefficient Standard Error pvalue Coefficient Standard Error pvalue BO_SIZE 0,237 0,123 Standard Error 0,246 BO_SIZE -0,202 0,205 0,324 -0,212 0,176 0,227 DUAL -2,171 0,640 0,001 -0,909 0,528 0,085 DUAL -1,579 0,507 0,002 -0,865 0,422 0,040 BO_NED 0,128 1,530 0,933 -0,377 1,263 0,765 BO_NED -0,145 1,168 0,901 0,126 0,980 0,898 BO_EXPERT 2,395 1,412 0,090 2,048 1,166 0,079 BO_EXPERT 2,197 0,984 0,026 1,135 0,818 0,165 CO_EXPERT 2,139 0,952 0,025 1,379 0,784 0,079 CO_EXPERT 1,414 0,711 0,047 0,729 0,590 0,216 OWN_MAN -2,126 0,700 0,002 -1,576 0,575 0,006 OWN_MAN -1,797 0,535 0,001 -1,203 0,445 0,007 OWN_GOV -3,289 1,014 0,001 -2,826 0,836 0,001 OWN_GOV -1,536 0,587 0,009 -1,914 0,489 0,000 FSIZE -2,486 0,485 0,000 FSIZE -0,436 0,161 0,007 LEV 6,510 1,713 0,000 LEV 8,318 0,983 0,000 LOSS -4,406 0,541 0,000 LOSS -6,043 0,506 0,000 CFO_TA 31,827 1,117 0,000 CFO_TA 32,706 1,054 0,000 63,668 12,911 R2 (overall) = 0,1892 R2 (within) = 0,3362 F-test u_i=0: F(527,2101) = 3,93 Prob > F = 0,000 0,000 Costant 9,966 4,061 0,014 Constant -3,624 1,982 0,068 Dependent variable: CONS Number of observations: 2.640 F(11,2101) = 96,73 Prob > F = 0,0000 Coefficient pvalue 0,618 Table 4.9: Estimated regression results according to REM measuring the influence of factors in corporate governance on the implementation of ACC Standard Error 0,299 Coefficient pvalue 0,427 Regression results according to Random Effect Model (REM) -1,215 1,406 Dependent variable: CONS Number of observations: 2.640 Wald chi2(11) = 1.216,70 Prob > Chi2 = 0,0000 0,387 R2 (overall) = 0,3059 R2 (within) = 0,3257 (Source: Author of the research) (Source: Author of the research) - Suitable selection between FEM and REM 11 12 Table 4.11: Hausman test results Fe Re BO_SIZE 0.123 DUAL -0.909 BO_NED CHAPTER Difference S.E -0.212 0.335 0.172 -0.865 -0.044 0.316 5.1 Analysis and comparision of regression results in different models -0.377 0.126 -0.503 0.797 5.2 Discussion of research results BO_EXPERT 2.048 1.135 0.913 0.832 CO_EXPERT 1.379 0.729 0.650 0.517 OWN_MAN -1.576 -1.203 -0.373 0.365 Hypothesis was disproved: The scale of Board of Directors does not have statistical significane with the implementation of ACC This result is homogeneous with the outcome of research by Ahmed & Duellman (2007), Kootanaee et al (2013), Mohammed et al (2016), Yunos et al (2014) OWN_GOV -2.826 -1.914 -0.913 0.677 FSIZE -2.486 -0.436 -2.050 0.458 LEV 6.510 8.318 -1.808 1.403 LOSS -4.406 -6.043 1.637 0.192 CFO_TA 31.827 32.706 -0.879 0.369 DISCUSSION OF RESEARCH RESULTS, RECOMMENDATIONS AND CONCLUDING REMARKS Hypothesis was approved: In companies where the Board Chairman was also the CEO, the ACC implementation’s degree was 0,909 points lower than companies without the concurrent employment of these two positions This result is homogeneous with the outcome of research by Malaysia and Roslinda Lim (2011) in Australia that states The concurrent employment of CEO and Board Chairman negatively affects the deployment of ACC Hypothesis was disproved: There was no statistical significance in the relationship between the ratio of nonexecutive board members an the implementation of ACC This result is homogeneous with the outcome of research by Kootanaee and partners (2013), Boussaid et al (2015), Xia & Zhu (2009) Test: Ho: difference in coefficients not systematic chi2(11) = (b-B)'[(V_b-V_B)^(-1)](b-B) = Prob>chi2 Hypothesis was approved: If the ratio of board member with accounting and finance expertise increases by 1%, the ACC deployment’s degree increases by 2,048 points This result is homogeneous with the outcome of research by Yunos et al (2014) in Malaysia 132,00 0,0000 (Source: Author of the research) This proves that FEM is suitable for the testing of factors in corporate governance’s influence on the deployment of ACC Therefore, the author uses estimated results of FEM (table 4.9) to discuss results in the next chapter Hypothesis was approved: The ratio of members in the supervisory board with accounting and finance expertise has a positive relationship with the ACC implementation with the statistical significane being 10% This result is homogeneous with the outcome of research by Madah & partners (2016) Hypothesis was approved: Listed companies with majority shareholders being Board of Directors have the degree of ACC implementation being 1,576 points lower than companies with majority shareholders not being Board of Directors at the significance being 1% This result is homogeneous with the outcome of research by Donglin Xia & Song Zhu (2009) in China, Anis Jarboui (2013) in France Mohammed et al (2016) in Malaysia Currently, Vietnam does not have regualtions on ownership’s percentage of Board of Director or the General Director Hypothesis was approved: Companies with capital ownership of Government being more than 50% has the lower rate of deploying ACC compared with firms with capital ownership of Government being below than 50% Previous research by Cullinan & et al (2012) in China and Mohammed et al (2016) in Malaysia also investigated the effect of the State’s ownership on the ACC deployment but no relationship with statistical significane was found 5.3 Some recommendations on the ACC implementation in companies listed in Vietnam stock market 5.3.1 Recommendations for companies Firstly, companies are require to enhance knowledge in terms of accounting standards and principles in order to correctly apply them and ensure the information provided by accountants being useful, comparable and reliable Secondly, results of empirical research are one of references that companies can use to self-evaluate the influence of factors in corporate governance on the ACC deployment: - In addition to maintaining the quantity of board members, companies are required to concentrate on each individual’s responsibily in the board in order to enhance the supervision of firms’ activities - Prohibit the concurrent employment of Board Chairman and CEO to avoid the usage of ACC as a tool to adjust profits or the intentional non- implementation of ACC - Companies are required to ensure the Board’s structure with the appropriate number of members with profession and knowledge in the firm’s operation 13 14 - Companies and shareholders are requested to raise their awareness of supervisory board’s role and promote the rights and tasks of this board implementation of ACC provided an general evaluation for the whole population Therefore, the thesis has not yet to consider differences in the degree of influence on the industry of each company - In the process of voting for Management Board by Board of Directors, it is necessary to pay detailed attention to the ownership of board members to control the independence of the board as well as ensure the shareholders’ rights Board of Directors are required to frequently supervise the volatility in buying, selling and holding shares of senior members in order to prevent them take advantage of company’s information or use personal relations to control the shares Thirdly, the thesis has yet to analyze the regulations of some countries in the world regarding where to implement ACC (in what contents or degree) in order to have experience in applying conservatism in accounting in Vietnam 5.3.2 Recommendations for State administrative agencies Ministry of Finance is required to provide strict regulations on the use of accounting estimates to limit the subjectivity of compaies in this issue Additionally, it is essential to request firms to clearly state the content of these accounting estimates, its impact on the financial statement published by companies Stricter regulations on the functions and duties of the Board of Directors are required to be promulgated to ensure the effective performance of the Board of Directors It is necessary to improve the qualifications of the Supervisory Board as well as its independence of the Supervisory Board to create a positive working environment The State Securities Commission needs to impose penalties for listed companies that fail to fully comply with the regulations on the ratio of members in Supervisory Board with appropriate profession The State is required to request companies to publish the report on Supervisory Board in the annual report 5.3.3 Recommendations for investors The implementation of ACC will affect the financial statement published by companies as well as investors' decisions When implementing ACC, profit information will be affected and more volatile which leads to the reduction in the forecast ability Therefore, when analyzing the company's financial situation, investors need to consider financial indicators (especially profit and cash flow) according to series of time periods, compare and analyze their values throughout quarters and years as well as the influence of factors on the value modification of these indicators Concurrentlt, investors are required to understand the impact of implementing ACC to properly assess the financial situation of companies in order to make sound investment decisions 5.3.4 Recommendations for education and training institutions Paying attention to the role of education and training institutions as well as organizations in perfecting the corporate governance mechanism by organizing short-term training courses, science and profession seminars to help companies' managers and policy makers have a better understanding of corporate governance's role and the application of its priniciples according to international practices in order to improve the quality of corporate governance in Vietnamese enterprises 5.4 Contributions of the thesis - The thesis presented the history of conservatism principle, the effect of the implementation, the measurement models of the principle implementation, the relationship between corporate governance and the implementation of prudent principles in accounting In addition, based on assessing the advantages and disadvantages of each model that previous studies have used to measure the degree of implementation of the prudent principle in accounting, the author selects the most appropriate method complying with conditions and characteristics of companies listed on Vietnam stock market - The thesis provides reliable empirical evidence on the status quo of infulence of factors in corporate governance on the implementation of ACC in companies listed on Vietnam stock market during the period of 2012 to 2016 5.5 Limitations of the thesis Firstly, the scope of the thesis is years lasting from 2012 to 2016 with a research population of 528 listed companies on both Hanoi and Ho Chi Minh Stock Exchange If the time period for research were longer with updated data, a more general view of the ACC implementation in companies would be produced Secondly, although the thesis analyzed and evaluated the status quo of ACC implementation in companies according to their industry and years of operation, the empirical research results on the impact of corporate governance's factors on the CONCLUSION In order to provide useful and reliable informationabout enterprises’ financial status, managers should follow accounting standards and principles Pre-recording potential loses in the future might help enterprises actively tackle possible changes and stalize business Then, information of financial statement would be more helpful to users Regarding the implementation of ACC, accounting practioners should use accounting estimations and base on subjective considerations to evaluate and record the status However, according to Watts & Zimmerman (1990), if managers and generators of financial statement provided exceeding estimations based on their subjective intentions, there might be benefit adjusting behaviors Also, if enterprises consciously disobey the principle and provide accounting estimations lower than reality in order to disclose benficial information as their own expectations, the implementation of the principle would become a tool for managers to control their benefits There are numerous factors affecting the implemention of ACC in enterprises, of which, characteristics of CG is an important aspect When there is an improvement in quality of CG, there will be an enhancement of observation related to complete and comprehensive implementation of ACC Improving operation as well as responsibilities of Board of Directors, Supervisory Board and determining suitable ownership structure would help to control benefit management, and supervise the implementation of current regulations for enterprises in accounting and finance area This thesis studied impacts of CG characteristics on ACC implementation in non-financial firms listed in Vietnam stock market in the period of 2012 – 2016 Based on the literature review, this thesis researched effects of characteristics of Board of Directors, Board of Supervisory and ownership on ACC implementation At the same time, according to an analysis into advantages and disadvantages of models used for the measurement of ACC implementation level, this thesis chose the model by Ahmed & Duellman (2007) This thesis applied regression with three methods of ordinary least square (OLS), fixed effect model (FEM), random effect model (REM) and used appropriate assurance to select the most suitable model in order to provide empirical results with highest reliability, which was FEM Among characteristics of CG in this thesis, of which namely ‘double positions’ (DUAL), ‘members of Board of Directors with accounting and finance expertise’ (BO_EXPERT), ‘members of Board of Supervisory with accounting and finance expertise ’ (CO_EXPERT), ‘captial ownership of Board of Mangers’ (OWN_MAN) and ‘capital ownership of Government’ (OWN_GOV) were proved to have relationship with ACC implementation in terms of statistical meaning Results of empirical study of this thesis added findings to previous ones about the relationship between CG and ACC implementation in developing countries like Vietnam in order to provide more understandings about reality of implementing ACC in enterprises here as well as impacts of each CG characteristics on this principle implementation Thesis’s theoretical and practical contributions would be useful references for enterprises, investors, authorities and researchers in their analysis into quality of financial statement and evaluation on CG in order to supply adjustments for better CG, which helps to improve usefulness and reliability of information disclosed by enterprises  ... appearance of auditing committee, accounting and financial expertise of members of the committee Those of ownership cover: ownership of Management Board and that of the State In Vietnam, there has been... better understanding of corporate governance's role and the application of its priniciples according to international practices in order to improve the quality of corporate governance in Vietnamese... their analysis into quality of financial statement and evaluation on CG in order to supply adjustments for better CG, which helps to improve usefulness and reliability of information disclosed