Accounting Law Reform and Accrual Reliability: The Moderating Role of Institutional Pressure

Abstract This study investigates whether the adoption of Vietnam’s amended Accounting Law (effective from 2017) improves accrual reliability, and whether this relationship is moderated by the institutional environment of the Ho Chi Minh Stock Exchange (HOSE), which imposes more stringent listing and governance requirements than its counterpart, the Hanoi Stock Exchange (HNX). Using a dataset of 4,410 firm-year observations from Vietnamese listed firms, the study assesses accrual reliability through models based on the persistence of cash flows and total accruals. To gain deeper insights, total accruals are decomposed into working capital, non-current operating, and financing components. The findings indicate that overall accrual reliability improves following the implementation of the amended law, with significant gains observed in working capital and financing accruals. However, contrary to theoretical expectations grounded in Institutional Theory and prior literature, the HOSE environment moderates this effect negatively: firms listed on HOSE exhibit a weaker improvement in accrual reliability. This suggests that elevated regulatory and market pressures may induce strategic reporting behavior, thereby diminishing the intended benefits of reform. By focusing on a domestic accounting law reform rather than IFRS adoption, this study contributes novel empirical evidence from an emerging market context. It also provides practical implications for regulators as Vietnam prepares for its transition to IFRS post-2025, highlighting that institutional structures expected to enhance compliance may in some cases undermine reform outcomes. JEL Classification: M41, M48 Paper type: Research paper