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SCIENCE ARTICLE
The impact of financial statement audit quality and the moderating role of political connections on environmental transparency in listed real estate firms in Vietnam
1
Faculty of Economics, Hanoi University of Natural Resources and Environment, Viet Nam
Submission date: 2025-10-06
Final revision date: 2025-11-23
Acceptance date: 2026-01-09
Online publication date: 2026-02-16
Publication date: 2026-02-15
Corresponding author
Management 2025;(2):728-751
KEYWORDS
JEL CLASSIFICATION CODES
M42
G34
Q56
D72
R30.
TOPICS
ABSTRACT
Research background and purpose:
Amidst growing pressure for Environmental, Social, and Governance (ESG) transparency, this study questions the effectiveness of formal governance mechanisms, such as high-quality audits, when they operate within a complex institutional environment where informal relationships play a significant role. Therefore, the purpose of this study is to examine the impact of financial statement audit quality on environmental transparency, while also investigating the moderating role of political connections in this relationship within listed real estate firms in Vietnam.
Design/methodology/approach:
The study employs a panel data regression method with a Fixed Effects Model (FEM) on an unbalanced sample of 654 firm-year observations from 70 firms over the period 2015-2024. Audit quality is measured by a dummy variable for Big4 firms, while political connections are identified through the manual collection of leadership background data. The reliability of the findings is reinforced by a series of robustness checks, including the System GMM model and Driscoll-Kraay standard errors.
Findings:
The research findings indicate that audit quality has a positive and statistically significant impact on the level of environmental transparency, confirming the existence of a “disciplinary spillover effect.” However, the core finding is that this positive impact is significantly weakened by the presence of political connections in the leadership. Further analysis also reveals that this “shielding” effect is most pronounced in private firms, while it is not statistically significant in state-owned enterprises.
Value added and limitations:
The study's contribution lies in elucidating the complex interaction between formal (auditing) and informal (political connections) institutions, while also identifying a critical boundary condition for the effectiveness of governance tools. These findings carry important implications, cautioning investors and policymakers that relying solely on formal governance mechanisms is insufficient. Nevertheless, the study is limited by its focus on the real estate sector and its use of a binary measure for audit quality, opening avenues for future research.
Amidst growing pressure for Environmental, Social, and Governance (ESG) transparency, this study questions the effectiveness of formal governance mechanisms, such as high-quality audits, when they operate within a complex institutional environment where informal relationships play a significant role. Therefore, the purpose of this study is to examine the impact of financial statement audit quality on environmental transparency, while also investigating the moderating role of political connections in this relationship within listed real estate firms in Vietnam.
Design/methodology/approach:
The study employs a panel data regression method with a Fixed Effects Model (FEM) on an unbalanced sample of 654 firm-year observations from 70 firms over the period 2015-2024. Audit quality is measured by a dummy variable for Big4 firms, while political connections are identified through the manual collection of leadership background data. The reliability of the findings is reinforced by a series of robustness checks, including the System GMM model and Driscoll-Kraay standard errors.
Findings:
The research findings indicate that audit quality has a positive and statistically significant impact on the level of environmental transparency, confirming the existence of a “disciplinary spillover effect.” However, the core finding is that this positive impact is significantly weakened by the presence of political connections in the leadership. Further analysis also reveals that this “shielding” effect is most pronounced in private firms, while it is not statistically significant in state-owned enterprises.
Value added and limitations:
The study's contribution lies in elucidating the complex interaction between formal (auditing) and informal (political connections) institutions, while also identifying a critical boundary condition for the effectiveness of governance tools. These findings carry important implications, cautioning investors and policymakers that relying solely on formal governance mechanisms is insufficient. Nevertheless, the study is limited by its focus on the real estate sector and its use of a binary measure for audit quality, opening avenues for future research.
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| eISSN: | 2299-193X |
| ISSN: | 1429-9321 (1997-2019) |
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