Unraveling the Nexus Between Earnings Quality, Tax Avoidance Behavior, and Firm Performance: Evidence from Vietnam

This study scrutinizes the significance of tax avoidance and earnings quality in shaping firm performance in Vietnam, a frontier emerging market. The study examines how tax avoidance and earnings quality influence firm performance, using return on assets (ROA) and return on equity (ROE) as performance indicator. The analysis is conducted on panel data covering the period from 2015 to 2022, with further comparisons made across the before and after COVID-19 periods. The study used panel data analysis to evaluate 3,360 observations of non-financial public firms in Vietnam. Empirical results reveal a negative effect of earnings quality on ROA and ROE. While tax avoidance shows a positive impact on ROE across all periods, its effect on ROA turns negative in the post-COVID period. This result indicates that the benefits of tax planning may be reduced under economic uncertainty. The study enriches existing literature by offering context-specific evidence drawn from a transitional economy, highlighting the importance of strengthening corporate governance and regulatory enforcement to ensure the effectiveness of financial reporting and tax strategies in value creation.