CERTIFICATION I hereby declare that the substance of this thesis is my own work and knowledge. This dissertation has not been submitted for any other degree or diploma of the university or higher degree. I certify that its contain has not been published or written by another person. CAO THI TUYET MAI 27 November 2012 i TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENTS During the time of studying in Vietnam – Netherlands programme for Master of Arts in Developing Economics, I have learned so much useful knowledge.
Therefore, I would like to thank to Programme and all the teachers that have taught me in this time. I want to express my deepest gratitude to my academic supervisor, Dr. Truong Tan Thanh, for his guidance and valuable comments in writing and finishing my M. His enthusiastic and encouraging has supported me during the process of this thesis to finish it on time.
Besides my supervisor, I want to acknowledge the tremendous support that I received from Prof. Nguyen Trong Hoai – Dean of Vietnam – Netherlands Programme and Dr. Pham Khanh Nam – Academic Director of Vietnam – Netherlands Programme for their assistance and great encouragement. I also would like to appreciate Master Nguyen Thanh Hai, Director of Finance Advisory Department of Saigonbank Berjaya Securities Joint Stock Company.
His encourage and knowledge has supported me a lot during my thesis writing process. My grateful thanks to my friends, Nguyen Thi Tuyet Van and Phan Bui Gia Thuy who help me overcome the difficulties to finish my thesis. Last but not least, I am truly grateful to my family: my parents, my parents in law, my husband and my brothers for their love and spiritual support in my life. ii TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT The thesis determines which factors that affected the operations of the companies listed on Ho Chi Minh Stock Exchange during the period 2007-2011 and measures the level of the variables such as growth, leverage, leverage^2, risk, CEO duality and size that impacted on performance of listed companies.
It utilizes a panel data of 93 Vietnamese listed companies and two methods accounting (ROA) and market (Tobin’s Q) to estimate the performance of firms. It employs many models in panel data such as Pool regression, Random Effects Model (REM) and Fixed Effects Models (FEM) to control unobserved effects. Three kinds of models are applied to find the most appropriate model and Fixed Effects Model is considered the most suitable model for further discussions and recommendations. The findings of this thesis show the support for not only the results of empirical studies but also the trade off theory and stewardship theory.
Size factor is the most significant support for two metrics of firm performance ROA and Tobin’s Q at 1% level. The thesis also finds that there is existence of the optimal capital structure because of a non linear relationship between leverage and firm performance. In particular, at 22.77% value of the optimal capital structure, the performance of firm (measured by ROA) will get maximum value, or at 72.30% value of the optimal capital structure, the performance of firm (measured by Tobin’s Q) will get maximum value. Besides that, Growth and Risk are found to have effect at 1% significant level to ROA only.
Moreover, CEO duality just has effect to Tobin’s Q at 1% level of significance. It is suitable in Vietnam condition because most of firms in Vietnam are family firms, therefore, there always has a phenomenon one person wears two hats. It leads the firm operate more efficiently and effectively when the chairman serves as the CEO. iii TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS Certification.
iii List of Tables. vii List of Figures. ix CHAPTER 1 INTRODUCTION. Structure of the research.
3 CHAPTER 2 LITERATURE REVIEW AND EMPIRICAL STUDIES .1 Theoretical relation between firm performance, corporate governance and capital structure .3 Trade off theory. 10 iv TIEU LUAN MOI download : skknchat@gmail.3 Corporate governance in Vietnam. 16 CHAPTER 3 RESEARCH METHODOLOGY .2 The description of variables use in this research .4 Hypothesis statement and model specification. 30 CHAPTER 4 EMPIRICAL ANALYSIS RESULTS .1 The statistic descriptions of variables .2 The empirical analysis .1Results of model robustness.
42 v TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 5 SUMMARY AND RECOMMENDATION. 47 APPENDIX I 93 LISTED FIRMS IN DATA SAMPLE. 51 APPENDIX II REGRESSION RESULTS. 55 APPENDIX III GENERAL INFORMATION RELATED TO LISTED FIRMS.
66 vi TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES Table 01 The description of variables use in the thesis. 24 Table 02 The descriptive statistics of data sample. 31 Table 03 The correlation matrix between ROA, TOBIN’s Q and variables. 33 Table 04 The White and Breusch-Godfrey test for Model 1A and 1B.
34 Table 05 The Hausman test for Model 2A and 2B. 34 Table 06 The Redundant Fixed Effects test for Model 3A and 3B. 35 Table 07 The estimated coefficients of six regression models. 36 Table 08 The Wald test for Model 3A and 3B.
40 vii TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Figure 01. The optimal amount of debt and the value of firm. Number of listed firms in the period 2006-2012. Number of new listed firms in the period 2006-2012.
67 viii TIEU LUAN MOI download : skknchat@gmail.com ABBREVIATIONS CEO. Chief Executive Officer D/E. Debt to Equity EBIT. Earnings before Interest and Tax FEM.
Fixed Effects Model HOSE. Ho Chi Minh Stock Exchange HNX. Hanoi Stock Exchange MBVE. Market Value of Equity and Book Value of Liabilities Divided by Book Value of Equity MBVR.
Market Value of Equity to Book Value of Equity MNC. Multinational Company OLS. Ordinary Least Square P/E. Price per Share to the Earnings per Share PROF.
Earnings before Interest and Tax plus Depreciation to Total Assets REM. Random Effects Model ROA. Return on Total Assets ROE. Return on Equity ROI.
Return on Investment SWOT. Strengths, Weaknesses, Opportunities and Treats VND. Viet Nam Dong ix TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 1 INTRODUCTION 1. Problem statement The stock market is an efficient channel for capital mobilization of the economy in developed countries as well as developing countries, thus the birth of the stock market in Vietnam plays a very important role in the attracting of domestic capital, foreign capital and also the socio-economic development.
Founded on July 20, 2000 with two listed companies, however, over one decade of operation at the end of 2011 there were 686 listed companies trading on the Ho Chi Minh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) with capitalization reached 464,036 billion VND. To perform its role as a channel to mobilize capital for economic efficiency, listed companies on the stock market themselves have to operate efficiently in order to create the trustworthiness from shareholders as well as domestic and foreign investors. Therefore, the performance of listed companies plays an important role to keep the market stabilizing and developing. Determining which variables impacted on and how they affected to the performance of listed enterprises is important because they will help not only the investors make right investing decisions but also the managers can know the variables that have more significant influence on firm to manage more efficiently and moreover, company can operate more effectively.
Currently, most research in Vietnam concentrates on issues affecting of the macro variables to the performance of the company therefore it has very little research on the internal matters of business. In contrast, this thesis only focuses on the internal matters of the business such as corporate governance, debt ratio, growth rate, capitalization, risk and also corporate sectors. This means the research subject: 1 TIEU LUAN MOI download : skknchat@gmail.com "An empirical study on company performance: Companies listed on Ho Chi Minh stock exchange" is essential. Research questions The questions of the thesis focus on identifying the factors that affected the performance of listed companies.
Specifically, this research will answer the following questions: 1) Which variables that affected the performance of listed companies in Ho Chi Minh Stock Exchanges? 2) How did they affect to the firms performance? 1. Research rationale In Vietnam, there were some researches that studied the effect of internal factors to the performance of firms such as Cuong Nguyen and Canh Nguyen (2012), Son Tran and Hoang Tran (2008), Oanh Nguyen (2010) and Son Nguyen (2010). However, these researches just used accounting method to measure the firm performance like Cuong Nguyen and Canh Nguyen - ROE, Oanh Nguyen - ROA and Son Tran and Hoang Tran – ROA and ROE. Besides that, the data was collected up to year 2010 (Oanh Nguyen), year 2008 (Son Tran and Hoang Tran).
Therefore, this thesis will extend more researches that study about the impact of internal factors on firm performance using market and accounting methods and the data will be updated to year 2011. Besides that, this thesis can be considered the empirical study on examining the corporate governance and the trade off theory. In reality, it will help the firms not only in their corporate governance but also in debt financing. Moreover, the thesis will also assist the investors and creditors in making their investment decisions.
The creditors can lend their money to the healthy firm and the 2 TIEU LUAN MOI download : skknchat@gmail.com investors can invest in the good performance firm. Finally, firms may choose appropriate optimal capital structure given firm conditions. Research objectives The research objective of this thesis is to determine the factors affecting the performance of companies listed on Ho Chi Minh Stock Exchange during the period 2007-2011. Besides, this thesis also measures the impacts of factors on the firm performance.
The results may have implications for managers and researchers. Research scope The research carries out a study of a number of internal factors of 93 listed companies on Ho Chi Minh Stock Exchange (HOSE) that were affecting the performance of these companies during the period 2007-2011. Based on the analysis, we will look at the extent to which they may affect the firm performance. We use both accounting (ROA) and market measure (Tobin's Q) as proxies for the firm performance.
The data of 93 listed companies in HOSE is collected in the period 2007- 2011, excluding finance firms (bank, securities, investment funds and insurance) because of their specific performance. Structure of the research There are five chapters in this research. Chapter 1 talks about the structure and objectives of the thesis. Chapter 2 introduces the theoretical basis and the previous studies.
Chapter 3 describes the data, the method used in this research and presents analysis estimate of the model. Chapter 4 presents and discusses research results. Chapter 5 summarizes the research results and concludes with some recommendations and limitations. 3 TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 2 LITERATURE REVIEW AND EMPIRICAL STUDIES This chapter mainly discusses about four theories and some empirical studies that relate to firm performance.
Besides that, corporate governance in Vietnam is also mentioned in this chapter. The chapter is divided into three parts. The first part contains the concept of firm performance and five theories that are used in this thesis. The next part provides some empirical studies which support for this thesis.
The final part discusses about the corporate governance in Vietnam.1 Theoretical relation between firm performance, corporate governance and capital structure 2.1 Firm performance According to Draf (2007), the performance of the company related to the way of using resources in an efficient way to reach the targets. Efficient performance of the company was identified and measured by various criteria such as return on asset (ROA), return on equity (ROE), and return on Investment (ROI). These criteria were considered the accounting point of view to approach the efficient operations of the company.