UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM HO CHI MINH CITY INSTITUTE OF SOCIAL STUDIES VIETNAM THE NETHERLANDS VIETNAM – NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS CORPORATE GOVERNANCE AND OWNERSHIP ON VOLUNTARY INFORMATION DISCLOSURE: CASE STUDY FOR LISTED FIRMS IN HO CHI MINH STOCK EXCHANGE By PHAN HOA THAO NGUYEN MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CTITY, October 2017 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM – NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS CORPORATE GOVERNANCE AND OWNERSHIP ON VOLUNTARY INFORMATION DISCLOSURE: CASE STUDY FOR LIESTED FIRMS IN HO CHI MINH STOCK EXCHANGE A thesis submitted in partial fulfillment of the requirement for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By PHAN HOA THAO NGUYEN Academic Supervisor: VU VIET QUANG HO CHI MINH CTITY, October 2017 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com DECLARATION I certify that this thesis entitled “Impact of corporate governance and ownership on Voluntary Information Disclosure of firms on Ho Chi Minh stock exchange (HOSE)”, which is submitted by me for completing the degree of Master of Art in Development Economics to Vietnam – Netherlands Programme (VNP). I certify this thesis has not been submitted for any degree and all materials and assistance in this dissertation have been acknowledged in the text. Phan Hoa Thao Nguyen | Page i LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEGDEMENT This thesis would not be completed without any assistance and instruction from many people. Sincerely, I would like to give my acknowledgement to my supervisor, friends, family because of their support and motivation for me during the time of performing this research for completing Degree of Master of Art in Development and Economics.
First of all, I would like to express my endless gratitude and thank to my supervisor, Dr Vu Viet Quang. Thank to his instructions and motivation, I had many useful advices for my thesis. His great generosity and enthusiasm encouraged me to develop my thesis topic more persuadable and attractive. Despite of being busy, he spent a lot of time explaining econometric model and data settling method to me.
His useful comments supported me improving thesis more qualified and effective. Moreover, I am grateful to Dr. Truong Dang Thuy for his assistance in constructing research design. Next, I would like to express my thank to all friends at VNP.
Spending a long time together from the first day to the completion of the course, I learned a lot from you about knowledge, spirit, assiduousness in studying. Beside that, I also want to thank VNP officers for their support in my learning and studying at here. Finally, I would like to express thankfulness to my parents, my brother and his wife for their supporting in my life. My special thank comes to most important person in my life, my husband, who has walked by my side, takes care of our baby that is about to be born, and assists unconditionally for me to pursue my dreams.
Phan Hoa Thao Nguyen | Page ii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABBREVIATIONS CEO: Chief executive officer GMM: Generalized Moment Method HOSE: Ho Chi Minh stock exchange OLS: Ordinary Least Square SEM: Stock exchange market SOE: State-owned enterprises UK: United Kingdom USA: United State of America Phan Hoa Thao Nguyen | Page iii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS Declaration. iii Table of contents. iv List of table. v List of figures.
vi List of appendix. vii Chapter 1: Introduction. 1 Chapter 2: Literature view and hypothesis development. 5 Chapter 3: Sample data and research methodology.
16 Chapter 4: Empirical results. 57 Phan Hoa Thao Nguyen | Page iv LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLE Table 1: Definition and measurement of independent variables Table 2: Descriptive statistic Table 3: The regression result by OLS regression method in SOEs in 2010 Table 4: The regression result by OLS regression method in SOEs in 2013 Table 5: The regression result by OLS regression method in SOEs in 2015 Table 6: The regression result by OLS regression method in family-owned companies in 2010 Table 7: The regression result by OLS regression method in family-owned companies in 2013 Table 8: The regression result by OLS regression method in family-owned companies in 2015 Table 9: The regression result by OLS regression method in block shareholders firms in 2010 Table 10: The regression result by OLS regression method in block shareholders firms in 2013 Table 11: The regression result by OLS regression method in block shareholders firms in 2015 Table 12: The regression result by Pooled OLS method in SOEs, family-owned companies, and block shareholders firms from 2010 to 2015 Table 13: The regression result by Fixed effect and Random effect method in SOEs, family-owned companies, and block shareholders firms from 2010 to 2015 Table 14: The regression result by generalized moment method (GMM) in SOEs, family-owned companies, and block shareholders firms from 2010 to 2015. Phan Hoa Thao Nguyen | Page v LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Figure 2.1: Conceptual framework Figure 3.1: Allocation of voluntary disclosure items in 2010 Figure 3.2: Allocation of voluntary disclosure items in 2013 Figure 3.3: Allocation of voluntary disclosure items in 2015 LIST OF APPENDIX Appendix A: List of voluntary disclosure items Phan Hoa Thao Nguyen | Page vi LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT Using final sample data of 237 publicly traded firms on HOSE for the study period from 2010 to 2015, the paper investigates the relationship between corporate governance and ownership to voluntary information disclosure in Vietnam. Furthermore, to check significant impact of corporate governance, ownership structure on voluntary information disclosure in Vietnam, the GMM regression is employed to deal with endogeneity problems and the results provide empirical evidences of the strong relationship between board size, family ownership, block share holders ownership and voluntary information disclosure.
Interestingly, the study finds that the negative relationship between board independence and voluntary disclosure is weakened in the presence of block shareholders, and the positive association of board size and disclosure level is strengthened for firms with family ownership. Keywords: voluntary disclosure, corporate governance, board leader structure, board independence, board size, SOEs, family-owned companies, block shareholder firms. Phan Hoa Thao Nguyen | Page vii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1 INTRODUCTION 1.1 Problem statement Nowadays, the stock exchange market (SEM) becomes a channel mobilizing capital effectively for firms to invest into interested project, produce and provide goods or services. The Vietnamese SEM passes through unstable period.
It may state that the SEM takes an important role in actuating national economy. First, due to having SEM, investing of idle capital becomes easier, accumulating capital is more abundant. Second, SEM provides businesses a chance in order to use capital source more effectively. Third, SEM is a tool in order to evaluate business and forecast the future.
Final, SEM provides a good forecast about business cycle in the future. The Vietnamese SEM spent unstable periods as stock price fluctuates continuously. Evenly, that fluctuation is not sometimes reasonable and not to be complied in accordance with any rules. Therefore, many investors lack of exact information about market.
There are some reality problems existing on SEM for a long time are the swaying price, violating disclosing information, and planting spy transaction… It is the time for government to impose strong methods to disclose market. The state owned enterprises dominated in Vietnam in the early 1980s. The Vietnam economy has passed two periods of French War and American War influencing on economic property form of enterprises from 1946 – 1975. After Southern liberation in 1975, there is a united combination between two of South and North region, Vietnam had gone to building period for economy and society.
Following this unifying, the Vietnam economy had operated according to same custom, model of central planning which had been adopted in North region was transferred to South region (Turner and Nguyen, 2005). This development has created the central planning economy which state ownership takes an important role as owning production means, agricultural co- Phan Hoa Thao Nguyen | Page 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com operative, and economy has based on heavy industry (Ronnas and Sjoberg, 1991). From the Doi Moi in 1986, the reform process had been applied for changing in Vietnam. According to this scenario, the central planning economy had been moved to market economy with many different sectors, collectivization, privatization, investment and foreign trade had been allowed in this period (Turner and Nguyen, 2005).
The Ninth Party Congress has put the 10 years Economic – Social Development Plan with the objective for decreasing poverty and raising growth which SOEs have occupied important leading role in most of main sectors (Painter, 2003). The restructured program is approved by government containing the capitalization and listing the SOEs which exists agency relationship of shareholders and government. At the present, the voluntary disclosure scenario of listed companies in Vietnam has been quite low in comparison with other countries in South East of Asia as Singapore, Thailand, Indonesia, Malaysia and Philippines. In the recent years, Vietnam economy has encountered difficulties and challenges leading to disadvantages in business, reducing production cost.
Because of weak financial situation, the listed companies publish less information and limit to provide internal situation to market. Hence, the activities of disclosing corporate information have been decreased, especially information about management board and control board. The corporate governance issues in Vietnam need to overcome difficulties as poor and inaccuracy quality of financial statement, shortage of financial supervision, centralization of shares, disrespect with shareholders, … These are important objectives assisting the foreign investors to decide whether to invest in Vietnam or not. To develop strongly and stably, one of the most important things for SEM is information disclosure and to be updated for shareholders and investors to make decisions exactly in investing and owning business’s stock.
Chakroun and Matoussi (2012) defined the voluntary disclosure as declaration other information of corporation Phan Hoa Thao Nguyen | Page 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com beside to obligatory ones disseminated by managers to shareholders. They also said that voluntary disclosure is a tool for shareholders in order to check managers’ activities, preserve investors, and limit agency cost caused by asymmetric information in operating business (see also Barac et al. Hence, a fundamental problem of corporate governance is the generation of asymmetric information in relationship of fiduciary - representative between owner and business manager. The owners – the trustee – allot their investment capital to a manager – the representatives – run the daily business of the enterprise.
The manager will be paid remuneration corresponding to the profits that companies bring back for the investor. However, the representatives often have the advantage of information than the trustee. It is alerted that representatives tend to exploit the advantage of this information to benefit themselves rather than for the individual investor. Berle and Means (1932) examine about the agency theory which creates many contradictory problems in benefit between shareholders and managers.
For companies where the owners run the business directly, there is no problem of information asymmetry in relationship of delegator - representative. But with the public shareholding company, this is a permanent problem because the ownership and operating rights are separated from each other. Therefore, public companies often require transparent information to protect investors. In the long term, the transparency of information is also beneficial for the enterprises.
If investors believe, businesses will often be additional capital to develop and the firm value will be increased.2 Problem objective By controlling the determinants of voluntary disclosure of corporate information, the managers may understand which ones have impact on disclosure of information.