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 THE ROLE OF WOMEN IN CORPORATE FINANCIAL PERFORMANCE IN VIETNAM BY NGUYEN THI HONG THU MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, May 2014 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 THE ROLE OF WOMEN IN CORPORATE FINANCIAL PERFORMANCE IN VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By NGUYEN THI HONG THU Academic Supervisor: Dr. PHAM KHANH NAM HO CHI MINH CITY, May 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Certification “I certificate that the substance of the thesis has not already been submitted for any degree and is not currently submitted for any other degree. I certify that to the best of my knowledge and help received in preparing the thesis and all sources used have been acknowledged in the thesis.” Signature Nguyen Thi Hong Thu Date: May 28th, 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Acknowledgements First and foremost, I would like to send my dearest thank to my supervisor, Dr. Pham Khanh Nam for his guidance and support.
In addition, I would also like to express my gratitude to all persons and organizations for their support, provision of assistance and information that made this thesis possible. I am grateful to the lecturers and staff of the project who helped improve my knowledge and fulfill the programme. Finally, I am greatly indebted to my family for their love for and support of me, keeping me in good condition for learning. I am also grateful to my close friends for their warm encouragement.
Thank you very much to all of you. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS Chapter 1: INTRODUCTION. Structure of the thesis. 3 Chapter 2: LITERATURE REVIEWS.
Theoretical relationship between women on board committees and corporate financial performance. Resource Dependence Theory. The Integrative Theory. Determinants of corporate financial performance.
The role of women on board committees in corporate financial performance9 2. 14 Chapter 3: RESEARCH METHODOLOGY. Overview the role of women on board committees and corporate financial performance in Vietnam. 17 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.
24 Chapter 4: EMPIRICAL RESULTS. Analysis of the correlation between all variables. Result of the regression analysis. Pooled OLS Regression.
Random Effect Models. Moderated Multiple Regression. 44 Chapter 5: CONCLUSIONS AND RECOMMENDATIONS. 47 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Chapter 1: INTRODUCTION This chapter explains reasons for choosing the research topic, its objectives and research questions.
In addition, this chapter also presents a brief of methodology and the thesis structure. Problem Statement Corporate financial performance implies the organization’s health and survival (Keller and Price, 2011). It shows the financial strengths and weaknesses of the company through by financial statements and annual report analysis. Meanwhile, it provides better understanding of the firm’s position and success.
In fact, at least 50 percent of companies with good financial health are more successful in the long term than their competitors in sustaining the firm performance over time. Financial performance of individual corporations varies markedly over time (Frei, 1999; Shei, 2007; Krestensen, 2008). Corporate financial performance could increase, decrease, or follow fluctuating patterns. Data from 100 listed companies in Ho Chi Minh Stock Exchange (HOSE) for the period 2008-2012 confirms this variation: the average of returns on assets was 8.32% while the highest level was 59.9% and the lowest was - 15.5%; returns on equity was around 16.2% while its maximum level was 158.8% and the minimum level was -34.
Some firms have losses that lead to negative results. In addition, Tobin’s Q of these companies had the average level at 1.088, the highest level was 5.19 and the lowest was 0. Thus, the role of the financial management is very important in the company. Studies on the effect of the management on corporate financial performance bring inconsistent results.
In individual corporate, high financial performance is likely to reflect management effectiveness and efficiency in making use of company’s resources and this in turn contributes to the country’s economy at large (Naser and Mokhtar, 2004). The role of management in company would be very important. For example, one of the most 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com well-known bankruptcies opened with the spectacular collapse of Enron Corporation in the U. in 2001 (Enron is the seventh largest listed company) related to the company’s management.
The role of the Board in Enron’s collapse and bankruptcy is concluded such as: (i) fiduciary failure, (ii) lack of independence between the company and certain Board members, (iii) conflicts of interests, (iv) excessive compensation, (v) high-risk accounting (IFC, 2004). From the bankruptcy in Enron, the result shows that the role of board committees in company is very significant (Zahra and Pearce, 1989). Several studies have produced estimates of the women’s role in corporate financial performance in developed countries, especially in the United State, Canada, and UK, but there is still insufficient data for developing countries (Rosa et al. However, research results on the role of women on board committees in corporate financial performance are mixed.
Specifically, it has been found that women on board and financial performance has a positive relationship (Carter, et al., 2003; Adams and Ferreira, 2004; Lang and Stulz, 1993; Campbell and Minguez-Vera, 2008; Smith N., 2006; Dezsö and Ross, 2012), a negative relationship (Frink et al., 2003; Bohren and Strom, 2006), and no-relationship (Rose, 2007; Smith and Verner, 2008). Studies on the role of women in corporate financial performance in Vietnam as well as in developing countries are still limited. Nowadays, the role of women is an important part of family life and society, and their strong representative in the economy. Moreover, they are significant contributors in agriculture, trade, education, social service, and entrepreneurship (Nguyen, 2011).
Thus, Vietnamese companies employ proportionally more women top managers compared to similarly populated countries in the same income group (Enterprise survey, 2011). The objectives of this research are to determine whether the role of women on board committees in corporate financial performance in Vietnam through the period from 2008 to 2012. 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Research Objectives The aims of this paper are to examine whether the role of women on board committees in corporate financial performance in Vietnam through the period from 2008 to 2012.
In particular: (1) To investigate the role of women on board committees in corporate financial performance. (2) To identify the determinants of women’s participation in board committees. Research Questions This study attempts to answer the following research question: (1) Do women on board committees influence corporate financial performance? (2) What are the determinants of women’s participation in the board? 1. Research Methodology Base on the Resource Dependence Theory and Integrative Theory, this study uses annual panel data of 100 listed companies on HOSE in Vietnam during the period 2008-2012.
To estimate the role of women on board committees in corporate financial performance, these regression methods are used such as Pooled Ordination Least Square (pooled OLS), Fixed Effects (FE) or Random Effects (RE), and Moderated Multiple Regression (MMR). Structure of the thesis This thesis organized in five chapters as follows: Chapter 1 explains the reason for choosing the research topic, its objectives and research questions. This chapter also explains briefly about methodology to test the hypotheses. 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Chapter 2 reviews the literature.
It starts with the concept of women on board committees and corporate financial performance. Following is theories relative women on boards and firm performance. Empirical studies also presented in this part. Chapter 3 explains data and variables which be used in the model.
This chapter also presents econometric techniques to test hypotheses. Chapter 4 presents empirical results corresponding to each estimation technique. Chapter 5 gives conclusion, policy implications, and limitations of the study. 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Chapter 2: LITERATURE REVIEW This chapter presents some theories relative to the role of women on board committees in corporate financial performance including the Integrative theory and Resource dependence theory.
In addition, empirical studies concerning the role of women on board committees also mentioned. Theoretical relationship between women on board committees and corporate financial performance 2. Resource Dependence theory Resource dependence theory (RDT) grounded in sociology and organizational theory and it studied of how external environment affect the behavior on the organization (i. Pfeffer and Salancik (1978) stated that the board committees attend the relationship between the company and other external competitors so that appeal environmental dependencies.
The authors proved that four advantages of external connections: (1) supply resources; (2) creation communication channel with important boards on the firm; (3) supply committees of support from main organizations in industries; and (4) creation authenticity for the firm. According to the resource dependence perspective, the board committee members help companies interface with its general and competitive environments (Zahra and Pearce, 1989). Many empirical studies supported the central argument of this perspective on board committee role (Pfeffer and Salancik, 1978; Pearce and Zahra, 1991). Furthermore, boards not only provide increase coordination between organizations and vital resources but also absorb external environment by providing information, thus enhancing firm performance.
Recently, to expand the RDT, Hillman, et al. (2009) suggests that different types of directors will provide more different valuable resources to the firm, then, should produce better firm performance. The presentation of women on board committees increased ability access to resources (Zahra and Pearce, 1989; Hillman et al., 2007), receive and 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com feedback information (Boyd, 1990), as well as enhance skills and knowledge of boards (Provan, 1980). Resource Dependence Theory put a fundamental basic for the most convincing theoretical argument on women leader in a business case.
Women hold the qualified characteristics in improving the information providing by unique information held by diverse directors. Generating unique information sets for better decision making makes women different from men. Corporate financial performance - The Integrative theory It is necessary to study on corporate financial performance in various synthetic; however, most approaches on this had been separate concepts. White and Hamermesh (1981) focus attention on several underlying concepts including industrial organization, organization theory and strategic choice to understand corporate financial performance.
Industrial organization theory is a branch of economics that focuses on the industry- level and corporate-level. According to the industrial organization perspective, market structure affects the financial performance. Research in the industrial organization tradition typically seeks direct relationships between market structure factors and financial performance, measured at the aggregate level. This perspective tends to ignore issues of strategy and organization.
Strategic choice theory derives from the study of corporate management and focuses primarily at the individual corporate level. Proponents of this perspective believe that managers, by proactive making decision, can develop strategies that better align the firm with its environment and so improve financial performance. Empirical research in the strategic choice tradition typically seeks relationships between strategy factors and corporate financial performance, and tends to place less emphasis on environment and organization variables. Such factors as market share, firm growth, firm size, diversification, new product development, quality, advertising, sales force expense, research and development, investment intensity and price have been extensively studied and mostly found relate to financial performance.
6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Contingency theory is a branch of organization theory. In contingency theory, combinations of unit causal factors (derived from the industrial organization, strategic choice or organization theory literatures), may interact and affect financial performance.