(LUẬN văn THẠC sĩ) corporate governance and ownership on voluntary information disclosure, case study for listed firms in ho chi minh stock exchange

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 TIEU LUAN MOI download : skknchat@gmail.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 TIEU LUAN MOI download : skknchat@gmail.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 TIEU LUAN MOI download : skknchat@gmail.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 TIEU LUAN MOI download : skknchat@gmail.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 TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS Declaration i Acknowledgement ii Abbreviations iii Table of contents iv List of table v List of figures vi List of appendix vi Abstract vii Chapter 1: Introduction Chapter 2: Literature view and hypothesis development Chapter 3: Sample data and research methodology 16 Chapter 4: Empirical results 25 Chapter 5: Conclusion 47 References 50 Appendix 57 Phan Hoa Thao Nguyen | Page iv TIEU LUAN MOI download : skknchat@gmail.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 TIEU LUAN MOI download : skknchat@gmail.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 TIEU LUAN MOI download : skknchat@gmail.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 TIEU LUAN MOI download : skknchat@gmail.com CHAPTER 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 coPhan Hoa Thao Nguyen | Page TIEU LUAN MOI download : skknchat@gmail.com Table 14: The regression result by generalized moment method (GMM) in SOEs, family-owned companies, and block shareholders firms from 2010 to 2015 This table shows result of relationship of corporate governance measured by board leader structure, board independence and board size and voluntary information disclosure Model 1, 2, and show the relationship of board leader structure and voluntary information disclosure in SOEs, family-owned companies, and block shareholders firms Next, model 4, 5, and reveal the association of board independence and voluntary information disclosure in SOEs, family-owned companies, and block shareholders firms Finally, model 7, 8, and indicate the influence of board size on voluntary information disclosure in SOEs, family-owned companies, and block shareholders firms ***, **, and * mark for the 1-, 5-, and 10-level of significant Variable Boardleader Model Coeff t Model Coeff 7.093 1.351 1.45 t 0.39 Model Coeff t -20.169 1.44 Boardin~ce Model Coeff t Model Coeff t Model Coeff -.856 2.004 -1.870 Boardsize -.002 0.05 Familyown 026** Firmsize 11.652*** Leverage -26.938 Externalaudit Blf 038 6.543 1.16 0.34 1.04 0.38 11.783** -.204** 048 0.13 1.63 2.43 2.31 0.64 7.989*** -18.646** 12.224** -.137*** -.016 3.02 1.95 2.57 3.96 110 0.5 332 1.29 -1.918 -22.078 8.554*** Model Coeff 3.496* 2.452 1.22 -.229 1.63 -.034 2.29 -.134 Model Coeff t 2.74 3.631* -7.159 -0.55 -18.160 14.191** 2.5 8.463 -.123 -1.53 -.251 067 1.55 1.73 0.29 0.35 1.66 1.23 1.25 1.12 Model t 1.29 -.036 Blockholder Bls 0.57 -0.73 Stateown Profit -0.67 t -.068*** 3.95 13.376*** 5.78 7.809*** -17.454** -2.2 -33.099** 6.161*** 2.71 9.300*** -.016 -0.4 -.138* 075*** 2.97 2.85 8.551*** 3.21 2.49 2.73 1.75 35.629*** 7.677** 3.36 2.6 2.96 -.127*** 5.994** 2.00 -.043 0.65 7.642** 2.09 -25.819 13.196*** -.178 1.35 2.99 1.58 0.49 Blb Bis Bif -.041 Bib Bss Bsf Bsb 1.21 009 0.42 044* 1.72 009 Phan Hoa Thao Nguyen | Page 44 TIEU LUAN MOI download : skknchat@gmail.com 0.83 Beside to principal variables, the ownership variables have also been sought out having statistical significance to voluntary disclosure In the regression model to board leader structure variable, family-owned variable have been suggested having positive and significant association to voluntary disclosure This statistic seemed to indicate that firms with high number of family members in board may disclose more about themselves to public Similarly, firms with a strategy of high disclosure have tendency in order to assign a large number of family members in board, and vice versa On the other hand, in the regression model to independence of board, blockholder variable have been sought out the negative and significant association to voluntary disclosure in significance level 1% This may reflect the fact that a group of block shareholders in companies usually not want to disseminate internal data and strategies to market or investors Beside to principal variables of model, the control variables take important roles in regression result The firmsize variable is positive and significant with 1% and 5% level in relationship to voluntary disclosure variable This may be a popular situation of Vietnam companies when the large companies would like to open themselves to outside investors and stock market for mobilizing investment capital Moreover, table 14 also reveals statistical significance between leverage and disclosure in SOEs, family-owned companies, and block shareholders firms Another control variable researched is auditor which reveals that a firm is audited by a external auditor, concretely one of the Big The result indicates that the audit variable has statistical significance level 1% and 5% This may reflect the fact that a firm is audited by one of the Big usually disclose more information than the others Big contributes to assist companies for disseminating more themselves to public On the other hand, the profit variable has also found having significance to voluntary disclosure The result of sample reveals popular characteristics of Vietnam firms, a firm with high profit may disclose better than firms with small profit The most noticeable feature in this table is Phan Hoa Thao Nguyen | Page 45 TIEU LUAN MOI download : skknchat@gmail.com interaction terms board independence and block shareholders variables, board size and family ownership The positive sign of Bib coefficient reveals that the negative association between number of independent directors and disclosure level is weaker for firms with block shareholder Similarly, the positive and significant coefficient of boardsize and familyown variable indicate that the positive association of board size and disclosure level is stronger for firms with family ownership Phan Hoa Thao Nguyen | Page 46 TIEU LUAN MOI download : skknchat@gmail.com CHAPTER CONCLUSION The extent of information disclosure which is disseminated by business managers is likely to be influenced by characteristics of corporate governance and ownership of that company By using data collected from 237 listed firms on HOSE from 2010 to 2015, the paper considers the gap in research about impacts of corporate governance on voluntary disclosure at three Vietnamese popular organization types SOEs, family-owned company, and block share holders firms in comparison with current researches Based on the list of 32 voluntary disclosure items, the findings from this paper reveal the evidences to confirm that characteristics of corporate governance containing board leader structure, independence of board, and size of board influence on voluntary disclosure of information in companies in Vietnam Furthermore, the paper also considers the impact of ownership on voluntary information disclosure Findings from this study provide the empirical evidences to confirm influences of corporate governance and ownership on voluntary disclosure Specifically, with cross-sectional data, the paper’s result shows that in SOEs and block shareholders companies, CEO duality and higher proportion of independent directors are associated with higher voluntary disclosure in 2010 and 2013 By contrast, data in 2015 reveals that a higher number of independent directors may express a lower voluntary disclosure In family-owned companies, the result suggests that board leader structure and board size is directly proportional with voluntary disclosure Furthermore, with panel data, in the state-owned enterprises and block shareholders firms, the GMM regression result reveals that a large size of board indicates that the larger number of members in board are, the higher the voluntary disclosure is The paper also shows that family-owned companies usually have high transparent index Contrary to familyPhan Hoa Thao Nguyen | Page 47 TIEU LUAN MOI download : skknchat@gmail.com owned companies, the block share holders firms disclose less information A noticeable feature is the interaction association in GMM result The paper finds the negative association of number of independent directors and voluntary information disclosure is weaker for firm with block share holders Similarly, the positive association of board size and voluntary information disclosure is stronger for firms with family-owned companies The result of paper reveals the practical situation and conditions of voluntary disclosure are influenced by internal and external factors of the businesses The external conditions contain Vietnam regulations and laws, especially management and legally biding system of government Moreover, the internal conditions includes internal control system, board of management, control board and independent audit In scope of this paper, factors influencing to information disclosure of the businesses have just considered in internal aspects of companies Nevertheless, the paper fails in providing evidence to support the association between characteristics of corporate governance and voluntary disclosure of listed firms on HOSE First, with the cross-sectional data, the paper could not find the statistical significant result of the board size variable and voluntary information disclosure variable Similarly, with the panel data, the paper also could not find the relationship of board size and voluntary information disclosure However, the result of cross-sectional data and panel data are relative consistency in board leader structure and board independence variable Likewise, with the result of GMM, the research result also does not find the association of board leader structure and independence of board to voluntary disclosure from 2010 to 2015 Moreover, the paper could not find the significant association of state-owed enterprises and voluntary information disclosure Beside that, only the interaction variables bib and bsf have significant result with the voluntary information disclosure The other variables could not provide the significant association with the voluntary information disclosure Phan Hoa Thao Nguyen | Page 48 TIEU LUAN MOI download : skknchat@gmail.com Based on these findings, some policy implications are suggested for the companies and government Firstly, it is necessary for the owners, shareholders, managers, and administrators to reconsider structure of organization, role of members, characteristics of board in order to select a best sample form for management board Secondly, in developing and integrating period, the SEM in general and listed firms in particular need more capital for investment and extended production of company from foreign investors Thus, in order to attract the investment capital, Vietnamese corporations need to raise disclosure for responding the interesting from outside potential investors in mobilizing capital effectively Thirdly, Vietnamese enterprises should update the new trends about strategy of managing and disclosing information from countries in the region and the world for enhancing competence and firm value Finally, government should promulgate the instructions and circulars for supervising process of corporate information disclosure Although this study has considered a number of corporate factors that are supposed to significantly impact in the firm’s voluntary disclosure, other related variables remain untested Also the empirical results should be taken of care as they could be distorted by outliers, probably More importantly, because of availability of disclosure and family ownership data, the study assumes that disclosure information and number of family members should remain unchanged in short-term or one year Phan Hoa Thao Nguyen | Page 49 TIEU LUAN MOI download : skknchat@gmail.com REFERENCES Ahmed,K., Nicholls,D (1994) The Effect of Non-financial Company Characteristicson Mandatory Disclosure Compliance in Developing Countries: The Case of Bangladesh.The International Journal of Accounting 29 (1) : 62– 77 Ahmed, S & Siddiqui, J (2011) Audit committee interactions with external auditors: Evidence from an emerging economy, Working paper, University of Manchester, United Kingdom Anderson, R.C and Reeb, D.M (2003), ‘‘Founding-family ownership and firm performance: evidence from the 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Journal of financial Economics, 80(2), 385417 Wan-Hussin, W N (2009) The impact of family-firm structure and board composition on corporate transparency: Evidence based on segment disclosures in Malaysia The International Journal of Accounting, 44(4), 313333 Xie, B., Davidson, W N., & DaDalt, P J (2003) Earnings management and corporate governance: the role of the board and the audit committee Journal of corporate finance, 9(3), 295-316 Yermack, D (1996) Higher market valuation of companies with a small board of directors Journal of financial economics, 40(2), 185-211 Phan Hoa Thao Nguyen | Page 56 TIEU LUAN MOI download : skknchat@gmail.com APPENDIX A: LIST OF VOLUNTARY INFORMATION DISCLOSURE ITEMS STT Description General and strategic information Annual report in English General background of the economy Company’s mission statement Brief history of the company Organizational structure Description of the goods or services of the company 10 Description of marketing networks for finished goods/services Company’s current business strategy Market share analysis Discussion about major regional economic developments Financial data Review of current financial results and discussion of major factors underlying performance Statement concerning wealth created e.g value added statement Return on assets Return on shareholders’ funds Liquidity ratios Gearing ratio Forward-looking information New product/service development Planned capital expenditure Planned research and development expenditure Planned advertising and publicity expenditure Earnings per share forecast Sales revenue forecast Profit forecast Social and Board Disclosure Number of employees for the last two or more years Information about employee workplace safety Statement of corporate social responsibility 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Phan Hoa Thao Nguyen | Page 57 TIEU LUAN MOI download : skknchat@gmail.com 27 28 29 30 31 32 Statement of environmental policy Names of directors Age of directors Academic and professional qualification of directors Business experience of directors Directors’ shareholding in the company and other related interests (e.g stock options) Phan Hoa Thao Nguyen | Page 58 TIEU LUAN MOI download : skknchat@gmail.com ... chosen for list in this paper including general and strategic information, financial information, forward-looking information, and social and board information as in Appendix A An information item... of information disclosure items containing 57 items including general information about the company, historical summary of financial results, non-financial information, forward-looking information, ... relationship between ownership and board composition on voluntary disclosure The mentioned voluntary disclosure contains non financial and financial information, and unforced information The final