unlicensed 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 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 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 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 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 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 .1 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 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 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 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 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 co- 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 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 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) 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