Fdi benefits and challenges of listing on the vietnam stock exchanges a case study of japanese compan

BANKING ACADEMY OF VIETNAM FACULTY OF FOREIGN LANGUAGES 🙣🕮🙡 GRADUATION THESIS TOPIC: FDI BENEFITS AND CHALLENGES OF LISTING ON THE VIETNAM STOCK EXCHANGES: A CASE STUDY OF JAPANESE COMPANY Student : Pham Hien Dieu Class : K21ATCB Academic year : 2018 – 2022 Student ID : 21A7510020 Supervisor : Mrs Le Thi Minh Que (M.A.) Hanoi, May 2022 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014126234081000000 Phạm Hiền Diệu 21A7510020 Banking Academy Faculty of Foreign Languages DECLARATION I – the author of this thesis, declare that this study is entirely my own work, which was done with my own effort and support of my supervisor The data and other documents used to conduct this research is collected validly from my internship institution Every data including previous research findings, tables, figures and others mentioned in this study is explicitly cited in the references I will completely take responsibility if there is any violation of the Banking Academy research ethics guideline Hanoi, 23 May 2022 Signature Pham Hien Dieu ii Phạm Hiền Diệu 21A7510020 Banking Academy Faculty of Foreign Languages ACKNOWLEDGEMENTS First of all, I would like to express my deep gratitude to my supervisor Mrs Le Thi Minh Que (M.A.) who has supported me a lot with enthusiasm to finish this research study She dedicated her time, shared her valuable knowledge, and gave me timely instructions that are all extremely useful to me Thanks to Mrs Minh Que, I can learn many new things that not only help me to have a correct direction to the research, but also to apply my practical knowledge skills in the workplace From the bottom of my heart, I would like to send my thank you and my respect to her Without her, my work cannot be completed Secondly, I am very grateful to my internship institution – Wall Street Securities Joint Stock Company for willingly allowing me to collect data that serve my study Especially, I would like to send my thank you to Mr Truong Quang Dat – Head of the Investment Banking Department, and Mr Dang Quoc Thang – Consultant of Investment Banking Department, who supported me a lot during my internship They also shared their experiences and gave me valuable advice that is an important contribution to my thesis Besides, I am also thankful to the lecturers of the Faculty of Foreign Languages and Banking Academy for teaching me during my four years at university All of them provided me with crucial knowledge and inspired me a lot to achieve my goals Save the best to last, my thankfulness is surely for my family and friends for their support at any moment of my life Their caring and encouragement are the motivation for me to overcome difficulties and accomplish this thesis iii Phạm Hiền Diệu 21A7510020 Banking Academy Faculty of Foreign Languages ABSTRACT In Vietnam, the stock market has been asserting its importance channel for firms to raise funds; however, according to the State Securities Commission, listed FDI enterprises on the Vietnam stock exchange currently are minimal in terms of number, size and market capitalization Therefore, the purpose of this study is to explore the benefits and challenges that FDI enterprises are encountering in the listing process on Vietnamese stock exchanges To achieve this goal, the case study method, together with the data collected from reliable sources was applied in this paper The research participant is an FDI Japanese company operating in Vietnam and doing a public listing process The results show that there are several benefits for the current Japanese Company as well as other FDI enterprises to be listed on Vietnamese stock exchanges, which are Government’s incentives, easy information access, professional services of consulting firms, and diverse forms of investment Besides, the paper also analyses considerable problems that these FDI enterprises have faced during the listing process, mainly incomplete legal corridor, financial reporting concerns, corporate governance issues, exchange currency fluctuations, and language barriers Thus, it is suggested that FDI enterprises, securities companies and legislators should take actions to deals with these problems Keywords: FDI enterprises, Vietnam stock exchanges, benefits, challenges, solutions iv Phạm Hiền Diệu 21A7510020 Banking Academy Faculty of Foreign Languages TABLE OF CONTENTS DECLARATION ii ACKNOWLEDGEMENTS iii ABSTRACT iv TABLE OF CONTENTS v LIST OF ABBREVIATIONS viii LIST OF TABLES ix LIST OF FIGURES x CHAPTER INTRODUCTION 1.1 Research Background 1.2 Significance of the Study .2 1.3 Research Purposes 1.4 Research Questions 1.5 Research Schedule 1.6 Research Structure CHAPTER LITERATURE REVIEW 2.1 Definitions of Key Terms 2.1.1 FDI 2.1.2 FDI Enterprises 2.1.3 Stock Exchanges .6 2.1.4 Listing of Securities 2.2 Overview of FDI Enterprises on the World Stock Exchanges 2.3 Conceptual Framework CHAPTER RESEARCH METHODS 11 3.1 Participants 11 3.2 Research Instruments 11 3.3 Data Collection .11 3.4 Data Analysis 12 v Phạm Hiền Diệu 21A7510020 Banking Academy Faculty of Foreign Languages CHAPTER FINDINGS AND DISCUSSION 13 4.1 Current Background of FDI Enterprises on the Vietnam Stock Exchanges 13 4.1.1 Overview of FDI Enterprises on Vietnam's Stock Exchanges 13 4.1.2 Top Listed Companies 18 4.1.3 Procedure for FDI Enterprises to be Listed on Vietnam's Stock Exchanges 22 4.2 Case Study of a Japanese Company 25 4.2.1 Establishment and Development Process .25 4.2.2 Global Network 27 4.2.3 Organizational Structure 28 4.2.4 The Main Business Activities 28 4.2.5 The Actual Listing Process .29 4.3 Benefits of FDI Enterprises to be listed on Vietnam's Stock Exchanges 29 4.3.1 Government’s Incentives 30 4.2.2 Easy Access to Information 32 4.2.3 Professional Services of Consulting Firms 32 4.2.4 Diverse Forms of Investment 33 4.4 Common Challenges for FDI Enterprises to be Listed on the Vietnam Stock Exchanges 35 4.4.1 Incomplete Legal Corridor .35 4.4.2 Financial Reporting Issues .38 4.4.3 Corporate Governance Issues 40 4.4.4 Exchange Rate Fluctuations 42 4.4.5 Language Barriers 43 4.5 Suggested Solutions for Challenges of FDI Companies to be Listed on Vietnamese Stock Exchanges .45 4.5.1 For FDI Enterprises .45 4.5.2 For Securities Companies 46 4.5.3 For Legislators .46 vi Phạm Hiền Diệu 21A7510020 Banking Academy Faculty of Foreign Languages CHAPTER CONCLUSION .49 5.1 Summary of Findings 49 5.2 Implications of the Research .50 5.3 Limitations and Recommendations for Future Research 51 REFERENCES 54 APPENDICES 59 Appendix A: Developed and Emerging Stock Market Performance 2018 59 Appendix B: Factors affecting foreign direct investment .59 Appendix C: List of Securities Companies operating in Vietnam 60 vii Phạm Hiền Diệu 21A7510020 Banking Academy Faculty of Foreign Languages LIST OF ABBREVIATIONS Abbreviations Explanation FDI Foreign Direct Investment SSC State Securities Commission JSC Joint Stock Company VSD Vietnam Securities Depository HNX Ha Noi Stock Exchange HSX Ho Chi Minh Stock Exchange UPCOM Unlisted Public Company Market WSS Wall Street Securities Joint Stock Company SBV State Bank of Vietnam CIT Corporate Income Tax viii Phạm Hiền Diệu 21A7510020 Banking Academy Faculty of Foreign Languages LIST OF TABLES Tables Page Table 1: Capitalization of FDI Companies on Vietnam’s stock 19 exchanges Table 2: Profits after tax of listed FDI companies on Vietnam’s 21 stock exchange from 2016 t0 2021 Table 3: Listing criteria on Vietnam’s stock exchanges 24 Table 4: Corporate income tax of the Japanese company from 31 2019 to 2021 Table 5: Shareholder structure of the Japanese company in 2021 ix 34 Phạm Hiền Diệu 21A7510020 Banking Academy Faculty of Foreign Languages LIST OF FIGURES Figures Page Figure 1: Structure of Financial Market Figure 2: Global network of the Japanese company 14 Figure 3: Organizational structure of the Japanese company 15 Figure 4: FDI inflow into Vietnam in the period of 2016-2021 16 Figure 5: Foreign direct investment capital by the form of investment in the period 2005-2020 Figure 6: Listed companies on Vietnam's stock exchange 17 Figure 7: Capitalization of listed companies on Vietnam's stock exchange Figure 8: Participants in Vietnam's stock market 24 Figure 9: Listing process on Vietnam’s stock exchange 28 Figure 10: Exchange rate between VND and USD in the period 2011 - 2021 42 x 17 27