Measurement of vietnamese commercial banks information disclosure and transparency

STATE BANK OF VIETNAM MINISTRY OF EDUCATION & TRAINING BANKING ACADEMY BANKING FACULTY - GRADUATION THESIS MEASUREMENT OF VIETNAMESE COMMERCIAL BANKS’S INFORMATION DISCLOSURE AND TRANSPARENCY V Student : Tr Class : K20 CLCB Course : 2017 - 2021 Student ID : 20A7510065 Advisor : Ph.D Ngu M HA NOI - 2021 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014127738001000000 GUARANTEE STATEMENT I declare that the graduation thesis “ Measurement of Vietnamese commercial banks' information disclosure and transparency ” is my own work The information used is indicated by the sources cited in the references The results of this thesis have not been published in any previous research and I take full responsibility for the authenticity of this thesis Ha Noi, May 20, 2021 Author T i V ACKNOWLEDGEMENT The graduation thesis majoring in Banking with the topic " Measurement of Vietnamese commercial banks' information disclosure and transparency " is the result of my own relentless efforts and the enthusiastic support and encouragement of the teachers, friends and family Through this, I would like to express my sincere thanks to those who have helped me during my study - scientific research recently I respectfully send my regards to Ph.D Nguy n Minh Phương - the person who directly and enthusiastically guided as well as provided necessary documents and scientific information for this essay, I sincerely and deeply thank you I would like to thank the leadership, the current board of directors and all the teachers of Banking Academy and the Banking Faculty for creating conditions for me to successfully complete my scientific research Finally, I would like to thank my family, relatives and friends for always being there for me, supporting and encouraging Best regards! Ha Noi, May 20, 2021 Author T ii V TABLE OF CONTENT GUARANTEE STATEMENT i TABLE OF CONTENT iii LIST OF SYMBOLS, ABBREVIATIONS v LIST OF TABLES, CHARTS vi INTRODUCTION CHAPTER I: OVERVIEW OF COMMERCIAL BANK AND INFORMATION DISCLOSURE & TRANSPARENCY IN COMMERCIAL BANK 1.1 OVERVIEW OF COMMERCIAL BANKS 1.1.1: Concept and main operations of commercial bank 1.1.2 The roles of commercial bank in the economy 1.2 INFORMATION DISCLOSURE AND TRANSPARENCY IN COMMERCIAL BANKING SYSTEM 1.2.1 Concept, requirements and roles of information disclosure & transparency in commercial bank 1.2.2 The factors that affect information transparency in Vietnamese commercial banks 12 1.2.3 Lessons from other countries 14 CHAPTER CONCLUSION 17 CHAPTER 2: APPLYING STANDARD & POOR METHOD FOR MEASUREMENT OF VIETNAMESE COMMERCIAL BANKS’ INFORMATION DISCLOSURE AND TRANSPARENCY 18 2.1 SITUATION OF INFORMATION DISCLOSURE AND TRANSPARENCY OF VIETNAMESE COMMERCIAL BANKS 18 2.1.1 Regulations of Vietnam 18 2.1.2 Practical application of regulation on information transparency in banking activities 23 2.2 MEASUREMENT METHOD FOR BANKING INFORMATION DISCLOSURE AND TRANSPARENCY 27 2.2.1 Baumann and Nier (2003) index 27 iii 2.2.2 CIFAR Index 29 2.2.3 RTI measurement disclosure index 30 2.2.4 S&P index 31 2.3 APPLICATION OF S&P METHOD: 32 CHAPTER CONCLUSION 38 CHAPTER 3: ANALYSIS AND ASSESSMENT OF MEASUREMENT SCALE 39 3.1 ANALYSIS OF MEASUREMENT SCALE 39 3.1.1 Vietnamese commercial banks 39 3.1.2 Singaporean & Thai commercial banks 52 3.2 ASSESSMENT OF MEASUREMENT SCALE 57 3.2.1 General assessment 57 3.2.2 Causes of shortcomings for Vietnamese commercial banks 60 CHAPTER CONCLUSION 64 CHAPTER 4: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE INFORMATION DISCLOSURE AND TRANSPARENCY OF COMMERCIAL BANKS IN VIETNAM 65 4.1 SOLUTIONS TO IMPROVE INFORMATION TRANSPARENCY OF VIETNAMESE COMMERCIAL BANKS 65 4.1.1 Commitment from senior leadership 65 4.1.2 Human Resources 66 4.2 RECOMMENDATIONS TO THE GOVERNMENT AND RELATED MINISTRIES 67 4.2.1 Recommendations to the Government 67 4.2.2 Recommendations to the Ministry of Finance 67 4.2.3 Recommendations to the State Bank: 71 4.2.4 Recommendations to the commercial banks 72 4.2.5 Recommendations to the auditing firms 73 CONCLUSION 75 REFERENCES 77 iv LIST OF SYMBOLS, ABBREVIATIONS Abbreviation Word meaning S&P Standard & Poor SEC Securities and Exchange Commission MCCG Malaysian Code on Corporate Governance SBV State Bank of Vietnam IFRS International Financial Reporting Standard IAS International Accouting Standard SFRS(I) Singapore Financial Reporting Standard (International) TFRS Thailand Financial Reporting Standard GTI Governance and Transparent Index VAS Vietnamese Accouting Standard WTO World Trade Organization ITDRS Information Transparency and Disclosure Rankings System SFAS Statements of Financial Accounting Standard GAAP Generally Accepted Accounting Principles CIFAR Center for International Financial Research HOSE Ho Chi Minh City Stock Exchange HNX Ha Noi Stock Exchange UPCOM Unlisted Public Company Market v Analysis and LIST OF TABLES, CHARTS Table 2.1: Regulations of Vietnam to information disclosure & transparency 18 Table 2.2: Financial information disclosure index 28 Table 2.3: RTI Index 30 Table 2.4: S&P index 32 Chart 1: Dispersion of Transparency & Disclosure Final ranking 40 Chart 2: Dispersion of Ownership structure & investor rights ranking 41 Table 3.1: Transparency of ownership scores 42 Table 3.2: Concentration of ownership scores 42 Table 3.3: Voting and shareholder meeting procedures scores 43 Chart 3: Dispersion of Financial Transparency ranking 44 Table 3.4: Business focus scores 44 Table 3.5: Accounting policy scores 45 Table 3.6: Comparison of financial statement layout 46 Table 3.7: Related parties and Auditing scores 48 Chart 4: Dispersion of Board structure and process ranking 49 Table 3.8: Board of directors structure & role scores 50 Table 3.9: Training & compensation of board of director and executives scores 51 Chart 5: Dispersion of Transparency & Disclosure Final ranking 53 Chart 6: Dispersion of Ownership structure & investor rights ranking 54 Chart 7: Dispersion of Financial Transparency ranking 55 Chart 8: Dispersion of Board structure and process ranking 56 Table 3.10: Distribution of commercial banks’ information transparency ranking 57 Table 4.1: The accounting standards that need implemented 68 vi INTRODUCTION The importance of the study Commercial bank plays an indispensable role in the development of Vietnam, as the provider and regulator of capital in the economy, and through the operation of commercial banks, central bank operates monetary policy To maximize their role, commercial banks are required to develop sustainably, simultaneously creating trust for the public However, the current development of Vietnam's financial market is facing significant challenges from international integration and especially in the face of unpredictable developments in the Covid-19 epidemic - slow economic recovery, sluggish increase in emerging economies , decline in commodity markets, contraction of global liquidity over concerns about a halt of monetary easing measures, unpredictable investment capital movement, The banking industry is facing the danger of falling into crisis when competition becomes fiercer, not only between commercial banks, but from all credit institutions operating in the same market sharing a goal of winning over customers, increase credit market share as well as expand the supply of banking products and services to the economy It can be seen that transparency of information in the banking and finance sector is an obligatory requirement under the economic integration and is the basis for enhancing Vietnam's financial and banking market to develop sustainably and reduce risks Rosengren (1999) argues that transparency reduces the cost of crises, Jordan et al (2000) suggest that transparency improves market discipline in crises, Summers (2000) consider transparency as the best way to prevent crises and an effective response to crises, while Vishwanath and Kaufmann (2001) regard transparency regulation as a part of the institutional structure that enhance financial stability [1] Sufficient and timely disclosure of information will increase transparency and from there, the bank can easily attract investment, deposits and develop products and services Despite occupying a very important role, information transparency in Vietnamese banks is still very limited, voluntary information disclosure remains quite sketchy, passive and not professional In 2013, the disclosure and transparency scores of Vietnamese listed companies were the lowest among Southeast Asian participating countries including Singapore, Philippines, Indonesia, Thailand, and Myanmar [2] The cause of this inadequacy comes from the lax state management when the laws are not sufficiently deterrent and the sanctions are still very light, leading to loopholes that make commercial banks easily bypasses the law Realizing the importance of the above issues, our thesis chooses the topic " Measurement of Vietnamese commercial banks' information disclosure and transparency " to analyze, evaluate and compare information transparency, thereby giving out appropriate recommendations and solutions to increase transparency and develop commercial bank in a sustainable manner Literature review In 2007-2008, when Vietnam started opening stock exchange market, in order to attract capital from domestic and foreign investors to invest in the domestic market, demand for companies' disclosure information required to users were increasingly concerned The problem for the researches during this period is how to increase the information value of companies listed on the exchange Typically in this period there were studies of authors such as: Nguyen Phuc Sinh (2008) "Improving the usefulness of corporate financial statements in Vietnam in the current period", Nguyen Dinh Hung (2010) "Transparency control system of financial information disclosed of listed companies in Vietnam ”, Up to now, there have been many research on transparency and information disclosure by Vietnamese authors, some can be mentioned as: “Solutions to improve the transparency of financial information of Vietnamese listed joint stock companies through the voluntary disclosure of information on the notes to the financial statements ” by author Ngo Thi Thanh Hoa (2012); Le, TN (2015) "Determinants of corporate social responsibility disclosure: the case of Vietnam"; "Determinants of Sustainability Disclosure: Empirical Evidence from Vietnam" by Anh Huu Nguyen, Linh Ha Nguyen (2020); Nguyen, T.M.H., Nguyen, N.T., & Nguyen, H.T (2020) "Factors affecting voluntary information disclosure on annual reports: listed companies in Ho Chi Minh City stock exchange ", Most of the above studies only focus on researching information on financial statements of companies listed on the stock market, not that of the financial sector, namely banking There are also a number of domestic articles on the issue of measuring information transparency, for example "Building transparency index and disclosing information for companies listed on the stock market in Vietnam " by Truong Dong Loc and Nguyen Thi Kim Anh (2016); or "Measurement of information transparency on financial statements of companies listed on the HNX" by Mai Thi Hoa (2020) However, during the research review process, we found that, among the above studies, there are authors who did qualitative research, authors who did quantitative ones, but there is a lack of studies that approach time series, and annalyze comparisons by country groups in the region Therefore, we decided that this is a topic that needs to be studied in the process of economic integration in Vietnam In the world, there have been many authors study the measurement of information transparency on corporates, such as Mary E Barth, Robert M Bushman, M Piotroski, Samir M El-Gazzar, …; studies that measure the information transparency index of credit institutions include authors like Aksu M, Kosedag Ah, From the above review, the new point of this research is a combination of international studies and based on previous studies about measuring information disclosed on the financial statements of banks, we conducted a survey of information disclosure on financial statements and websites of commercial banks in Vietnam, evaluate the transparency of information based on the survey results, and at the same time compare with other banks in the same region including Singapore and Thailand, thereby giving solutions to enhance bank’s transparency of information