ceos generation firms ownership and firm risk taking evidence from vietnamese listed firms on ho chi minh stock exchange

RISK-TAKING: EVIDENCE FROM VIETNAMESE LISTEDFIRMS ON HO CHI MINH STOCK EXCHANGEIn this study, we examine the influence of the CEOs'''' generation and ownershipon firm risk-taking.. Using a

TON DUC THANG UNIVERSITY FACULTY OF FINANCE AND BANKING

CEOS' GENERATION, FIRM'SOWNERSHIP AND FIRM RISK-TAKING:

EVIDENCE FROM VIETNAMESELISTED FIRMS ON HO CHI MINH

in Finance and Banking

HO CHI MINH CITY, OCTOBER 2022

FACULTY OF FINANCE AND BANKING

CEOS' GENERATION, FIRM'SOWNERSHIP AND FIRM RISK-TAKING:

EVIDENCE FROM VIETNAMESELISTED FIRMS ON HO CHI MINH

in Finance and Banking

HO CHI MINH CITY, OCTOBER 2022

We would like to express our sincere thanks to my instructor, Ph.D Le BaoThy, who helped us to complete this report Her enthusiastic guidance and valuableadvice helped me through the stages of writing this report We would like to thank youfor taking so much precious time and correcting many of our mistakes.

We would like to thank Ton Duc Thang University for creating conditions for usto carry out this important thesis.

We sincerely thank you!

Ho Chi Minh City, day month year 2022 Author

DECLARATION OF AUTHORSHIPTHE THESIS HAS BEEN ACCOMPLISHED

AT TON DUC THANG UNIVERSITY

I hereby declare that this thesis was carried out by myself under theguidance and supervision of Ph.D Le Bao Thy ; and that the work contained andthe results in this thesis are true and have not been either submitted anywhere forany previous purpose or published in any other literature The data and figurespresented in this thesis are for analysis, comments, and evaluations from variousresources by my own work and have been fully acknowledged in the referencepart.

In addition, other comments, reviews and data from other authors, andorganizations used in this thesis have been acknowledged, and explicitly cited.

I will take full responsibility for any fraud detected in my thesis Ton DucThang University is unrelated to any copyright infringement caused on my work(if any).

Ho Chi Minh City, October 2022

DUONG HUYNH HUYEN NHI BUI LAM BAO TRAM

RISK-TAKING: EVIDENCE FROM VIETNAMESE LISTEDFIRMS ON HO CHI MINH STOCK EXCHANGE

In this study, we examine the influence of the CEOs' generation and ownershipon firm risk-taking Using a dataset of companies in the Construction and Real Estateindustries in Vietnam (traded on the Ho Chi Minh Stock Exchange) from 2009 to 2021,we find that the coefficient of SEEKERS is negatively significant with PPE, and thecoefficient of BUILDERS is positively significant with PPE On the other hand, thecoefficient for Seeker CEOs is positively significant with σ(ROA), and the coefficientfor Builder CEOs is negatively significant with σ(ROA) However, we did nosignificant results are obtained for these CEOs' generation with Leverage and σ(ROE).Finally, the analysis results about ownership show that there is a significant andnegative relationship between ownership and firm risk-taking

2.2 Seekers and Builders 6

CHAPTER 3: DATA AND RESEARCH METHODOLOGY 9

3.1 Data sources and sample 9

LIST OF FIGURES

Figure 1.1: Profitability developments of real estate enterprises in Vietnam

(HOSE) in the period 2009 – 2021 4

LIST OF TABLESTable 3.1: Variable construction 11

Table 3.2: Descriptive statistics of the variables 13

Table 3.3: The matrix correlation coefficient among the variables 17

Table 3.4: Hausman test results of FEM and REM 18

Table 3.5: Hausman test results of FEM and REM 18

Table 3.6: Heteroskedasticity result of Models (1) and (2) 19

Table 3.7: Heteroskedasticity result of Models (3) and (4) 19

Table 3.8: Heteroskedasticity result of Models (5) and (6) 20

Table 3.9: Heteroskedasticity result of Models (7) and (8) 20

Table 4.1: Seeker, Builder CEOs, and other factors affect firm risk-taking (GLSModels) 22

ABBREVIATED LIST

CHAPTER 1: INTRODUCTION

The literature provides evidence that a company's risk tolerance is highlycorrelated with the age of the CEO in the corporation A research study about careerperspectives shows that younger CEOs have not developed a solid reputation.However, other scientific investigations that take into account professionalconsiderations reveal that younger CEOs are more risk-averse This is due to the factthat they have yet to solidify their reputation and the amazing influence that CEOs playin company growth and business performance (Andreou et al., 2017) On the otherhand, younger CEOs are more inclined to implement company practices that areconservative in nature (Sirias et al., 2007) This is because they don't want to faceconsequences for their company's poor performance On the other side, it has beenobserved that younger CEOs tend to take risks, be overconfident, and exaggerate theirmanagerial skills For instance, previous research indicates that younger CEOs arelinked to riskier corporate strategies and have a higher chance of being involved incrashes (Serfling, 2014)

The company's willingness to take risks is essential to its long-term growth Thereis data that suggests many managers view risk-taking as a crucial component of themanaging role (March & Shapira, 1987) The study of Nana (2016) also reveals thatsenior CEOs are more likely to undertake diversified acquisitions and that theircompanies have more diverse business areas and conditions The risk preferences ofother senior executives may also influence the company's overall risk profile because aCEO normally does not establish company policies alone but rather as a team member.Executives in the CEO's age group should encourage the CEO's risk-taking behavior ifthe CEO's age affects his or her risk appetite According to this prediction, as the CEOand the next most powerful executive get older, the volatility of stock returns,

important CEO (Chief Executive Officer) is older, a company's activities are morediversified According to studies, stock gains are rising while the corporate risk isdecreasing (French et al Future stock returns for businesses run by senior CEOs willbe lower than those for businesses run by younger leaders They contend that aportfolio with the youngest CEOs will perform better than one with CEOs in the oldestage group in terms of portfolio earnings that are risk-adjusted

In this study, we only focus on the construction and real estate sector for thefollowing reasons:

First, real estate is one of the industries with a significant position and function inthe national economy, having a close connection to the construction, buildingmaterials, financial, and monetary markets The long history of real estate from the pastto the present can be shown to be primarily comprised of official transactionsbeginning in 1993 At that time, there were relatively few real estate enterprises,primarily land use rights, and real estate was primarily transacted in gold TheVietnamese real estate market formally debuted in 1993 and was dominated bysecondary sales until 2003 The foreign sector started to pay attention to investmentand development, including housing, rented offices, and industrial parks TheVietnamese real estate market has generated a variety of business products through thestages of formation and development, and it has grown significantly The advancementof socioeconomic development, the ability to attract investment capital, and thepromotion of development, industrialization, and modernization will all besignificantly aided by the sustainable development and efficient administration of thisfield In the nation's modernization In terms of total registered capital, real estate camein second with 3.15 billion USD and 22.5% Vietnamese industrial real estate investorscontinue to find the country appealing due to a stable currency, a rise in tradeagreements, and free commerce, according to Cushman & Wakefield, the world's

estate businesses listed on the Vietnam stock exchange comprised the sample for ourstudy Our findings can be used as a reference for real estate to have solutions to

improve activities contributing to real estate development, creating a premise forsustainable development

Figure 1.1: Profitability developments of real estate enterprises in Vietnam (HOSE) inthe period 2009 – 2021.

Our team noted several findings using a dataset of real estate companies listedon the stock exchange in Vietnam from 2009 to 2021 First, generational variationsamong CEOs in the Vietnamese real estate market can influence business risk-taking.Second, the firm's risk-taking is proxied by Leverage, SD (ROA), SD (ROE), and PPE,but our evidence shows that CEO generation difference only affects SD (ROA), andPPE Third, we also found ownerships have a positive or negative on the firm risk–taking.

Our report is researched with the following objectives: First, we look for factorsaffecting the risk-taking of companies in the field of Construction and Real Estate in

9.23%9.78% 10.14% 10.14% 9.88%9.87%9.80%9.36%9.77% 10.03% 9.75% 10.02%39.20%

34.84% 33.90% 33.31%30.28% 31.43%

27.94%29.47%26.88%28.31% 29.02%

Vietnam Then, we focus on analyzing the impact of CEOs' generation and ownershipon corporation risk-taking.

The remainder of the thesis is structured as follows We review the relatedliterature and present our hypothesis development in Chapter 2 Chapter 3 describes thedata and research methodology Our main results and discussions are displayed inChapter 4 Finally, we conclude this study by discussing the implication and limitationsof this study in Chapter 5.

CHAPTER 2: LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

2.1 Generation theory

The generation theory has two different fields of research: The Sociologicalperspective and the Cohort perspective The sociological perspective of view isexpressed through opinion without consideration of the individual It is produced bythe reasons and behaviors of patterned people Sociologists, however, are notconcerned with personal traits; they also strive to explain trends in addition tomonitoring social perspectives Instead, they discovered widespread attitudes andcharacteristics among the characteristics and behaviors among millions of people Oneof the fundamental aims of the sociological perspective is to identify and comprehendthe patterns underlying the recurrent elements of social interaction and to investigatethe social repercussions of these patterns According to the social perspective theory of

Malmendier & Tate (2005), the thinking, ideas, and management of differentgenerations are interrelated and influenced by historical events and influence eachother This idea combines the process of development with the impact of society, thesefactors are considered as a process of development through generations because theycannot exist without each other Each generation of people has the same view of lifeand development at work based on contact, development with the experiences that

approach does not address how generation affects individual characteristics It is moreconcerned with how the interactions and goals of generations influence social change.

Immediately after the second research strand, the theory of viewpoints of groupsor populations born nearly at the same time, composed of three groups: the population'sage group, the population's age groups, and the group of people who are aging andsuccessive in historical epochs The interaction between groups of people playingvarious roles according to age is its variation, the last group The aging process andintergenerational relationships in society are examined in these social studies.According to Nuthall (2001) perspective theory, generations are groups of people whohave shared historical, economic, and social events This definition is used in thesecond study series They can be identified by their year of birth, age, place ofresidence, and notable historical occurrences that took place during pivotal times intheir life (Hambrick, 1986) These historical occurrences, which may have taken placewhen they were children, adolescents, or young adults, are significant enough to affecthow people of the same generation perceive values, personality, attitudes, beliefs,values, cognitive styles, and proclivities (Jaffee et al., 2007; Strauss and Howe, 1991).

The exposure to significant economic and social events throughout a generation's earlyyears affects how that generation responds to social situations.

We obtained some important results in this study According to Tee and Pak

events that are simultaneously significant in history, economics, and society Based ontheir year of birth, age, location, and significant historical occurrences at pivotalperiods of their lives, it is possible to identify them (Kupperschmidt, 2000) Thesehistorical events, which may have occurred during their late childhood, adolescence, orearly adulthood, had a significant enough effect to influence how both the younger andolder generations see values, personality, attitudes, beliefs, values, cognitive styles, and

Source: author’s calculation

As can be seen in Table 3.3, the correlation coefficients between the variablesare all less than 0.7, proving that there is very little risk of multicollinearity in thedataset.

Table 3.4: Hausman test results of FEM and REM

Test: H : difference in coefficients not systematic0chi2(8) = (b-B)'[(V_b-V_B) ^(-1)](b-B) = 22.46

Prob>chi2 = 0.0041

(V_b-V_B is not positive definite)

Source: author’s calculation

As can be seen from Table 3.4, we run the Hausman test and show that the Pvalue (=0.0041) < α = 0.05 Therefore, we reject hypothesis H but hypothesis H is0 1accepted With the same result, The FEM is more appropriate (Model 1,2).

Table 3.5: Hausman test results of FEM and REM

Test: H : difference in coefficients not systematic0chi2(8) = (b-B)'[(V_b-V_B) ^(-1)](b-B) = 19.26

Prob>chi2 = 0.0135

(V_b-V_B is not positive definite)

Source: author’s calculation

As can be seen from Table 3.5, we run the Hausman test and show that the Pvalue (=0.0135) < α = 0.05 Therefore, we reject hypothesis H but hypothesis H is0 1accepted With the same result, The FEM is more appropriate (Model 7,8).

Table 3.6: Heteroskedasticity result of Models (1) and (2)

Wald testH0: sigma(i)^2 = sigma^2 for all ichi2 (43) = 77739.05Prob>chi2 = 0.0000

Source: author’s calculation

According to Table 3.6, the test results show that the P-value (= 0.0000) < αwith a 1% significance level The H0 hypothesisfailed.It can be seen that Model (1)and (2) has heteroskedasticity We adjusted for heteroskedasticity using the GeneralLeast Square (GLS) method

Table 3.7: Heteroskedasticity result of Models (3) and (4)

Wald testH0: sigma(i)^2 = sigma^2 for all ichi2 (43) = 69064.12Prob>chi2 = 0.0000

Source: author’s calculation

According to Table 3.7, the test results show that the P-value (= 0.0000) < αwith a 1% significance level The H0 hypothesisfailed.It can be seen that Model (3)and (4) has heteroskedasticity We adjusted for heteroskedasticity using the GeneralLeast Square (GLS) method