Ownership concentration, corporate risk-taking, stock liquidity and firm performance

Ownership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performanceOwnership concentration, corporate risk-taking, stock liquidity and firm performance

Researchbackground

From the macroeconomic perspective, investment is one of three main channels through which the government’s policies affect economic activity The others are consumption and trade channels (Figure 1.1) From the microeconomic perspective, such policy transmission is channeled through corporate investment During the process of micro-transmission, firm-level organizational characteristics which are definedbycontractualarrangementssuchasgovernancestructuresplayacentralrole.

Figure 1.1 The role of governance structures in a micro-transmission through corporate investment

Corporate governance refers to a mechanistic system of rules, structures,processes and procedures by which a corporation is controlled and directed (Baker and Anderson, 2010) Over recent decades, corporate governance has become the main theme in management and finance research An increasing body of academic research has been built on the associations of corporate governance practices with firm performance (notably, see Bhagat and Bolton, 2008), and with the riskiness of firm performance (notably, see John et al., 2008) As a key corporate governance mechanism, ownership concentration reflects the level of investor protectionw h i c h

2 leads to different consequences of firms’ risk-taking orientation in investment decisions and thus different impacts on firm growth.

The determining roles of ownership concentration on firm risk-taking and performance are essentially linked to private benefits-based incentives generated by the separation of ownership and control which raise agency problems between managersandshareholdersandamongshareholders.Fromtheperspectiveofagency theory, Jensen and Meckling (1976) imply that principal–agent and principal– principal problems are affected by ownership structures in terms of consequent interest conflicts that stem from the controlling nature of concentrated ownership It isarguedthatwhichoftheproblemsofagencythatmattersmoredependsonthelevel of ownershipconcentration.

When ownership is dispersed, managers whose interests deviate from shareholders’ ones could make excessively riskier investments that damage firm value(risk-shiftingbehavior).Also,risk-aversionmanagerscouldmakeconservative decisions that ignore positive net present value (NPV) projects Even if managers’ interests are aligned with shareholders’ ones by incentive contacts (i.e., managerial ownership encourages), this could not necessarily create incentives for theseinsiders to increase growth-oriented risk-taking because of their un- diversification or entrenchmenteffect(ShleiferandVishny,1997;Morcketal.,1988).Moreseriously, they could be encouraged to expropriate non-manager owners’ wealth once their equity ownership increases (and they are not strictly monitored by diffusedowners).

When ownership is concentrated, the agency problem is likely to shift from manager-versus-shareholder conflicts to the minority-versus-controlling shareholder conflicts, raising the concern about the minority protection rights (Claessen andYurtoglu, 2013) Although ownership concentration lowers agency costs related to the principal-agent problem by providing an efficient monitoring mechanism discouraging managers from opportunistic exploitation of information asymmetries orpotentialexpropriationofinvestors,thisgovernancepracticecouldmakeminority shareholdersdifficulttolimitpotentialexpropriationbycontrollingshareholders(La Porta et al., 2000) – which is regarded as a consequence of risk-taking behavior by these large shareholders, who have incentives to force the firm to take on excessive risk (Shleifer and Vishny, 1997) Such a serious issue of expropriation may be pronouncedinenvironmentswithweakrightsofinvestorprotectionsuchasemerging markets (see Claessen and Yurtoglu, 2013) or transitional economies (see Balsmeier and Czarnitzki,2017).

Concentrated ownership exhibits a complex relationship with firm performance The trade-off between the monitoring effect (enhanced due to concentrated oversight) and the expropriation effect (whereby controlling owners prioritize personal benefits over firm value) determines the optimal level of ownership concentration This relationship is further influenced by the intensity of ownership accumulation, suggesting a curvilinear pattern in the ownership concentration–performance curve.

At a low level of ownership concentration, as illustrated in terms of ownership distribution by Balsmeier and Czarnitzki (2017), the relation could be positive because of the dominance of the monitoring effect over the expropriation effect However, if of enough the ownership concentration is high, the expropriation effect could begin to exceed the monitoring effect and the relation becomesnegative 1 Inotherwords,therelationbetweenownershipconcentrationand firm performance can be non-monotonic ornon-linear.

From the perspective of market capitalization, an ownership structure that shapes the nature of agency problems influencing shareholder interests should affect firmvaluationbymarketinvestors.Asafore-mentioned,theagencyprobleminterms of interest conflicts between managers and shareholders appears to be the norm in firms with a dispersed structure of ownership Managers whose interests arederived

Despite the prevalent negative view of ownership concentration, a high level of concentration can positively impact firm performance This occurs when the interests of large shareholders and managers strongly align, mitigating the negative effects of potential expropriation by small investors This was demonstrated by Morck et al (1988), who identified a "up/down/up" relationship between ownership concentration and firm value Furthermore, concentrated ownership reduces agency costs associated with asymmetric information, as owners are incentivized or empowered to effectively monitor management and mitigate the risk of biased decisions or inefficient investments that could distort firm value (Shleifer and Vishny, 1986).

This monitoring effect of ownership concentration is even more substantial in markets with under-developed external governance mechanisms (Filatotchevet al., 2013) In such markets, ownership concentration can serve as an effective internal governance mechanism substituting for shortfalls in institutional environment (Shleifer and Vishny, 1997; Lins, 2003; Boubakriet al., 2005) In general, apositive relation between concentration and valuation should be observed as indicative of the monitoringeffect.

In firms with highly concentrated ownership, the agency problem in terms of interest conflicts between controlling and minority shareholders matters most (Claessen and Yurtoglu, 2013) It is because a significant presence of controlling shareholders,albeitalleviatesmanagerialagencycosts,damagesminorityinterestsin virtue of the possibility of wealth expropriation by these large owners (La Portaetal., 2000) The expropriation effect of majority/controlling shareholders thus should be more pronounced in institutional environments with weak protection of minority investor rights such as emerging/transitional economies (see Claessen and Yurtoglu, 2013;

Balsmeier and Czarnitzki, 2017) Other things being equal, this effect of concentrated holdings should exert a negative impact on firmvaluation.

In terms of a net effect, the concentration–valuation relation should be an outcomeofatrade-offbetweenthemonitoringandexpropriationeffects(Filatotchevet al., 2013) As corporate governance practices are different among countries, there existinternationallydiversifiedpatternsoftherelation.Infact,empiricalstudiestend to confirm the relation as a non-monotonic curve: either a U-shaped curve (Hu and Izumida, 2008;

Tran and Le, 2020), or an inverted U-shaped curve (McConnell and Servaes, 1990;

Himmelberget al., 1999; Thomsen and Pedersen, 2000; Makhijaand Spiro, 2000;

Beineret al., 2006), or piecewise-linear patterns (Morck et al.,1988;

Hermalin and Weisbach, 1991; Holdernesset al., 1999) However, evidence in emerging/transitional economies has a tendency to show solely a positive relation (Claessens,1997;Claessensetal.,1997;XuandWang,1999;Claessensetal.,2002; Lins, 2003; Baiet al., 2004; Makhija, 2004; Gunasekarageet al., 2007; Heugensetal., 2009; Maet al., 2010; Nguyen et al., 2015a; Alkurdiet al., 2021; Nashier and Gupta, 2023) This can be interpreted as a reflection on the weakness of external governance mechanisms such as market disciplines or a legal and regulatory framework for investor protection, which encourages ownership concentration toact as an effective internal governance mechanism substituting for these institutional deficiencies.

Formarketeconomies,theeffectivenessofthemicro-transmissionmechanism ofmonetarypolicycanbedeterminedbythemarketliquidity.Insearchforamarket- based mechanism of how governance structures affect firm performance, it is traced backtotheliteratureontransactioncostsoftheimmediacyoftransferringownership Begin with Demsetz (1968)’s premise of transaction costs, scholars have developed theoretical and empirical models based on dealer cost components such as order- processing costs and/or information costs (Amihud and Mendelson, 1986; Merton, 1987; Chiang and Venkatesh, 1988;

Kini and Mian, 1995) As implied by these models, the active base and specific types of shareholders are potential sources for changes in alleviating or exaggerating the stockliquidity.

Blockholders’marketparticipationandownershipaccumulationarearguedas enablers of draining stock liquidity According to Kini & Mian (1995) and Amihud (2002),theilliquiditycostscouldcanceloutthebenefitsfromthefactthatownership concentrationcouldbefavorablyregardedasamonitoringmechanismformitigating agencyproblems(Jensen&Meckling,1976;Demsetz&Lehn,1985;Demsetz,1986; Coffee, 1991;

Bhide, 1993) The liquidity damage from ownership concentrationisanalyzed in several theoretical and empirical studies (e.g., Bolton and Von Thadden, 1998; Maug, 1998;

Morck et al., 1988; McConnell & Servaes, 1990; Bethel et al., 1998).

Ownership concentration affects stock liquidity through two primary channels: real friction and informational friction Real friction implies that trading liquidity decreases with fixed trading costs Informational friction suggests that trade-based liquidity declines with increased adverse selection costs Empirical studies have supported these channels in developed and advanced emerging markets but have yet to explore their differences in emerging and frontier markets, where the liquidity effects of ownership concentration remain poorly understood.

In a nutshell, the mechanisms defining how ownership concentration drives firm performance can be illustrated by the figure below.

Figure 1.2 Conceptual framework for the relationship between ownership concentration and firm performance

Motivations andtherationale

Because of being characterized by weak investor protection and high ownership concentration, emerging markets and transitional economies naturally become reasonablecandidatestoexploretheconnectionbetweengovernancequalityandfirm performanceaswellasitsrisk-takingandstock-liquiditymechanisms.Theownership concentration– performance relationship is intensively investigated in emerging marketsandtransitionaleconomies(seeClaessenandYurtoglu,2013;Balsmeierand Czarnitzki, 2017) Regarding the relationship between investor protection andrisk- taking,emergingmarketsandtransitionaleconomiesalsoattractmuchattention(see John et al., 2008) Although the risk-taking mechanism of concentration– performance relationship is well recognized in the literature, empirical evidence on the contemporaneous associations of ownership concentration with firm risk-taking and performance is not well-established.

Besides,therehasbeenaneglectedsectoroftheglobalequitymarketsofarin the research landscape of corporate governance That is the area of frontier markets whicharefeaturedbyhigherownershipconcentrationandweakerinvestorprotection in comparison with developed and emerging markets Undoubtedly, they should be good candidates to examine the role of ownership concentration on corporate risk- taking activities and firm growth However, the fact that the availability ofcorporate governancedataforfrontiermarketsislimitedmakesprospectedsurveysonasetting (group) of such countries difficult and costly This makes country-specific investigations more feasible rather than multi-country studies Therefore, I opt to exploretherelationshipsbetweenownershipconcentration,corporaterisk-takingand firm performance in the context of Vietnam – a typical frontier market (transitional) economy.

Among frontier market economies, Vietnam has concerns about corporate governance issues In fact, corporate governance in Vietnam shares common characteristicswithcorporategovernanceinotherfrontiermarkets–intermsofhigh ownership concentration, weak legal system, and investment destinationforinternationaldiversificationbenefits.Nevertheless,theVietnameseequitymarkethas thedistinctionofbeingoneofthelargestfrontiermarkets.Asacommunist-remaining economy, Vietnam has its political processes reflected in national governance practices Current concerns about corporate governance issues are linked to the country’sweakinstitutionalenvironment,especiallytheproblemofminorityinvestor protection (Le and Walker, 2008; Nguyenet al., 2015ab).

The ownership structure of Vietnamese corporations, most of which were state-dominatedpreviously,haschangedconsiderablysincethegovernmentinitiated the massive privatization program – also known as “equitization” – as a part ofthe1986 economic reform (World Bank, 2013) In the stock market, improvements in the legal and regulatory framework, especially the 2007 issuance and the 2012 revisionofcorporategovernanceregulations,thatstrengtheninvestorprotectionhave stronglyincreasedthedynamicsofcorporateownershipforlistedcompanies.Despite claimed improvements in institutional quality, it is interesting to observe that ownership in Vietnam has been increasingly concentrated in hands of large shareholders Indeed, according to the statistics for Vietnamese listed firms in Chapter 2 of this dissertation, the average percentage of a firm’s equity stakes held bylargeinvestors(whoownatleast5%ofitsoutstandingshares)hasincreasedfrom about 41- 44% in 2008-2009 to nearly 55% in 2020, with an average of 49.5% over the period of 2008-2020 This concentration of direct controlling interest inVietnam is comparable to that (around 50%) in East Asian countries such as Hong Kong, Indonesia, and Malaysia (see Claessen and Yurtoglu,2013).

Vietnamese phenomenon of state-centered ownership switched over to privatelyaccumulatedownershipconcentrationisacaptivatingresearchlandscapein frontier or emerging markets One intriguing theme is whether firms with more concentrated ownership are more profitable or more valued by market investors International results for making an answer to that question have even been mixed so far The fact that ownership structure and corporate governance in Vietnamesefirms are dynamic over recent decades additionally offers an experimental opportunity to make it easier to detect the effects of ownership concentration Also, this helps to consolidate incomplete findings by previous studies in the Vietnamese context (e.g., Nguyen et al (2015a) and Tran and Le (2020)).

Like other frontier equity markets, Vietnam is at an earlier stage of financial development and at a lower level of global integration (Berger et al., 2011) The fact that attention by international investors to frontier markets like Vietnam’s is quickly growing should be linked to market liquidity that can be restricted by ownership concentration Moreover, the Vietnamese equity capital market with its small size and illiquidity has legal restrictions on foreign ownership, aggravating its environmental shortfalls of corporate governance Although Vietnam’s corporate governance quality has been improved through its recent reforms, more reforms are needed especially in aspects of minority shareholder protection (World Bank,2013).

The role of foreign ownership in Vietnam's equity market has gained significant attention, as evidenced by recent scholarly studies Exploring the impact of ownership concentration and blockholder identities on stock liquidity in Vietnam offers valuable insights for international investors and policymakers These findings hold implications for corporate governance in emerging markets, guiding investment strategies and regulatory measures to foster a transparent and efficient financial system.

For the state-of-art research on Vietnamese firms, one strand of empirical literature focuses on the relationship between ownership structure and firm performance(e.g.,PhungandMishra,2016;Nguyenetal.,2015a).Anotherstrandof the literature looks into the relationship between ownership structure and firm risk- taking (e.g., Vo, 2016a; Vo, 2018; Ho et al., 2021; Đặng et al., 2022) Also, a recent strand of the literature examines the effect of ownership structure on stock liquidity (Tran et al., 2018).

This dissertation explores the connection between ownership structure and firm performance, considering alternative performance measures like market-based Tobin's Q and accounting-based ROA By comparing these measures, the research demonstrates that results are influenced by measurement differences By introducing the Vietnamese context, it contributes to the understanding of the relationship between ownership concentration and performance in various markets (emerging, secondary emerging, and developed) The findings shed new light on the concentration-performance relationship, departing from previous risk-taking strand studies.

Vo,2016a;Vo,2018;Hoetal.,2021;Đặngetal.,2022)andtheliquiditystrand(Tran et al., 2018).

Firstly, I investigate the risk-taking mechanism by using the Glejser heteroskedasticity test to extract risk-taking measures Secondly, I decompose the effect of ownership concentration on stock liquidity into its two channels – real friction and informational friction, and I empirically examine such channels with a spectrum of liquiditymeasurements.

Objectivesandquestions

This dissertation delves into the complex nexus between corporate governance and firmperformanceinVietnam’semergingequitymarket.Thegovernancemechanism that this dissertation focuses on is the concentrated ownership structure which is typical amongst companies in the Vietnamese market characterized by a weak institutional environment and poor investor protection, though other mechanisms such as board composition and firm-specific characteristics are still considered as control variables There are difference approaches to directly/indirectlyinvestigating such a concentration–performancerelationship.

In particular, this dissertation in the context of emerging Vietnam has three following primary objectives.

(i) The first aim is to investigate the firm performance impacts of concentrated ownership structure as an important mechanism of corporategovernance.

(ii) The second aim is to investigate the impacts of ownership concentrationonfirm risk-taking activity measured by the riskiness of firmperformance.

(iii) Thethirdaimistoinvestigatetheimpactsofownershipconcentrationonstock liquidity as a determinant of marketvaluation.

Respectively, throughout this dissertation, my research aims to answer three main questions as follows.

(i) What are the relationships between ownership concentration and firm performance in the Vietnamese emerging market?

(ii) How does ownership concentration affect firm risk-taking activity in the Vietnamese emergingmarket?

(iii) How does ownership concentration affect stock liquidity in the Vietnamese emergingmarket?

Researchmethodology

Data This dissertation uses a data panel of firms publicly listed on the two

Vietnamese stock exchanges, the Ho Chi Minh Stock Exchange (HOSE) and the HanoiStockExchange(HNX),overthe2008–2020period.Accountingandfinancial data are extracted from theThomson Reutersdatabase, whereas ownership data and management/board profiles are sourced fromVietstock Matching the two datasets is based on some criteria First, financial institutions (i.e., banks, securities and insurance companies) are excluded Then, a sample for empirical estimations is established as an unbalanced panel: selected firms have (1) consecutiveobservations in the sample period with continuing data available for at least three years, and (2) firm-year observations without missing or incomplete data for calculating variables Thefinalsamplethatmeetsthetwofilteringcriteriaincludes529non-financialfirms.

Methodology Based on the proposed research objectives and questions, the dissertationusesseveralapproachesformodelingtheresearchproblems.Chapter2 uses both linear and nonlinear regressions to examine the relationship between ownership concentration and firm performance Glejser heteroskedasticity test is introduced to measure risk-taking behaviors which are modeled in both linear and nonlinear relations To examine the threshold effects of ownership concentration on firm valuation, I employ the “piecewise” regression approach For robustness tests,alternativemeasuresoffirmperformanceandrisk-takingarealsoused.InChapter3, the effects of ownership concentration are examined for a spectrum of liquidity proxies I conduct further robustness tests regarding the nonlinearity of the concentration–liquidity relation as well as the different effects of the types of blockholders.Toaddressthesourcesofendogeneityissues,robustestimatorssuchas the system generalized method of moments (GMM) and the two-stage least squares (2SLS) are used for regressions in Chapter 2 and Chapter 3, in addition to basic estimation models such as the pooled ordinary least squares (OLS) and fixedeffects Estimations are applied to both static and dynamic panels ofdata.

Mainfindings

The investigation begins by comprehensively examining the impact of concentrated ownership on firm performance Subsequently, the study delves into the risk-taking behavior within the ownership concentration-performance nexus to ascertain how it influences the relationship The findings indicate a significant distinction between the results obtained using two alternative performance measures: accounting profitability and market valuation.

There exists an implied relation between ownership concentration and firm profitability through the risk-taking channel Meanwhile, I find no evidence of the connection between ownership concentration and market valuation, implying that ownership concentration might affect firm valuation through other channels Such a puzzle has been fully resolved in further investigations of the dissertation The first effort intensively discovers the essenceofthelinkagebetweenownershipconcentrationandmarketperformancethat is widely detected in the international literature I demonstrate and consolidate the mixedevidenceofownership-performancerelationthroughapiecewise- regression approach.Consequently,thesecondeffortaimstoexplainthediscoveredownership- performanceeffectsthroughthechannelofmarketliquidity.Basedonthehugebody ofliteratureaboutliquidity,Icontributenovelevidenceontheconcentration-liquidity effects through real friction and information friction channels It is a fact that emerging-market equities with highly concentrated ownership are more likely to be illiquid due to the increasing levels of adverse selection and transaction costs In the context of Vietnamese market with weak protection of minority shareholder rights,a firm with concentrated structure of ownership could encounter a trade-off between the positive monitoring effect and the liquidity-reducing effect In fact, the dissertation has found evidence of the limited liquidity effects of institutional investors and foreign investors with long-term investmenthorizons.

Contributions

Thisdissertationmakescontributionstotheextantliteratureoncorporategovernance intermsoftheoryandindustry.Fromthetheoreticalperspective,thedissertationhas broughttwocriticalargumentsforwardatthecurrentnarrativeabouttheperformance influence of corporate governance in different economic landscapes The first lineof argumentation is the role of ownership concentration as an effective governance mechanism should be channeled to firm performance through both internal an external routes I begin this line with an intensive review on the prevailing relationship between ownership concentration and firm performance The general conclusionistheliteratureontherelationshiphasbeeninconclusive.Previousstudies have argued distinct explanations based on confused and mixed evidence In the dissertation, I have argued that the divide could be caused by tworeasons.

The first is that the impact of ownership concentration on firm performance goes through both mechanisms of risk-taking orientation and liquidity destruction I decide to find out advocates of this argument through evidence in frontier markets where the dissension within the effect of ownership concentration on firm performance should be exacerbated by the risk-taking and liquidity mechanisms.

Specifically, the dissertation sheds light on the performance effect of ownership concentration in neglected frontier markets by specifying evidence of non-linear or monotonic patterns In essence, ownership concentration is an effective internal corporate governance mechanism in underdeveloped environments with weak national governance structures However, this mechanism is only effective over a certain level of ownership concentration and more profound at higher levels of concentration.Theagencytheorygrantsplausibleexplanationsforthisphenomenon, butadeeperinvestigationintothisshouldbenecessary.Ihavefurtherdelvedintothe risk-taking and liquidity activities, concluding that they are significantly effective as channeling mechanisms of the relationship between ownership concentration and firmperformance.

The second reason of the theoretical divide may be the discrepancy in definitions of firm performance It is surprising that researchers have bypassed this important issue in their empirical investigations on the corporate performance effect of ownership concentration Demsetz and Villalonga (2001) at a rare mention of the contention between different measurements argue that time reflection and human constraints are two important aspects to differentiate the accounting-based measure of performance such as operating profitability and the market-based measure of performance such as market valuation I am really intrigued by their assertion when witnessing the conflicting results from the vast body of previous studies severally using the non-identical measures of performance By demonstrating the differences between the two alternatives of performance, my dissertation contributes an analytical framework to the empirical literature on potential measurement errors of firm performance Derived from such theoretical perspective, the dissertation offers numerous implications for interpreting how ownership concentration drives accounting-based and market-based performance Particularly, the main findings have specific implications for risk-taking, valuation, and regulation practices in corporate management, market investment, and policy-making process with regard to emerging markets.

Thesecondlineofargumentationabouttheinfluenceofcorporategovernance onfirmperformanceisbroughtforwardinthedissertationislinkedtomethodological approaches employed to examine the mechanisms of the relationship While it is necessary to consider both alternative measures of firm performance for corporate governance research, the impact mechanisms of ownership concentration should be identified by elegant methods The first issue to address is endogeneity in corporate governance literature The dissertation contributes technically advanced analyses to theempiricalliterature.Infact,Ihaveintensivelydiscussednotonlypotentialsources of endogeneity clearly indicated in previous studies but also genuine resolutions to researchers’ disregard for the noteworthy statistics from regression estimators I specifically describe some essential grounds on the usages of the system generalized method of moments (GMM) and the two-stage least squares (2SLS) approaches in examining the risk-taking and liquidity mechanisms of concentration- liquidity relationship.Anotherissueisthatempiricalresearchersusethecommommethodsof dealing with endogeneity without clear argument about its sources In fact, understanding the inherent endogeneity of corporate governance relationships is crucial to choose the proper remedy to the problem In search of the effect of ownership concentration on the riskiness of firm performance, I use the Glejser (1969) heteroskedasticity test to learn about such an internal linkage Furthermore, thecausalrelationshipsbetweenownershipconcentrationandrisk-takingorbetween ownership concentration and stock liquidity are debatable in the literature on corporate governance Therefore, the dissertation could partly contribute to the related literature in thatway.

From a management viewpoint, ownership concentration can enhance firm valuationthatisevaluatedbymarketinvestors.Thisinfluenceisnotstraightforward, but of a trade-off between monitoring and liquidity-reducing effects in inefficient markets likeVietnam From an investment angle, market investors can realize the value of ownership concentration as an effective internal governance mechanism in weak institutional environments However, investors may requiremore compensatory returns for investing in illiquid equities with concentrated ownership.

This observation is extremely crucial for strategies in capital allocation andportfolio management.Infact,illiquiditypremiumisregardedasasignificantpricingfactorin financialassetpricingmodels.Itisarguablethatmarketinvestorscanrequiregreater returnsforilliquidstockswithhighlyconcentratedownership.Internationalevidence shows that illiquid-minus-liquid stocks provides global investors with positive significantly return premiums (Amihud et al., 2015) In the landscape of emerging markets, robust evidence also indicates that stocks with market illiquidity offer significantandpositiveexcessreturnsforbothlocalandglobalinvestors(Buttetal., 2022) This dissertation does not address the effect of illiquidity by the cross-section approachofassetpricing,butratherapanelapproachofdetectingthestatisticaleffect of the ownership concentration on stock liquidity which is regarded as a mechanism of the concentration-performance relationship Nevertheless, the dissertation has implications for active portfolio investment strategies in a manner that emerging markets like Vietnam could offer lucrative opportunities for local and global investors.Specifically,Ifindthattheeffectofilliquidityisprofoundforinstitutional investors such as foreign institutions The dissertation therefore contributes some fundamental analyses toward the frontier-market studies using the pricing models with the illiquidity premium infuture.

Theabove-mentionimplicationsarerelevanttothefactthatilliquidemerging- market equities with concentrated ownership could still attract more international investment thanks to their benefits of portfolio diversification Such benefits could bemoreattractiveinVietnamasafrontiermarketwithuniquecharacteristics(Berger et al., 2011).

Therefore, the dessertation’s argument on the trade-off between the monitoring benefit and the liquidity-imparing cost of a concentrated structure of ownership could be brought in policy discussions on the progress of upgrading the status of a capital market For theVietnamse capital market, some issues should be the level of ownership concentration and the restriction on foreign ownership From the standpoint of policymakers, conclusive results in this dissertation aresu p p o r t i v e of the national schemes of upgrading toward upper tiers from the frontier status of the equity market In fact, the results suggest that reducing ownership concentration can boost stock liquidity but may impair firm performance This trade-off warrants further investigation.

Structure ofthedissertation

For the remainder of the dissertation, Chapter 2 reviews the related literature on ownershipconcentration,risk-taking,stockliquidity,andfirmperformance.Fromthe systematized literature, Chapter 2 continues with introducing research motivations and developing empirical hypotheses Chapter 3 presents the modeling framework and emprical approaches for the dissertation Chapter 4 reports the empirical results for the nexus between ownership concentration and firm performance Risk-taking andliquiditymechanismsoftherelationshipareanalyzedindetail.Chapter5focuses on discussing the results Chapter 6 concludes the dissertation with remarks and findings, research contributions, practical implications and researchlimitations.

LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT192.1Introduction

Related literature

2.2.1 Ownership concentration and firmperformance 2.2.1.1 Monitoring effect and expropriationeffect

Corporate governance mechanisms significantly influence firm performance, as highlighted by the dominance of research in this area Agency theory posits that ownership structures impact principal-agent and principal-principal conflicts In cases of low ownership concentration, diffuse control and limited monitoring power by shareholders can impair their ability to oversee management, leading to agency problems.

In the opposite direction, managers have less incentive to report full information on their strategic decisions about operating activities to their bosses.

Managerswhorealizetheycanexploitthisinformationasymmetrytomaximizetheir privatebenefitswillexecuteinvestmentprojectsthatarenotnecessarilyintheinterest of shareholders Such misalignment of owner and manager objectives might lead to distorted or sub-optimal investments and then impair firm performance Besides, the agency costs are translated into higher return rates required by outside investors, reducing firm valuation by the market The fact that managers can act opportunistically at the expense of shareholders fosters using contractual incentive mechanismssuchasexecutivecompensationpackagestodiminishthedivergenceof interest (Jensen and Meckling, 1976) However, such an instrument for addressing the agency problem, in the context of enterprises with dispersed ownership, might aggravate the free rider problem (see Balsmeier and Czarnitzki, 2017), which is usually in case of firms with concentrated ownership In particular, manager owners mayexpropriatethewealthofnon-managerownersoncetheyarelefttothediscretion conferred by their firm’s diffuse ownership structure This requires complementary mechanisms of corporate governance that can efficiently deal with the agency problem Shleifer and Vishny (1997) suggest that legal protection of investor rights and concentration of ownership can be powerful governing instruments to curb the agencyproblem.

Although concentrated ownership can alleviate the principal–agent problem via the monitoring pressure that large shareholders put on the management (Shleifer and Vishny, 1997), such an ownership structure comes at a cost because of the resultantconsequencesofthedivergenceofinterestbetweenminorityandcontrolling shareholders – which exactly raises the principal–principal problem above- mentioned.Thereisanenormousincentiveforcontrollingshareholderstogetprivate benefits of control at the expense of minority shareholders Large shareholders are not usually diversified (Demsetz and Lehn, 1985) and these bearers of excess risk tend to impose conservative thoughts on the management in making investment decisions Besides, large investors have their own private interests that are not necessarilycoincidentwiththoseofminorityinvestors(andmanagers).Tomaximize their wealth,large shareholders would utilize their excess controlling power to redistribute welfare from others – in both efficient and inefficient ways (Shleiferand

Vishny, 1997) This potentially leads to expropriations of minority investors (and managers), possibly making investments distorted Obviously, the costs of concentratedownershipdependonthestrengthofminorityinvestorprotectionrights In an environment where minority investor rights are strongly protected, expropriation incentives by large shareholders could be limited significantly Although a better environment of investment protection is often related to dispersed ownership enforced by a legal framework such as the United States and the United Kingdom, some advanced markets such as Japan, Germany, and French are featured by family and bank controls (see Claessen and Yurtoglu, 2013) In a weak environment of investor protection, private benefits of control are high and pronounced entrenchment of inside owners will restrain outside investors from conservingtheirwealth(seeBalsmeierandCzarnitzki,2017).Inthiscontext,internal governancemechanismssuchownershipconcentrationcansubstituteforinstitutional drawbacks to enhance corporate governance quality and thus increase firm performancethroughbeingconducivetowealthexpropriationreduction(Shleiferand Vishny, 1986;

Admati et al., 1994) and investment capital efficiency (La Porta etal., 2000; Durnev et al.,2004).

The quality of corporate governance is believed to affect firm valuation and operating performance The argument is that better governance environmentsshould boost firm performance through efficiency improvements in management and investment activities As well-acknowledged mechanisms of governance, firm-level ownership structure and country-level investor protection have their roles investigated in association with corporate performance A huge amount of empirical evidence has been accumulated to shape the relationship between ownership concentrationandfirmperformance.Empiricalevidenceontherelationshipbetween ownership structure and firm performance is diverse: the recursive relation may be linear or non-linear(e.g., concave or convex, piecewise- or curvi- linear) or inconclusive In reality, non-linear relations have been commonly found inthe existing empirical literature 2 Nevertheless, several patterns of this relation are practically existent across different surveyed samples of ownership structures.

Typically, the relation is demonstrated as an inverted u-sharped (concave) curve (McConnell & Servaes, 1990; Han and Suk, 1998; Holderness et al., 1999;Thomsen and Pedersen, 2000; Sun et al., 2002; Schmid and Zimmermann, 2008; Arosa et al., 2010;BalsmeierandCzarnitzki,2017),oraninvertedu-sharpedcurveextendedwith anupwardtrend(Morcketal.,1988;HermalinandWeisbach,1988;Cho,1998;Short etal.,1999;Gugleretal.,2004).Besides,theconvex(u-shaped)impactofownership structure on firm performance is not uncommon in some specific contexts, for example,suchasownershipconcentrationinJapanesefirms(HuandIzumida,2008), family ownership in French firms (Gharbi and Othmani, 2022), state ownership in Chinese firms (Wei and Varela, 2003; Wei et al., 2005; Ng et al., 2009; Yu, 2013) 3 and in Vietnamese listed firms (Phung and Mishra,2016).

2.2.1.2 Trade-off between monitoring and expropriation effects in marketvaluation

The aforementioned evidence of non-monotonic relations is interpreted as the result ofatradeoffbetweenthemonitoringandexpropriationeffects.Foridentifyingwhich

2 Some empirical studies find no relation between ownership concentration and firm performance (DemsetzandLehn,1985;McConnellandServaes,1990;Prowse,1992;Mehran,1995;Himmelberg etal.,1999;Chenetal.,2005),whichisstronglysupportedbystudiesaccountingfortheendogeneity issueofownershipstructure(DemsetzandVillalonga,2001;Schultzetal.,2010;Phametal.,2011).

Othersfindalinearrelationwhichiseitherpositive(McConnellandServaes,1990(withinstitutional investor ownership);

Xu & Wang, 1999; Claessens and Djankov, 1999; Claessens et al., 2002; Kapopoulos and Lazaretou, 2007;He, 2008; Nguyen et al., 2015a; Buallay et al., 2017 (with the largest block holding); Paniagua et al., 2018 (a negative relation in terms of ownership dispersion); Kao et al., 2019; Alkurdi et al., 2021;

Nashier and Gupta, 2023) or negative (Gunasekarage et al., 2007; Hu et al., 2010; Buallay et al., 2017 (with three largest blockholdings)).

3 ForthecontextofChinesefirms,Wei(2007)demonstratesthattherelationbetweenstateownership and firm performance is a non-linear (neither a u-shaped nor an inverted u-shaped) curve with a negative effect observed when the state stake above50%. of the effects dominates the other, the nature of national institutions should matter.

ClaessenandYurtoglu(2013)andBalsmeierandCzarnitzki(2017)raisetheissueof agency conflicts between majority and minority shareholders in weak institutional environments such as emerging markets and transitional economies Poor investor protection in these contexts encourages the wealth expropriation by controlling shareholders However, in such markets with under-developed national governance, Filatotchevet al (2013) argue that the monitoring effect should more influential.

Shareholders’ interest-based incentives to monitor management should be higher in firmsweaklydisciplinedbyexternalgovernancemechanisms.Inthiscase,ownership concentration can serve as a substitute for institutional deficiencies (Shleifer and Vishny, 1997; Lins, 2003;

This argument is supported by many findings of a dominance of the monitoring effect over the expropriation effect For example, Claessenset al (1997) find a valuation-enhancing role of bank-sponsored funds in Czech firms that they have a large ownership stake This implies that the market values the firms with their main debtholders being large (indirect) owners because these stakeholders have more advantageous information and better incentives to discipline the firms, i.e, mitigate the conflicts between shareholders and managers and between shareholders and creditors Lins (2003) shows that non-management block holdings are positively associated with firm valuation in emerging markets He also finds that the beneficial governance role of blockholders is more pronounced in countries with weaker external shareholder protection.

The moderating effect of national governance quality on the relation between ownership concentration on firm valuation is recently examined by Nguyen et al.

(2015a),whouseadynamicapproachfortwoAsiancontextswithtypicaldifferences in national governance infrastructure, i.e., Vietnam and Singapore Their results advocatetheargumentabouttheeffectivemonitoringinfluenceoflargeshareholders in firms with concentrated ownership In addition, the valuation effect ofblockholdingismoreprofoundinfirmsoperatinginVietnam,whichhasaninstitu tional environment of significantly lower quality In general, firm-level and/or country- level studies tend to confirm a positive association of firm valuation with ownership concentration Empirical evidence in addition to the above-mentioned ones includes Claessens (1997), Xu and Wang (1999), Claessenset al., (2002), Baiet al., (2004), Makhija,(2004),Gunasekarageetal.(2007),Heugensetal.(2009),Maetal.(2010), Kaoetal.

(2019),Alkurdietal.(2021),NashierandGupta(2023)andamongothers However, this evidence may diverge from the net effect of the monitoring and expropriation trade-off (i.e., a dominance of the monitoring effect over the expropriation effect) because they have not scrutinized the potential nonlinear relationship between ownership concentration and firmvaluation.

2.2.2 Ownership concentration and firmrisk-taking

The linkage between corporate governance mechanisms and firm risk-taking behavior has been a theme of corporate finance research increasingly attracting scholars It is acknowledged that a firm’s corporate governance features affect the firm’s performance through their effects on the firm’s risk-taking behavior, that is, the firm’s risky choices of investment projects under the presence of growth opportunities (Wright et al., 1996; John et al., 2008) In other words, as the natureof risk-taking behavior plays a decisive role in the process of firm value creation, an investigationintoconnectionsbetweencorporategovernancecharacteristicsandrisk- taking incentives can reveal the essence of the corporate governance–performance relationship.

The influence of investor protection and ownership concentration on risk- taking behavior has implicitly or explicitly been documented by the prevailing literature on firm growth To begin with, one can delve back into the financial developmentliteraturethatemphasizeslegalfoundations.LaPortaetal.(1997,1999) confirmthesignificantroleofthelegalenvironment,characterizedbybothlegalrules and their enforcement, on capital market development, and argue that an improvement in such an environment can reduce the agency conflictb e t w e e n minorityandcontrollingshareholdersintermsofstrongerlegalprotectionofminority shareholderstolimitthepotentialexpropriationbycontrollingshareholders.Shleifer and Vishny (1997) support the argument by considering the expropriation as a consequence of risk- taking behavior by large shareholders, who have incentives to forcethefirmtotakeonexcessiverisk.Justasthelegalrightsthatthelargeinvestors require to limit the expropriation by managers, Shleifer and Vishny argue that the legal protection required by small investors can help to prevent the expropriation by both the managers and the large investors La Porta et al (2000) relate efficient corporategovernancetothestrongprotectionofinvestorsthatisreflectedinfinancial market development, equity ownership dispersion, and capital allocation efficiency Therefore, a positive relationship should be implied for the connection between concentrated ownership and risk-taking in well-established investor protection countries.

However,inlowinvestorprotectioncountrieswhereownershipconcentration is regarded as a firm-level governance mechanism substituting for institutional shortfalls (Shleifer and Vishny, 1997), the concentration/risk-taking association can be revealed under two guises On the one hand, concentrated ownership could increase risk-taking In weak institutional environments, the minority investor expropriation by controlling shareholders can become more serious in various forms such as transfer pricing, assets stripping, related-party transactions, and tunneling distortion (see La Porta et al., 2000;

Development ofresearchhypotheses

Based on the previous literature review and the specified emerging context of Vietnam, I present the three main empirical hypotheses in this dissertation.

First, the theories posit that the relationship between ownershipconcentration and firm performance may be positive as a result of the monitoring effect (Shleifer and Vishny, 1986;

McConnell and Servaes, 1990; Zingales, 1995; Claessens and Djankov, 1999) or negative as a consequence of the expropriation effect (Morck et al.,1988;ShleiferandVishny,1997;LaPortaetal.,2000).InthecaseofVietnamas a country with relatively weak institutional quality (Nguyen et al., 2015a), the positive effect can be more obvious Therefore, I hypothesize a generally positive linkage between ownership concentration and firm performance in this emerging context.

Hypothesis 1 Vietnamese firms with higher concentrated ownership havebetter performance on average.

Second, the theoretical arguments imply a positive or negative relationship between ownership concentration and risk-taking activity depending upon the essentials of the institutional environment (Shleifer and Vishny, 1997; Morck et al., 1988;LaPortaetal.,2000).AsVietnam’scapitalmarkethasaweaklevelofinvestor protection,theargumentthatVietnamesefirms withconcentrated ownership have

17 Bousnina et al (2022) have recently investigated the impact of ownership structure on stock liquidity in Tunisia; however, they only focus on foreign ownership. more incentives to take risks is plausible Therefore, I hypothesize a generally positive association of ownership concentration with risk-taking for Vietnamese firms.

Hypothesis 2 Vietnamese firms with higher concentrated ownership havemore risk-taking activities, indicating a greater variability of performance.

Finally, the previously surveyed studies indicate an adverse relationship betweenownershipconcentrationandstockliquidity.Suchaliquidity-reducingeffect istheexpenseofusingownershipconcentrationasaninternalgovernancemechanism to eliminate agency costs (Jensen & Meckling, 1976; Demsetz & Lehn, 1985; Demsetz, 1986; Morck et al.,

Bhide,1993;Kini&Mian,1995;Bolton&VonThadden,1998;Maug,1998;Bethel et al., 1998;

Amihud, 2002) Similarly for Vietnam as a typical context of frontier markets, I hypothesize a negative relationship between ownership concentration and firmperformance.

Hypothesis 3 Vietnamese firms with higher concentrated ownership havelower stock liquidity.

It should also be noted that the hypothesized relation is based on controlling for the participation of institutional investors who can play vital roles in emerging markets(Rubin,2007;Dangetal.,2018).Also,asownershipconcentrationdecreases market liquidity through the real friction channel (i.e., trading activity effect) and/or informational friction channel (i.e., adverse selection effect) (Stoll, 2000; Brockman et al., 2009; Rubin, 2007), there are two variants ofHypothesis 3totest:

Hypothesis3a.ForVietnamesefirms’stocks,higherownershipconcentrationreduces market liquidity in terms of reducing trading activity due to increased transaction costs onaverage.

Hypothesis3b.ForVietnamesefirms’stocks,higherownershipconcentrationreduces market liquidity in terms of increasing adverse selection due to information asymmetries.

Summary

It is well recognized that ownership concentration plays its role as an internal corporate governance mechanism In weak institutional environments, ownership concentrationcanserveasasubstituteforweakprotectionofinvestorrightsandthus improve firm growth (Shleifer and Vishny, 1997; Boubakri et al., 2005) Thecurrent chapter has surveyed the existing literature on the associations of firm performance withownershipconcentrationinbothemerginganddevelopedmarkets.Specifically, the literature on the nexus has been intensively reviewed in terms of risk-taking and liquiditymechanisms.

Emerging markets, featuring concentrated ownership structures, have garnered scholarly interest in exploring the relationship between ownership concentration and firm risk-taking and performance However, extant literature lacks a comprehensive understanding of the underlying mechanisms and overlooks the impact of different performance measures, such as operational profitability and market valuation Vietnam, a frontier emerging market with distinct characteristics, serves as an ideal case study to address these research gaps.

MODELING FRAMEWORK, DATAANDMETHODS

Introduction

This chapter of the dissertation introduces empirical research approaches for the examined relationship between ownership concentration and firm performance as well as its mechanisms of corporate risk-taking and stock liquidity I start with the modeling framework in section 3.2, identifying empirical specficiations for regression estimations Section 3.3 describes how datasets are collected and utilized for the empirical models Methods for measuring the variables and dealing with econometric issues are also discussed.

Modelingframework

3.2.1 Differencesbetween accounting-based measures and market- basedmeasures of performance

The measurement of firm performance is one of the methodological issues that most studies have neglected to consider Demsetz and Villalonga (2001) show two important aspects that differentiate the accounting-based measure of performance, i.e.,profitabilityratiossuchasROA,fromthemarket-basedmeasureofperformance, i.e., Tobin’sQ: time reflection and human constraints In the perspective of time,the accounting rate is a backward-looking measure evaluating what a firm has already achieved, while Tobin’sQis a forward- looking measure evaluating what a firm will (is expected to) achieve From the perspective of humanity, measuring operational profit rates is constrained by accountant professional standards, while Tobin’sQisa market valuation mediated by investor psychological behaviors Despite the differences, researchers tend to undoubtedly carry out a bias selection of using the performance measure Indeed, Demsetz and Villalonga (2001) point out that “accounting profit rates have been ignored presumptuously in favor of Q in thestudiesthatfollowedtheDemsetzandLehnstudy”(p.214).Severalstudiesfollowing

Demsetz and Villalonga’s argumentation have considered both measures intheir work These in a limited number can be seen in Appendix A, in which I just summarizesometypicalstudies.Ingeneral,moststudiesuseTobin’sQastheirmain proxy for firm performance Furthermore, there is a bias in their empirical results of the ownership– performance relation The evidence relating to accounting profitability tends to show no relation, while the one relating to market valuation tends to be mixed A majority of such evidence relating to Tobin’sQhas a tendency towardanon- monotonicrelation.Theoretically,thiscanbeinterpretedasanoutcome of a trade-off between the monitoring effect and the expropriation effect of concentrated ownership.

Is there potentially a difference in the effects of ownership concentration on these performance measures? Ambiguous findings in the U.S market may be a manifestation of this conjecture Several studies show a consistency in their results using different measures of performance However, such empirical evidence aiming at a consolidation for U.S firms is found in differing samples (Demsetz and Lehn, 1985;DemsetzandVillalonga,2001)ornotfullyreported(Himmelbergetal.,1999) For non-U.S. contexts, existing results on operational and market performance measures have also leaned toward a consistency, regardless of being with statistical significance(HuandIzumida,2008;ThomsenandPedersen,2000)orinsignificance

(e.g.,Chenetal.,2005;Schultzetal.,2010).Becausethekeypointforthedifference in measuring performance is the reflection on market investors’ psychological behaviors in case of Tobin’sQ, it is plausible to believe that some market imperfectionscanbeasourceofapotentialdiscrepancyinconsequentconcentration– performance relations As a result, such a disparity is likely to be seen in capital markets with the least efficiency.

In markets with high levels of information asymmetry such as emerging markets or particularly

In emerging markets, variations in ownership structure can be interpreted by investors as indicators of monitoring and expropriation risks However, due to asymmetric information, these risks may be underestimated or overestimated, leading to adverse selection and moral hazard issues Consequently, the market valuation of companies may be distorted, despite the absence of any actual accounting effect As a result, it is possible to observe a mediating effect of ownership concentration on market valuations, even when there is no true economic impact.

In this chapter, I would model the influence of ownership concentration on firmperformanceintermsofbothaccountingprofitabilityandmarketvaluation.Firmprofitability should be measured by accounting returns on assets or equity, and firm valuationofinvestmentopportunitiesshouldbeproxiedbymarket-relatedratiossuch as Tobin’s Q.

This approach would guarantee a comprehensive understanding of expected performance impacts of ownershipconcentration.

The measure of ownership concentration is the percentage of combined holdings of large shareholders who own at least 5% of total outstanding shares,block holding.

Previous studies for the Vietnamese context such as Nguyen et al (2015a), (Tran &

Le, 2020), and (Tran & Le, 2022) have also employed this measure.

In addition, detailed identities of ownership concentration are used to check the robustness of the results related to liquidity models Specifically, I break down block holdings into different identities depending on specific types of blockholders: insiders and outsiders, foreign and domestic investors, and institutional and individual investors This approach helps to understand the essence of the liquidity impacts of ownership concentration through different large shareholders For example, it is necessary for international investors and indigenous policymakers to realize the roles of foreign investors in emerging markets Even evidence of the importance of foreign investors in Vietnam has been ambiguous so far (Vo, 2016ab;

3.2.3 Modeling the impacts of ownership concentration on firm performanceandrisk-takingactivity

3.2.3.1 Firm performance as a function of ownershipconcentration

As a standard approach, I estimate the impact of ownership concentration on firm performance by the following regression:

The study employs two key metrics for performance assessment: return on assets (ROA), calculated as EBIT over beginning-of-year assets, and Tobin's Q, a market-based valuation measure approximated by the end-of-year market-to-book ratio of total assets Ownership concentration, a crucial factor in corporate governance, is quantified using the block holding measure, which represents the cumulative shareholding of large investors (owning at least 5% of outstanding shares) as required by the State Securities Commission (SSC) of Vietnam.

Consistent with Adams et al (2005), Nguyen (2012), Faccio et al (2011, 2016),Boubakeretal.(2016),Kaoetal.(2019),andNashierandGupta(2023),Iusefirm- specificControl variableswhich are widely recognized in the prevailing literature, includingFirm size,the natural logarithm of total assets;Leverage,the financial leverage measured by the ratio of total debt to total assets; current and lagged values ofROA,the ratio of EBIT to total assets;Capex,capital expenditures divided by sales;Age, the number of years since the date of listing;Tangibility, the ratio of fixed to total assets;Sales growth, another proxy for growth opportunities measured by the yearly growth rate in sales 18 ; andIndustryandYeardenotev e c t o r s

18 This variable is used to capture measurement errors in Tobin’sQ. of industry and year dummies, respectively Note that, whenROAis used asFirmperformance, the current and lagged values ofROAare excluded fromControlvariables Also, when testing for the non-linear relationship between ownership concentration and firm performance, the square ofBlock holding,Block holding^2, is employed in addition toBlock holding.

The extant literature on corporate governance also documents board composition as a significant governance determinant of firm performance (see Wintokietal.,2012).F o r isolatingtheireffectsonfirmperformancefromownership concentration’s effect, I add governance-related control variables, board characteristics, includingCEO duality, a dummy variable equal to 1 if the chairman andthechiefexecutiveofficer(CEO)arethesameperson,andzerootherwise;Boardsize,thenumb erofdirectorsonthefirm’sboard;Boardindependence,theproportion of outside (non-executive) directors on the board; andGender diversity,theproportion of female directors on theboard.

3.2.3.2 Risk-taking as the divergence of expected firmperformance

Similar to the approach by Adams et al (2005), Nguyen (2012), Boubaker et al.

(2016), and Castro Martins (2020), firm risk-taking is proxied by the absolute deviation of firm performance from its expected value, which is obtained by the procedure known as the Glejser (1969) heteroskedasticity test In particular, the Glejser-type tests are implemented in two steps The first step is exactly estimating the specification of performance determinants, Equation (3.1), withordinary least squares(OLS)andgettingthesam pleresiduals𝑒̂ 𝑖𝑡 Theabsolutev al uesof𝑒̂ 𝑖𝑡 are risk-taking measures of interest relative to alternative measures of firmperformance,ROAand Tobin’sQ The idea of measuring risk-taking behaviors by the residuals of performance regressions technically implies that the riskiness of performance links with unanticipated variations (unpredictability) in firm performance Inevitably, this approach satisfies the premise that firm performance is affected by risk-taking behaviorwhichisthenatureofthegovernance– performancerelationship.Thesecond step of the Glejser tests is the one I utilize to detect the effect of ownership concentration on firm risk-taking This requires running specific regressions onobtainedmeasuresofrisk-taking,|𝑒̂ 𝑖𝑡 |:

+𝛽 3 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦 𝑖 +𝛽 4 𝑌𝑒𝑎𝑟 𝑡 +𝑢 𝑖𝑡 (3.2) Following the Glejser approach above-mentioned, control variables used in the specification of firm risk-taking, Equation (3.2), are the same as in the specification of firm performance, Equation (3.1) For this dissertation’s objectives, Equations(3.1)and(3.2)arejuststylizedmodelstodetecttheinfluenceofownership concentration on firm performance and risk-taking, respectively In the initial identification of the relations for the static data panel, I use OLS regressions with cluster effects at the firm level rather than with fixed firm effects The reason is that ownership structure tends to change slowly over time, and thus the impact of ownershipdifferentialsonfirmperformanceandrisk- taking,ifitactuallyexists,may notbefoundbythefixedeffectsestimator(Boubakeretal.,2016;Adamsetal.,2005; Zhou, 2001).

For the sake of comparison, I also report estimated results using fixed effectsregression.

Previous research indicates that endogeneity is a serious issue about which scholars should be cautious in studying the association of corporate governance mechanisms with performance (Schultz et al., 2010; Coles et al., 2012; Wintoki et al., 2012; Kao et al., 2019) and risk-taking (Coles et al., 2006; John et al., 2008; Nguyen, 2011;

Koerniadi et al., 2014; Boubaker et al., 2016) Specifically, Wintoki et al (2012) categorize three likely sources of endogeneity in the governance–performance relation, namely unobserved heterogeneity, simultaneity and dynamic endogeneity.

As an intermediate channel of governance–performance linkage, the relationship between governance and risk-taking could also be tainted by such potential sources of endogeneity In the process of detecting the governing determinants of firm performance and risk-taking in Equations (3.1) and (3.2), I additionally reportrobust estimates using Blundell and Bond’s (1998) system generalized method of moments (GMM) The system GMM can deal with all three sources of endogeneity in the dynamicpanelapproach(i.e.,Equations(3.1)and(3.2)includeonelaggeddependent variable as an explanatory variable.) For the sake of comparison, I also report estimated results from a dynamic panel approach for pooled OLS estimations (with cluster effects at the firm level) although these estimates may be inconsistent due to potential endogeneity issues (Wintoki et al.,2012).

3.2.4 Threshold effects in the relationship between ownership concentrationandfirmperformance

Following the dynamic approach used in previous studies on corporate governance, the influence of ownership concentration on market performance is modeled as follows:

+𝛽 15 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦 𝑖 +𝛽 16 𝑌𝑒𝑎𝑟 𝑡 +𝑒 𝑖𝑡 (3.3) where, the dependent variable of valuation is Tobin’sQor its logarithmic form,lnQ.

The measure of ownership concentration,𝐵𝑙𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑖𝑛𝑔, is the explanatoryvariable ofinterest.Controlvariablesincludeotherfirm-levelgovernancecharacteristics(i.e.,

𝐶𝐸𝑂 𝑑𝑢𝑎𝑙𝑖𝑡𝑦,𝐵𝑜𝑎𝑟𝑑 𝑠𝑖𝑧𝑒,𝐵𝑜𝑎𝑟𝑑 𝑖𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑐𝑒,and𝐺𝑒𝑛𝑑𝑒𝑟 𝑑𝑖𝑣𝑒𝑟𝑠𝑖𝑦)and otherfirm- specific characteristics(i.e.,𝐹 𝑖 𝑟 𝑚 𝑠𝑖𝑧𝑒, 𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒 , 𝑅𝑂 𝐴 ;𝐶𝑎 𝑝𝑒 𝑥 , 𝐴𝑔

𝑒,𝑇𝑎𝑛𝑔𝑖𝑏𝑖𝑙𝑖𝑡𝑦, and𝑆𝑎𝑙𝑒𝑠 𝑔𝑟𝑜𝑤𝑡ℎ) Definitions for these variables are delineated inAppendix C (Panel C1).𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦and𝑌𝑒𝑎𝑟are vectors of industry and year dummies, respectively The subscripts𝑖and𝑡specify firm and time dimensions,respectively; and𝑡 − 1denotes one-year lagged values.

Dataandmethods

3.3.1 Sampleanddata 3.3.1.1 A sample of Vietnamese listedfirms

ThisdissertationusesasampleofVietnamesefirmstoinvestigatethenexusbetween ownershipconcentrationandfirmperformanceaswellasitsrelevantmechanismsforseveralreas ons.First,Vietnameseenterpriseshaveahighlyconcentratedstructureof ownership, and such ownership concentration under an under-developed, weak national governance system like Vietnam’s one can serve as a corporate governance mechanismthatcanpotentiallyaffectcorporaterisk-takingactivityandperformance Second, ownership structure in Vietnamese companies has changed significantly sincetheinitiationofamassiveprivatizationprogramasapartofthe1986economic reform.Theconsequencesofthisprocess,whichisalsoknownas“equitization”,can be observed in the immature listed equity market of Vietnam (available since 2000).

Specifically, improvements in the legal and regulatory framework, especially the 2007 issuance and the 2012 revision of corporate governance regulations, that strengthen investor protection have strongly increased the dynamics of corporate ownershipforlistedcompanies.Third,theVietnamesecapitalmarketwithitsserious imperfections serves as an excellent candidate for distinguishing the effects of ownership concentration on accounting- and market-based measures ofrisk-taking/performance In fact, it is shown that Tobin’sQ, a market-based measure of performance, is a poor proxy for investment opportunities in imperfect conditions of the Vietnamese capital market (Tran and Le,2017).

ThedissertationaimstostudyfirmsthatarepubliclylistedontheVietnameseequity market,both the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange(HNX) Information on firms’ annual financial statements and historical data for equity price and outstanding number of shares are extracted fromThomsonReuters’database.StudyingVietnameselistedfirmsfaceslimita tionsofdata availability Indeed, Vietnam’s equity market appears to be an insignificant,undersized component of the economy before 2006 Only 26 firms are listed onHOSE by the end of 2004: it is a passage of four and a half years since the date ofHOSE establishment with its first two traded securities In 2005, the constitution ofHNX contributes 9 firms to the overall market size of 41 listed firms As of 2006,Vietnamese firms’ initial public offerings proliferate Market scale dramatically increases at 30-40% each year until 2010, covering two opposite stages of the stock market:theboom(2006-2007)andthecrashafterward.Theactivescaleofabout700 listed firms is relatively stable from 2011 to 2020 Understandably, it is reasonable for scholars to delve into the time span starting from at least 2006 once they wish to derive corporate research evidence from the case of Vietnamese listed firms In the research strand of ownership structure–firm performance relationship, for example, Phung and Mishra (2016) conduct an investigation on an unbalanced sample (2744 firm-year observations) over the period of2007-2012 and Nguyen et al (2015a) use a smaller sample (488 firm-year observations) from 2008 to2011.

Table 3.1 Evolution of block ownership in Vietnamese listed firms

Ho Chi Minh Stock Exchange (HOSE)

As chosen in this dissertation, the research sample consisting of both HOSE- and HNX-listed companies stretches from 2007 to 2020 Financial institutions, including banks, securities, and insurance companies, are excluded from the sample.

The dataset for estimating specific specifications is established as an unbalanced panel – in which usable firms have (1) consecutive observations available in at least threeyears,and(2)nomissingorincompletedataforcalculatingvariables.Applying these selection criteria to theThomson Reutersdataset results in an initial “accounting” sample of 572 non-financial firms (5260 firm-year observations) covering the period of 2008-2020 23 This sample represents over 75% of all firms listed on the market during the period from 2012 to 2020 24 TheThomson

Reuterssource,whichisavailableattheendoffinancialyears,isalsousedforcalculatingthe market-based measure of performance, Tobin’sQ For the specifications of Tobin’sQ, an unbalanced panel of 526 firms (5159 firm-year observations) is available for estimation after matching this market-based ratio with the accounting sample based on the two filteringcriteria.

I further apply the winsorization technique to reduce the effect of serious outliers across all specified analyses Measures of firm performance (ROAand Tobin’sQ) and accounting variables including financial leverage, capital expenditure,andtangibilityarewinsorizedatthe0.5%levelonbothsides(i.e.,atthe

0.5%and99.5%percentiles)ofthesampledistribution.Assalesgrowthhasalargely right-skewed distribution, I winsorize at the bottom 0.5% and at the top 5% of this variable’s distribution.

The other accounting variables in logarithmic form, firm size (logarithmoftotalassets)andage(logarithmof[thenumberoflistingyearsplus1]),

For accuracy, the year 2007 is excluded from the analysis due to calculation discrepancies Accounting returns (e.g., return on assets calculated as EBIT divided by prior year assets) and sales growth metrics are affected by the exclusion of 2007 data.

24 In fact, this sample of 572 non-financial firms represents over 80% of non-financial firms on the market during the period of 2012-2020. are not winsorized because the logarithmic transformation often helps alleviate potential impacts by outliers.

Daily data on stock prices and trading volumes are collected to measure liquidity-related variables specified in Equation (3.11) These variables are liquidity proxies includingSpread,Amihud,Zeros,Zeros2,FHT,Amivest,Turnover, andVolume, and controlling variables such as share price (Price), market capitalization (Marketcap),andstockreturnvolatility(Volatility).Financialdataareextractedfrom Thomson Reuters’Datastream, and data for ownership and board characteristics are obtained fromVietstock The combined sample available for the regression specification includes 523 firms listed on both stock exchanges (the Ho Chi Minh Stock Exchange – HOSE and the Hanoi Stock Exchange – HNX) over the period from 2008 to2020.

Ownership and management information are obtained from Tai Viet Corporation (Vietstock), a renowned Vietnamese financial information provider Vietstock's ownership data includes the number of shares and equity stakes held by significant shareholders, defined as those holding at least 5% of outstanding shares Board composition and governance-related variables (25 in total) are extracted from Vietstock's corporate management structure dataset (2008-2020) Notably, to address imperfections in the dataset, adjustments were made to remove duplicate information on board members, potentially impacting measures of board size, independence, and gender diversity Additionally, cases lacking information about CEO and chairman positions were addressed, ensuring the integrity and accuracy of the data used in this dissertation.

25 This is the threshold for mandatory disclosure of equity ownership in Vietnam. identifying positions Some cases lead to different inferences for the CEO duality.

For verification, I compare these cases to relevant information provided in periodic corporate governance reports downloadable at websites of checked firms, HOSE or HNX.

Eventually, the manually adjustedVietstockownership and management datasetsaremergedwiththeselectedThomsonReutersaccountingandfinancialdata samples and keep only firms that meet the two filtering criteria as applied to getting theinitialaccountingsample.Dependingonwhichofthedependentvariablesisused to measure firm performance in established specifications, different subsamples are employed A subsample of 529 firms (5191 firm-year observations) is available to investigate the relationship between ownership concentration and firm profitability (ROA) Once Tobin’sQis used as a dependent variable, 526 firms (maximum 5159 firm-year observations) are left to examine the association of ownership concentration with firmvaluation.

To address endogeneity, the two-way system GMM estimator was employed Given the high persistence of performance variables like ROA and Tobin's Q, a dynamic modeling approach for their determinants is deemed appropriate The empirical findings (Section 4.2) demonstrate the persistence of firm performance, highlighting the necessity of considering dynamic aspects in estimating the ownership-performance relationship Thus, OLS and fixed effects estimations in static panels are prone to bias.

ThesystemGMMestimatorwhichisrobusttothedownwardbiasintwo-step standard errors, thanks to the Windmeijer (2005) correction, should theoretically produceefficientandconsistentestimates.Usingtoomanyinstruments,however,can overfit endogenous variables If this is the case, the estimator fails to eliminate endogenouscomponents,andparameterestimatesarebiasedasaresult(Roodman,

2009) Hansen’s (1982)J-test is a standard specification check for the two-step system GMM and also a test of instrument validity Albeit its robustness to heteroskedasticity, theJ-test can be weakened by instrument proliferation(Bowsher, 2002) Unfortunately, there is no exact criterion of how many instruments inrelative term should be a safe number.

Summary

It is a fact that the associations of ownership concentration with risk-taking andwith performanceareinvestigateddiscretely.Notmanyexaminecontemporaneouslyboth connections in the same framework For a sample of U.S firms, John et al (2008) examine the relationships between ownership concentration and risk-taking, and betweenrisk-takingandfirmgrowth.However,theirfirmgrowthmeasures(i.e.,asset growth and sales growth) do not reflect firm profitability Nguyen (2011) examines the connection between firm risk and performance (i.e.,ROAor Tobin’sQ) in addition to his main investigation on the relationship between ownership concentrationandrisk- takingforJapanesefirms.Tothebestofmyknowledge,there has been no study that directly validates the concentration–performance relationship by examining the influence of concentration on risk-taking behavior linked to performance.Idecidetoexploresucharisk- takingchannelinthecontextofafrontier emerging market by using a linking technique that is employed by Adams et al (2005), Nguyen (2012), and Boubaker et al (2016), who use theGlejser heteroskedasticity test to extract risk-taking measures from firm performance regressions and then probe the linkages between their variables of interest andt h e s e risk-taking measures For robustness tests, I also use alternative measures of risk- taking such as standardized volatilities in profit rates and stock returns.

As empirical research tends to prefer a market-based measure ofperformance likeTobin’sQtoanaccounting-basedonelikeROA,DemsetzandVillalonga(2001) raisethenecessityofconsideringbothmeasuresconcurrently.Inaccordancewiththis implementation, studies tend to support the view of Demsetz (1983) (e.g, Demsetz and Villalonga, 2001; Chen et al., 2015) Nevertheless, the existence of mixed empirical results, especially non-monotonic evidence, from using the market-based measure such as Tobin’sQshould garner more attention from researchers with respect to the distinctive natures of this measure as pointed out by Demsetz and Villalonga (2001) Unfortunately, the question of whether there is an empirical difference in defining the concentration–performance relationship by using the two different measures of performance has been neglected by researchers This dissertation addresses this question by looking into firms publicly listed in the exchanges of Vietnam, a typical frontier capital market I believe that the setting of emerging capital markets where market imperfections such as information asymmetries exacerbate the market investors’ capability of firm valuation is a good candidate for testing for potentially divergent results from these two measures In other words, the divergence if any in results from the two measures should emanate from the failure of market investors in realizingtrueperformance.

Methodologically, I inspect for empirical results with respect to the two measures of performance, in the context of an imperfect capital market, which can affirm whether there exists a difference in empirical outcomes as a consequence of differentsourcesinthemeasurementoffirmperformance.Iuseasampleofpublicly listedfirmsinVietnamtoaddressthetwoobjectives.ThefirstreasonisthatVietnam has an under- developed, weak national governance system (Le and Walker, 2008; Nguyen et al., 2015ab), and Vietnamese firms are characterized by having highly concentrated ownership.

In such an institutional environment, especially with poor investor protection rights,ownership concentration can serve as acorporate governance mechanism that can potentially affect firm-level risk-taking activity and performance Another reason is that its government’s massive privatization scheme since 1986 (i.e., under the implementation of the “Doi Moi” policy) has changed significantly ownership structure in Vietnamese enterprises Coupled with its recent reformsincorporategovernancepractices,thelistedequitymarketofVietnamwhich is available since 2000 constitutes an interesting venue for governance research Moreover, Vietnam’s economy is at an earlier stage of financial development with a frontiercapitalmarket.Seriousimperfectionslikeinformationasymmetriesmakethe

Vietnamesemarketanexcellentcandidatefordistinguishingtheeffectsofownership concentrationonaccounting-andmarket-basedmeasuresofrisk-taking/performance.

Anotherobjectiveofthedissertationistoinvestigatetherelationshipbetween ownership concentration and stock liquidity in the Vietnamese market, which provides a clear setting for testing the relationship in emerging markets Threemajor aspects set this research apart from existing research First, to the best of my knowledge, this research is the first to investigate the different channels of the ownershipconcentration–liquidityrelationshipinemergingmarkets.Iuseaspectrum of liquidity measurements available in the literature to investigate the influence channelsofownershipconcentrationonequityliquidity.Second,Iexploreownership concentration in different categories of shareholders, including inside-outside, foreign-domestic, and individual- institutional blockholders This approach provides an overview of all possible influences of the concentration identities on liquidity.

Third,theuniquesampleoftheVietnamesestockmarketisemployedtoexaminethe potential nonlinear influence of ownership concentration on equityliquidity.

Introduction

Thischapterofthedissertationpresentsempiricalresultsforregressionspecifications identified in the previous chapter Using an extensive data sample of Vietnamese listedfirms,severalanalyseshelptorevealthestatisticalrelationsbetweenownership concentration and firm performance as well as its mechanisms of corporate risk- taking and stock liquidity.

Section 4.2 presents results of the estimated impacts of ownership concentration on firm performance The different results are obtained for the alternative measures of firm perfomance.

The results of the risk-taking mechanismandnon- monotonicityoftherelationshiparereportedindetail.Section4.3 presents results of the estimated impact of ownership concentration on market liquidity More robustness checks are implemented to ensure the obtained estimates are consistently significant.

Results of the impacts of ownership concentration on firm performance andrisk-taking

Table 4.1 provides descriptive statistics for the sampled data Return on Assets (ROA) has a mean of 9% with a standard deviation of 9% Similarly, Tobin's Q (Q) has a mean of 1.1 with a standard deviation of 0.61 Absolute deviations from expected ROA and Q, measuring firm risk-taking, are 5.8% and 0.25, respectively The total equity fraction held by large shareholders who own at least 5% of a firm's outstanding shares is 50% on average, indicating high ownership concentration in Vietnamese listed firms.

(3 rd quartile) The maximum value of block holding observed in the sample is99.7%.

As regards board composition, the situation that a firm’s CEO and board chairmanarethesamepersonaccountsfor20%ofallobservedcases.ForVietnamese listed firms, the average number of directors on the board is 5.4 with a minimum of 2andamaximumof11.Amongthesedirectors,independentnon-executivedirectors represent 56% of board membership, implying an average of about 3 independent directors on the board On average, the proportion of female directors is 11%, which indicates women’s under- representation in the board structure of Vietnamesefirms.

Financially, Vietnamese publicly listed firms possess a moderate financial debt ratio (31.3%) and allocate approximately 8.5% of sales to capital expenditures Their assets are primarily intangible (26.3%), and they have experienced a substantial annual sales growth rate of 9.4% Notably, these firms are relatively young, with a mean age of 5.89 years since IPO, significantly lower than the average age of 14.67 years from establishment.

Obs Mean Std Dev Min 25% Median 75% Max

Measures of firm risk-taking

Board size (no of directors) 5191 5.437 1.122 2 5 5 6 11

Firm size (total assets in billion dongs) 5191 2,099 6,435 12 210 539 1,551 131,511

Age (no of years from the establishment) 5184 14.673 7.756 0 9 13 18 60

Age (no of years from the IPO year) 5191 5.890 3.842 0 3 6 9 20

Age (ln(no of years from the IPO year]+1)) 5191 1.729 0.697 0.000 1.386 1.946 2.303 3.045

Table 4.2 displays a correlation matrix for all variables Panel A presents pairwise correlations between alternative firm performance and risk-taking measures The correlation between firm profitability (ROA) and firm value (Tobin's Q or logarithm of Q) is approximately 0.55 This correlation in the Vietnamese sample is lower than the 0.60 correlation observed in the U.S sample by Demsetz and Villalonga (2001) The correlation coefficient between the two performance riskiness measures, |e(ROA)| and |e(Q)|, is 0.32 The correlation between market-based performance and risk-taking measures (0.63) is stronger than that between accounting-based measures (0.45).

Panel B of Table 4.2 indicates that there is no seriously large correlation between explanatory variables The largest correlation coefficients are between firm size and leverage (0.425), tangibility and capital expenditures (0.334), and board independence and gender diversity (0.266) Ownership concentration issignificantly and positively correlated with firm profitability and valuation as well as the market- based measure of risk-taking Except for the accounting-based measure of risk- taking, ownership concentration shows no statistically significant pairwise correlation.

Ownership structure tends to be more highly concentrated among larger and older firms, and among firms with more tangible assets and more board independence In contrast, more diffuse ownership is generally related to higher levels of CEO duality and salesgrowth.

26 Such measures of firm performance highly correlate (about 0.97) with their own industry adjusted measures.

Panel A Correlations between alternative measures of firm performance and risk-taking

(4) Industry-adj ROA 0.974 *** 0.512 *** 0.515 *** 1 (5) Industry-adj Q 0.506 *** 0.964 *** 0.896 *** 0.516 *** 1 (6) |e(ROA)| 0.455 *** 0.362 *** 0.277 *** 0.445 *** 0.342 *** 1 (7) |e(Q)| 0.250 *** 0.634 *** 0.451 *** 0.214 *** 0.614 *** 0.323 *** 1 (8) sigma(ROA) 0.195 *** 0.143 *** 0.138 *** 0.175 *** 0.113 *** 0.303 *** 0.224 *** 1 (9) sigma(return) -0.0454 ** -0.00872 -0.0197 -0.0344 * 0.00113 0.0486 *** 0.0551 *** 0.0917 *** 1

Panel B Correlations between explanatory variables

(4) Board independence 0.0950 *** -0.0793 *** -0.114 *** 1 (5) Gender diversity -0.0194 0.140 *** -0.0575 *** 0.266 *** 1 (6) Leverage 0.0145 -0.0106 0.0478 *** -0.0326 * -0.0699 *** 1 (7) Firm size 0.0928 *** -0.117 *** 0.279 *** -0.0430 ** -0.0859 *** 0.425 *** 1 (8) Capex 0.00286 -0.0539 *** 0.0845 *** -0.0284 * -0.0335 * 0.142 *** 0.190 *** 1 (9) Age 0.0928 *** -0.250 *** 0.00970 0.251 *** 0.0484 *** 0.00851 0.155 *** -0.0251 1 (10) Tangibility 0.113 *** -0.0525 *** 0.123 *** -0.0332 * -0.0442 ** 0.196 *** 0.171 *** 0.334 *** -0.0270 1 (11) Sales growth -0.0444 ** 0.0414 ** 0.0558 *** -0.0585 *** -0.0276 * 0.0917 *** 0.0685 *** -0.0102 -0.162 *** -0.00799 1

4.2.2 Multivariateanalysis 4.2.2.1 Ownership concentration and firmprofitability

Table 4.3 and Table 4.4 report estimated results from the regressions on the accounting-based measure of firm performance,ROA In each table, columns (1)-(3) present results for the static panel while results for the dynamic panel are described in columns (4)-(6) While Table 4.3 shows no statistical significance of a linear relation between ownership concentration (measured as combined ownership by all block holders) and firm profitability, results for testing the non-linear relation presented in Table 4.4 indicate that firm profitability is a quadratic function of ownership concentration.

In Table 4.3, robust OLS estimates for the linear impact of ownership concentration on firm profitability are statistically significant for the static and dynamic panels Fixed effects estimate for the static relationship is significant at the 5%levelofsignificance(column(3)),signifyingtheprobabilitythatthefixedeffects regression (without controlling industry effects) could weakly detect the effect of slow changes in ownership structure on firm performance (Adams et al., 2005; Boubaker et al., 2016) The strong significance of the laggedROA’s estimated coefficients in the dynamic approach supports the previous argument about the dynamic nature of firm performance (Wintoki et al., 2012) In results obtained from system-GMM regressions that deal with sources of endogeneity, the statistical significance of some control variables

(e.g., capital expenditure, firm age, and asset tangibility)foundpreviouslyfromOLSandfixedeffectsregressionsdisappears.The signs of some firm-specific controls such as financial leverage and sales growth remain significant but weaker (at the 5% level.) Noticeably, the effect of ownership concentration becomes statistically insignificant, implying it is indistinguishable from zero when dealing with endogeneity issues (columns (5) and(6)).

Table 4.3 Ownership concentration and firm profitability: linearity

Explanatory variables: PooledOLSwithouti ndustry effects PooledOLSwithindustryeffec ts Fixed effects PooledOLSwithindustryeffect s SystemGMMwithout industry effects SystemGMMwithi ndustry effects

Industry fixed effects No Yes No Yes No Yes

Year fixed effects Yes Yes Yes Yes Yes Yes

Robust std errors Yes Yes Yes Yes Yes Yes

Arellano-Bond test:AR(1) (p-value) 0.000 0.000

Arellano-Bond test:AR(2) (p-value) 0.534 0.533

HansenJ-test of over-identification (p-value) 0.162 0.187

Estimated coefficients are reported with heteroskedasticity-robustt-statistics in parentheses * indicates significance at 10%; ** significance at 5%; *** significance at 1%.

System-GMM estimates are Blundell and Bond’s (1998) system GMM estimates using a two-equation system of the regression in levels and in first differences.

I examine the potential non-linear relation between ownership concentration and firm performance by adding the square ofBlock holdingto regressions on firm profitability (ROA) whose results are described in Table 4.4 Except for the fixed effects regression in column (3) for the static panel 27 , other regressions indicate a quadratic relation between ownership concentration and firm profitability for Vietnamese listed firms Endogeneity-robust SGMM estimates forBlock holding(positive coefficient) andBlock holding squared(negative coefficient) in column(6) illustrate a concave effect of ownership concentration on accounting-based performance Firm profitability increases with ownership concentration, then higher concentration beyond a certain threshold will reduce firmprofitability.

Again, all control variables related to firm characteristics are statistically significant in OLS and fixed effects models However, signs for some of these variables such as capital expenditure, firm age, and asset tangibility disappear when moving to GMM models, which suggests that some sources of endogeneity such as simultaneity and dynamic endogeneity might lead to spurious results for regressions using fixed effects or pooled OLS estimators (Wintoki et al., 2012; Schultz et al., 2010) The results in this dissertation for Vietnamese firms confirm that one should not ignore the dynamic aspect of governance–performance relationship As dynamic panel-based results shown in Table 4.3 and Table 4.4, estimated coefficients of the laggedROAareallsignificantlydifferentfromzero(t-statistic>10).ForpooledOLS estimations (with industry effects),R-squared rises from 23% in the static model (column (2)) to 67% in the dynamic model (column (4)) Response coefficients of past performance estimated from GMM regressions (~0.55) are much smaller than those from OLS regressions (~0.71) – which may be biased Finally, other mechanismsofcorporategovernancesuchasboardcharacteristicsarenotinfluential to changes in the profitability of Vietnamesefirms.

27 Again, disapperance of the ownership signs in the fixed effects model could be explained by the factthattheperformanceeffectofslowchangesinownershipstructurecannotbeeffectivelydetected by static fixed effect estimations (Adams et al., 2005; Boubaker et al.,2016)

Table 4.4 Ownership concentration and firm profitability: non-linearity

PooledOLSwithindustryeffec ts Fixed effects PooledOLSwithindustryeffe cts

Industry fixed effects No Yes No Yes No Yes

Year fixed effects Yes Yes Yes Yes Yes Yes

Robust std errors Yes Yes Yes Yes Yes Yes

Arellano-Bond test:AR(1) (p-value) 0.000 0.000

Arellano-Bond test:AR(2) (p-value) 0.492 0.487

HansenJ-test of over-identification (p-value) 0.185 0.232

Estimated coefficients are reported with heteroskedasticity-robustt-statistics in parentheses * indicates significance at 10%; ** significance at 5%; *** significance at 1%.

System-GMM estimates are Blundell and Bond’s (1998) system GMM estimates using a two-equation system of the regression in levels and in first differences.

Tables 4.5 and 4.6 present estimated results from regressions on the market-based firm performance measure, Tobin's Q For the static panel, results are reported in columns (1)-(3), while columns (4)-(6) show results for the dynamic panel Table 4.5 presents estimated outputs for testing the linear relation, and Table 4.6 shows those for detecting the non-linear relation.

In Table 4.5, OLS and GMM estimates indicate a positive relation between ownership concentration and firm value at different levels of significance, though these results disappear in the static fixed effects model (columns (3)) and SGMM model with industry effects (columns (6)) To make a comparison to Nguyen et al.’s (2015a)results,itisvitaltorealizethattheresearchmodelinthissectionadditionally incorporates values ofROAand laggedROAas well as industry fixed effects in Specification (3.1) of Tobin’sQ 28 Return ratioROAmeasures firm profitability which is well-recognized as a significant determinant of firm valuation The results in Table 4.5 (and Table 4.6) affirm the significance ofROAas a powerful driver for changes in Tobin’sQ, except for GMM estimators The results also show that controlling industry effects reduces the significance of the variable of interest,Blockholding Although the estimated coefficient ofBlock holdingin the SGMM model without industry effects (column (5)) is significant at the 10% level, that ofBlockholdingbecomesinsignificantintheGMMmodelwithindustryeffects(column(6)).

28 The fact that Nguyen et al (2015a) use the logarithm of Tobin’sQto test thelog-linearrelation between ownership concentration and firm value also makes a difference.

Table 4.5 Ownership concentration and firm valuation: linearity

PooledOLSwithi ndustry effects Fixed effects PooledOLSwithi ndustry effects

Industry fixed effects No Yes No Yes No Yes

Year fixed effects Yes Yes Yes Yes Yes Yes

Robust std errors Yes Yes Yes Yes Yes Yes

Arellano-Bond test:AR(1) (p-value) 0.000 0.000

Arellano-Bond test:AR(2) (p-value) 0.096 0.100

HansenJ-test of over-identification (p-value) 0.139 0.166

Estimated coefficients are reported with heteroskedasticity-robustt-statistics in parentheses * indicates significance at 10%; ** significance at 5%; *** significance at 1%.

System-GMM estimates are Blundell and Bond’s (1998) system GMM estimates using a two-equation system of the regression in levels and in first differences.

Table 4.6 presents the results for examining the non-linear relation between ownership concentration (measured as total block holdings) and firm valuation (measured as Tobin’s Q) For most regressions except for GMM regressions, a u- sharped or convex relation is found for Vietnamese listed firms In other words, the relationisseeminglynegativeuptoacertainthresholdofownershipdistributionand positive afterward This may be a consequence of the trade-off between the negative and positive effects of ownership concentration At first, a higher level of concentratedownershipleadstoacutbackonfirmvaluationbythemarketasoutside investors are dominated by increasing realization of expropriation risk by large shareholders When ownership concentration reaches a certain level, the trade-off leads to a positive net effect of ownership accumulation on firm value Understandably, closer convergence of block holders’ interest objectives and the firm’s value maximization is translated into a higher valuation by the market corresponding to the firm’s higher size of blockholdings.

Nonetheless, the insignificance of endogeneity-robust GMM estimates indicates the nonlinearity of the relation between ownership concentration and firm value might be far from being fashioned It should be noted that the obtained estimates for SGMM regressions are statistically insignificant for all explanatory variables These are extremely strange, and they can imply a technical misspecificationoftheempiricalrelationofinterest.Infact,thediversityofprevious evidence mentioned in section 2.2.1 suggests the potential nonlinear relation may be quadratic(convex or concave), non-monotonic orpiecewise-shaped.

Table 4.6 Ownership concentration and firm valuation: non-linearity

Explanatory variables: PooledOLSwithouti ndustry effects PooledOLSwithi ndustry effects Fixed effects PooledOLSwithi ndustry effects SystemGMMwithouti ndustry effects SystemGMMwithi ndustry effects

Industry fixed effects No Yes No Yes No Yes

Year fixed effects Yes Yes Yes Yes Yes Yes

Robust std errors Yes Yes Yes Yes Yes Yes

Arellano-Bond test:AR(1) (p-value) 0.000 0.000

Arellano-Bond test:AR(2) (p-value) 0.107 0.109

HansenJ-test of over-identification (p-value) 0.150 0.209

Estimated coefficients are reported with heteroskedasticity-robustt-statistics in parentheses * indicates significance at 10%; ** significance at 5%; *** significance at 1%.

System-GMM estimates are Blundell and Bond’s (1998) system GMM estimates using a two-equation system of the regression in levels and in first differences.

4.2.2.3 Ownership concentration and corporaterisk-taking

Thisdissertationinvestigatestherisk-takingmechanismofownershipconcentration– performance relationship by using the Glejser (1969) test for heteroskedasticity similar to Adams et al.

(2005), Nguyen (2012), and Boubaker et al (2016) Using abnormalcomponentsofaccountingandmarketperformanceasproxiesforcorporate risk-taking behavior, I test for both linear and non-linear impacts of ownership concentrationonrisk- taking.TheestimatedresultsofthetestsarepresentedinTable

Results of the impact of ownership concentration onstockliquidity

ThecorrelationsbetweenliquidityproxiesarepresentedinTable4.13.Itisclearthat the proxies for trading activity such asTurnoverandVolumeDare negatively correlated with the illiquidity proxies includingSpread,Amihud,Zeros,Zeros2,andFHT.

BecauseAmivest, which is the reciprocal ofAmihud, is a liquidity proxy, ithas positive correlations with bothTurnoverandVolumeD The correlation coefficient betweenAmivestandVolumeDis 0.85.

It is interesting to observe that all pair-correlations ofZeros2with the other proxies of illiquidity are negative, although its negative pair-correlations withAmivest,Turnover,andVolumeareunderstandable.ThisimpliesthatZeros2isapoor proxy of illiquidity in the Vietnamese equity market, which is in line with Marshallet al.’s (2013) observation thatZero2is the poorest measure which does not accurately capture illiquidity in frontier markets Therefore, I do not introduce regressions for this proxy in the empirical analyses in the nextsections.

For the transaction cost proxies of liquidity,Amihudas a cost-per-dollar- volume proxy is positively related with the percent-cost proxies such as high- lowSpread,ZerosandFHT,withthecorrelationsrangingfrom0.24to0.34.WhileZeroshas a moderate correlation of 0.5 withSpread, it has a high correlation of 0.9 withFHT.AccordingtoMarshalletal.(2013),FHTisagoodproxyforactualtransaction cost in the root mean square error (RMSE) analysis but its RMSE is significantly different from the price impact benchmark Marshallet al.’s (2013) estimates forthe Vietnamese market show thatFHTis insignificantly correlated with both quotedand effective spread benchmarks,whereasAmihudis the only significant performer among the transaction cost proxies regarding the “horse races” in terms of their Spearman correlations for bothbenchmarks.

Table 4.13 Correlations between liquidity measures

Spread Amihud Zeros Zeros2 FHT Amivest Turnover VolumeD

Zeros2 -0.246 *** -0.202 *** -0.0798 *** 1 FHT 0.568 *** 0.336 *** 0.897 *** -0.187 *** 1 Amivest -0.190 *** -0.149 *** -0.313 *** -0.0995 *** -0.308 *** 1 Turnover -0.181 *** -0.202 *** -0.397 *** -0.00878 -0.326 *** 0.210 *** 1 VolumeD -0.281 *** -0.242 *** -0.483 *** -0.0678 *** -0.460 *** 0.847 *** 0.476 *** 1

4.3.2 Ownership concentration and stockliquidity 4.3.2.1 Robust OLSregressions

Table 4.14 presents OLS estimates for Equation (4.11), specifying the relationship between ownership concentration and stock liquidity There are seven columns reporting respectively the results of regressions for the liquidity proxies including high-lowSpread,Amihud,Zeros,FHT,Amivest,Turnover,andVolumeD Standard liquidity controls are share price (Price), firm size based on market value (Marketcap), and the volatility of daily stock returns (Volatility) Obtained estimates are robust to heteroskedasticity and serial correlation.

The results indicate that the liquidity influence of ownership concentration (Block holding) is statistically significant for all liquidity proxies Illiquidity proxies such asSpread,Amihud,Zeros,andFHTare positively impacted by large shareholdings (columns (1), (2), and (3)), implying that the ownership concentration reduces stock liquidity A similar implication of the liquidity-impairing effect of concentration is manifest in significantly negative estimates of block holdings throughtheregressionsforAmivest,Turnover,andVolume(columns(5),(6)and(7)).

Estimates for controlling variables are statistically significant except the estimate ofVolatilityonAmivest Except for the model of FHT, the other regression models show that firms with larger market capitalization have more liquid stocks.

Stocks with larger prices are less liquid (except the models ofAmihudandFHT).

Meanwhile, return volatility has mixing effects on the different proxies of liquidity.

Table 4.14 Ownership concentration and stock liquidity: robust OLS regressions

Spread Amihud Zeros FHT Amivest Turnover Volume

Industry fixed effects Yes Yes Yes Yes Yes Yes Yes

Year fixed effects Yes Yes Yes Yes Yes Yes Yes

Robust standard errors Yes Yes Yes Yes Yes Yes Yes

* p< 0.10, ** p< 0.05, *** p< 0.01 Estimated coefficients are reported with heteroskedasticity-robust t-statistics in parentheses.

Table 4.15 presents 2SLS (within-group) estimates from regressing liquidity measures on ownership concentration using basic (standard) liquidity controls includingshareprice(Price),firmsize(Marketcap),andreturnvolatility(Volatility) The first four columns of Table 4.15 show the results corresponding to illiquidity proxies (i.e.,Spread,Amihud,Zeros, andFHT), while the other columns report the results corresponding to liquidity proxies (i.e.,Amivest,Turnover, andVolume).

Estimated coefficients ofBlock holdingare significantly negative in the models of liquidity proxies (except for the model ofSpread) and significantly positive in the models of illiquidity proxies (except for the model ofAmivest) This indicates the tendency that stock liquidity is lower for firms with higher ownership concentration.

The article's empirical findings highlight the critical influence of stock price, firm size, and return volatility on stock liquidity Firms with lower stock prices and higher return volatility experience greater trading activity Conversely, illiquid stocks, characterized by wide bid-ask spreads and substantial price impact, are typically associated with smaller market capitalization These observations underscore the importance of these factors in shaping the liquidity characteristics of stocks.

For 2SLS-specific post-estimation tests, the Kleibergen-Paap LM test in each of all models rejects the null hypothesis that the specification is under-identified.

Also, both Cragg-Donald Wald test and Kleibergen-Paap Wald test reject the null hypothesisofweakidentification,implyingthatexcludedinstrumentsdonotperform poorly.

Except for the model ofTurnover, results from the Hansen test of overidentifying restrictions fail to reject the null hypothesis that the instruments are validinstruments.

The empirical relations between stock liquidity and ownership concentration are very clear 30 as they are significantly negative at all, implied through the models of both illiquidity and liquidity proxies Thus, it makes sense that ownership concentration affects stock liquidity through both real friction (trading activity) and informational friction (adverse selection cost) components of liquidity.

WhileTurnoverandVolumeare trade-driven measures of liquidity, the others are order- drivenmeasuresofliquidity.Itisafactthatblockholdersmaynotbedrivenbytrading activitybutadverseselectioncosts;ornotdrivenbyadverseselectioncostbuttrading activity.

Therefore, it is necessary for the models of order-driven (trade-driven) liquiditymeasurestobecontrolledbytrade-driven(order-driven)liquiditymeasures Following Rubin (2007), I try to affirm the difference with regard to the two dimensions of liquidity by making use of a spectrum of liquidity variables Accordingly, if blockholders differ only in trading activity (and do not affect the adverse selection costs), block holdings should not help in explaining price impact oncethemodelcontrolsfortradingactivity.Similarly,ifblockholdersonlyaffectthe adverse selection costs (and not trading activity), block holdings should not help in explaining trading activity once the model controls for adverseselection.

30 I also report first-difference 2SLS (FD-2SLS) estimates obtained from the basic regression of liquidity.IuseAnderson&Hsiao’s(1982)dynamicapproachbyaddingalaggeddependentvariable As shown in TableS2 (Supplemental Tablesin Appendix D), ownership concentration remains significantly associated with most of liquidity proxies, except forSpreadandAmivestmodels The effect of ownership concentration on the measure of price impact,Amihud, now become significant atthelevelof10%.Ingeneral,liquidityproxiessuchasVolumewhichshouldcapturetradingactivity are linked to ownership concentration It is noted that the post-estimation tests for the models ofSpread,Zeros,FHTandTurnoverreject the null hypothesis of the validity of theinstruments.

105 Table 4.15 Ownership concentration and stock liquidity: within 2SLS regressions

Spread Amihud Zeros FHT Amivest Turnover Volume

Year fixed effects Yes Yes Yes Yes Yes Yes Yes

Robust standard errors Yes Yes Yes Yes Yes Yes Yes

Kleibergen-Paap rk LM statistic 69.39 69.39 69.39 69.39 69.39 69.39 69.39

Kleibergen-Paap rk Wald F stat 62.94 62.94 62.94 62.94 62.94 62.94 62.94

* p< 0.10, ** p< 0.05, *** p< 0.01 Estimated coefficients are reported with heteroskedasticity-robust t-statistics in parentheses.

Table 4.16 Ownership concentration and liquidity spectrum: within 2SLS regressions

Spread Amihud Zeros FHT Amivest Turnover Volume

Trading activity:VolumeD Adverse selection:Amihud

Panel C: With liquidity controls and institutional ownership

Panel D: With liquidity controls and institutional ownership

Note: Standard liquidity controls are share price (Price), market capitalization (Marketcap), and stock return volatility (Volatility) For the estimation approach of liquidity spectrum (Rubin, 2007), measures used to capture the trading activity component of liquidity are trading volume (VolumeD) and turnover (Turnover) while those used to capture the adverse selection component of liquidity are Amihud (Amihud) and high-low spread (Spread) Further control variable is institutional ownership (Institutional).

* indicates significance at 10%; ** significance at 5%; *** significance at 1% Estimates are obtained by the within 2SLS estimator Year fixed effects are included For brevity, only estimates ofBlock holdingand controlled components of liquidity (i.e., trading activity and adverse selection) are reported Estimates of other variables and regression statistics can be seen inSupplemental Tablesof Appendix D (Tables S3, S4, S5, S6).Validity of the results are confirmed by post- estimation test statistics, including Kleibergen-Paap rk LM, Cragg-Donald Wald F, Kleibergen-Paap rk Wald F, and Hansen J statistics.

Table 4.17 Ownership concentration and liquidity spectrum: AH-2SLS regressions

Spread Amihud Zeros FHT Amivest Turnover Volume

Trading activity:VolumeD Adverse selection:Amihud

Panel C: With liquidity controls and institutional ownership

Panel D: With liquidity controls and institutional ownership

Trading activity:Turnover Adverse selection:Amihud

Note: Standard liquidity controls are share price (Price), market capitalization (Marketcap), and stock return volatility (Volatility) For the estimation approach of liquidity spectrum (Rubin, 2007), measures used to capture the trading activity component of liquidity are trading volume (VolumeD) and turnover (Turnover) while those used to capture the adverse selection component of liquidity are Amihud (Amihud) and high-low spread (Spread) Further control variable is institutional ownership (Institutional).

* indicates significance at 10%; ** significance at 5%; *** significance at 1% Estimates are obtained by the within 2SLS estimator Year fixed effects are included For brevity, only estimates ofBlock holdingand controlled components of liquidity (i.e., trading activity and adverse selection) are reported Estimates of other variables and regression statistics can be seen inSupplemental Tablesof Appendix D (Tables S7, S8, S9, S10).Validity of the results is confirmed by post- estimation test statistics, including Kleibergen-Paap rk LM, Cragg-Donald Wald F, Kleibergen-Paap rk Wald F, and Hansen J statistics.

Summary

Themainresultsfromthischapterprovidecountry-specificempiricalevidenceofthe associations of corporate governance with corporate risk-taking, stock liquidity and firm performance in frontier markets – a neglected sector of existing governance research that is characterized by highly concentrated ownership and weak investor protectionrights.

Firstly, I have simultaneously investigated the relationship between corporate governance and performance and its risk-taking mechanism in a linking approach.

Ownership concentration's impact on firm performance and risk-taking varies based on the performance metric used, particularly in imperfect capital markets Researchers should explore the potential effects of ownership concentration on firm value and its relationship with riskiness in emerging markets like Vietnam, where such investigations can contribute to a better understanding of the interplay between ownership structure and firm outcomes.

For empirical specifications examining the relation between ownership concentration and stock liquidity, the main finding is that firms with higher concentrated ownership have their stocks more illiquid (higher transaction costs) or less tradable (lower trading volume and share turnover) This effect signifies both real friction effect and informational friction effect of ownership concentration on stock liquidity In other words, variations in the level of ownership concentration affect stock liquidity through consequent changes in trading behavior and in informational environment of the market.

Introduction

This chapter of the dissertation discusses the main results obtained from empirical models.Section5.2arediscussionsontheeffectsofownershipconcentrationonfirm performance The risk-taking mechanism and non-monotonicity of the relationship are intensively discussed in sections 5.2.2 and 5.2.3 Section 5.3 are discussions on the influence of ownership concentration on market liquidity Further investigation in sections 5.3.2 and5.3.3 focuses the nonlinearity of the concentration-liquidity relationship and the roles of blockholderidentities.

Discussions on the impacts of ownership concentration on firm performanceandrisk-taking

The dissertation aims at an empirical clarification of corporate governance mechanismsduringtheinitialepisodeinVietnam’sequitymarketdevelopment.The main concern is the relationship between ownership concentration and firm performance.

Firstly, I testHypothesis 1that Vietnamese firms with higher concentrated ownership have better performance on average Firm performance is primarilymeasuredbyaccountingprofitability(ROA)andmarketvaluation(Tobin’sQ).

Essentially, this hypothesis is supported by several robust regressionsaddressing serious endogeneity issues The main findings are manifested in Table 4.4 andTable

Ownership concentration significantly influences firm profitability, exhibiting a quadratically concave relationship While ownership concentration has a positive impact on profitability at lower levels, it begins to negatively affect profitability beyond a certain threshold This threshold, estimated at 46%, represents the point where the monitoring benefits of concentrated ownership start to diminish, while the risk of expropriation by controlling shareholders increases This threshold effect, unique to emerging markets and distinct from the convex relationship observed in developed markets, suggests a trade-off between monitoring effectiveness and expropriation risk, depending on the level of ownership concentration.

(1999) for U.S managerial ownership and Gharbi & Othmani (2022) for French family ownership).

Ownership concentration positively affects firm valuation in alog- linearrelation estimated in Table 4.11 and Table 4.12 Noticeably, the relation is profound whenthelevelofownershipaccumulationexceeds28percent(i.e.,estimatesofBlockholding(0.281.

00)aresignificantlypositive).Thevaluationirrelevanceofownership concentration below 28 percent may be interpreted as a mixed market evaluation of monitoringeffectinthelowrangeofownershipconcentration.Thismightberelated to the disappearance of the significant value effects of ownership concentration in Table 4.5 and Table 4.6 I further discuss the non-monotonicity of this relation in section 5.2.3 below.

Ownership concentration has drawn interest from investors, despite concerns about expropriation effects This dissertation examines the relationship between ownership concentration and firm performance through two approaches The first investigates how concentration creates incentives for corporate investment risk-taking (Section 5.2.2) The second examines the compensation mechanism by which market investors demand compensation for the stock illiquidity caused by ownership concentration (Section 5.3).

5.2.2 Ownership concentration and firmrisk-taking

This discussion is based on the results of the estimated relation between ownership concentration and risk-taking for Vietnamese list firms The results are illustrated in Table 4.7 and Table 4.9 Robust estimates imply there is no linear linkage between ownership concentration and the riskiness of firm performance For example, estimates ofBlock holdingand its quadratic term are insignificant in Table 4.7 The fact that estimates ofBlock holdingare negative with a significance level of 10% in Table4.9(columns(2)and(3))maybeunreliablebecausetheArellano-

There is evidence of a nonlinear relationship between ownership concentration and market riskiness, as indicated by volatility of returns and Tobin's Q This finding suggests a U-shaped relationship, where firm risk decreases with ownership concentration below a certain point (between 40-50%), then increases again with ownership concentration exceeding that threshold.

Changes in market-based performance such as Tobin’sQcould be associated with the profit rates that investors can realize through revealed financial statements.

This relates the u-sharped impact of concentration on risk-taking to the u-sharped curve of the concentration-profitability relation found in the previous section (evidencedbytheresultsinTable4.4andTable4.8).Indeed,theownershiplevelthat firm profitability increases with ownership concentration is 46 percent Since aggressive blockholders accumulate more controlling power, they can effectively direct investment decisions toward more lucrative but riskier growth opportunities Basically, the evidence in this dissertation has supportedHypothesis 2thatVietnamese firms with higher ownership concentration have more risk-takingactivities, implying a greater variability ofperformance.

5.2.3 Non-monotonicity of the concentration-performancerelationship

PiecewiseregressionsbasedonEquation(3.3)areusedfortheempiricalexamination of how concentrated ownership is valued The results in Table 4.11 and Table4.12show that the association of firm valuation with ownership concentration ranging from 5 percent to a certain level,𝜂(between 25 and 35 percent for example), is inconclusiveinthecontextofVietnamasafrontiermarket.Oneinterpretationisthat the monitoring effect is negligible at low levels of ownership concentration When ownership is dispersed, shareholders confront the free-rider problem where there is not enough incentive for a single shareholder to individually bear entire increased monitoring costs and at the same time gain increased monitoring benefits pro rata to his or her equity stake Another explanation is that the monitoring effect tends to be minor and may be cleared out by opposite effects such as the expropriation effect–which also tends to be modest in low degrees ofconcentration.

When combined ownership by large shareholders exceeds𝜂,valuation increases with concentration This positive relation supports the agency theory’s argument about the monitoring effect of ownership concentration By holding major equity fractions, controlling shareholder(s) or a coordinated group of shareholders should have interest-related motives in monitoring and disciplining the firm’s management anddriveitsinvestmentstrategiesinalignmentwithshareholdervalue-maximization targets(Shleifer and Vishny, 1986) The more ownershipis concentrated, the more incentivesshareholdersasawholehave.Asthemonitoringmechanismhelpsmitigate managerial agency costs, firm performance gets improved – as predicted by Jensen and Meckling’s (1976) theory.

This is straightforward to be realized by outside investors, and consequent market expectations push up equity prices The higher ownership is concentrated, the greater the firm valueis.

Such positive ownership–valuation relation is in line with evidence advocating the monitoring effectiveness in under-developed governance environments like emerging markets (Claessens, 1997; Claessenset al., 1997; Xu and Wang, 1999;

Claessenset al., 2002; Lins, 2003; Baiet al., 2004; Makhija,2004;Gunasekarageet al., 2007; Heugenset al., 2009; Maet al., 2010; Nguyen et al.,

2015a).Contextualizedinafrontiermarket,thisdissertationconfirmsthatownership concentration acts as an efficient internal governance mechanism partly substituting forweakexternalgovernancemechanisms.Furthermore,Iarguethattheremayexist certain levels of the expropriation effect that should be overwhelmed by stronger levels of the monitoring effect 32 Then, a trade-off between both effects shapes the concentration– valuationrelation.Infact,thepositiverelationinthiscaseimpliesthat the net effect (i.e., the dominance of the monitoring effect over the expropriation effect) is greater when ownership is moreconcentrated.

In contrast to linear relationships observed in emerging markets, the study presents evidence of a non-linear, monotonic relationship between valuation and concentrated ownership in the Vietnamese frontier market This relationship exhibits exponential growth when concentrated ownership surpasses a threshold (𝜂) between 25% and 35%, indicating a logarithmic-linear expression for the valuation-concentration correlation This finding reconciles seemingly conflicting results from previous studies by Nguyen et al (2015a) and Tran and Le (2020).

Because Nguyen et al (2015a) employa

32 It is because the expropriation effect of large shareholders as an agency cost of the controlling– minority problem matters most in firms with concentrated ownership structure and should be pronounced under weak institutional environments. logarithmictransformationofTobin’sQestimates,theessentialofthelinearpositive relationbetweenownershipconcentrationandloggedQfoundintheirstudyisalog- linearrelation between ownership concentration and in-levelQ From Tran andLe’s

The U-shaped relationship between block holding and Q is estimated to have a turning point at approximately 28% combined ownership The concentration-valuation curve follows a log-linear function or a U-shaped curve The monitoring effect outweighs the expropriation effect at higher levels of concentration.

Nguyen et al (2015a) show ownership concentration in Vietnamese companies can substitute for the weak national quality and find a significantly positive (log-linear) relation between ownership concentration and market-based measureoffirmperformance,Tobin’sQ.Inthisperspective,theresultsinChapter2 aboutanon-monotonicrelationbetweenownershipconcentrationandfirmvaluation, or Tobin’sQ, are complementary to Nguyen et al (2015a)’s evidence.It should also benotedthattheevidenceofNguyenetal.(2015a)isbasedonusingapooledsample of both Singaporean and Vietnamese companies This dissertation is therefore the first purely detecting such a concentration–valuation relation in Vietnam Also, the finding is partly consistent with Phung and Mishra (2016)’s findings on non-linear relations between ownership structure and firm performance in the context of Vietnamese publicly listed firms In particular, Phung and Mishra (2016) show that theimpactofstateownershiponfirmperformancemeasuredbyTobin’sQisconvex

33 Athighlevelsofownershipconcentration,thisfindingisconsistentwithHuandIzumida’s(2008) evidenceforJapanesefirms.Theyfindthatwhenownershipismoreconcentrated,whilemonitoring incentivesofcontrollingshareholdersarestronger,expropriationactivitiesbytheseshareholdersare less as a result of the increasing net cost of expropriation Ultimately, the monitoring effect is dominant at high degrees of ownershipconcentration.

(inau-shapedcurve)whileaconcavepattern(inaninvertedu-shapedcurve)isfound for the relation between foreign ownership and firm performance As an aggressive measure of ownership structure, ownership concentration as total combined ownership should expose its impact on performance as a net effect of individual impactsofownershipidentities,suchasstateandforeignownership,onperformance In the context ofVietnamese firms, the role of state ownership on performance as a governance mechanism can outweigh that of foreign ownership (restricted to the maximum shareholding level of 49%) In fact, the log-linear curve ofconcentration– valuation relation implied in this dissertation is comparable to the convex shape of state ownership–performance relation evidenced by Phung andMishra.

Discussions on the impact of ownership concentration onstockliquidity

In this dissertation, I use many proxies for stock liquidity to examine how the level of shareholding concentration relates to the immediacy of transferring ownershipinthe Vietnamese equity market The first group of proxies includesSpread,Amihud,Zeros,andFHT,whichreflecttheinformationalfrictioncompone ntofliquidity.The second group of proxies includes Amivest, Turnover, and Volume, which reflect the realfrictioncomponentofliquidity.AlthoughsomeliquidityproxiessuchasAmihudandVolum earebetterthantheotherproxiesincapturingtheliquiditycomponents,it is plausible that ownership concentration hurts stock liquidity in this frontier market during the period of2008-2020.

Robust results in this dissertation supportHypothesis 3that Vietnamesefirms withhigherconcentratedownershiphavelowerstockliquidity.Morespecifically,the two mechanisms of the impact that are suggested byHypothesis

Higher ownership concentration negatively impacts market liquidity by reducing trading activity and amplifying adverse selection Increased transaction costs associated with higher concentration discourage trading, while information asymmetries create opportunities for informed traders to exploit uninformed ones These findings are supported by various regression specifications and econometric techniques, ensuring robustness.

Specially, institutional investors seem to have interesting stories about their roles in frontiermarketslikeVietnam.Thestrongsignificanteffectofinstitutionalownership on trading activity has disappeared in SGMMregressions.

5.3.2 Nonlinearity of the concentration-liquidityrelationship

Further,Iinvestigatethepotentialnonlinearityoftherelationshipbetweenownership concentration and stock liquidity with a squared term of ownership concentration (Block holding sq) added to Equation (3.11) Table S15 in Appendix D reports SGMM estimates for the nonlinearity relationship The results are generally mixed among different regressions for different liquidity proxies For the proxies for the informational friction component of liquidity, only estimates ofBlock holding sqin the models ofZerosandFHTare statistically significant However, the estimated coefficients ofBlock holdingin these models become negative and weaker/insignificant compared to those ofBlock holdingin Table 4.18 The squared term of ownership concentration in the model ofAmihudis insignificant while the positive sign of the estimated coefficient ofBlock holdingis still significant, albeit weaker,atthe10%level.Hansentest’sresultsinthemodelofAmihudcannotconfirm thevalidityoftheinstrumentsthough.Fortheproxiesfortherealfrictioncomponent ofliquidity,themodelsofTurnoverandVolumeprovideevidenceofthenonlinearity oftheliquidityrolesofownershipconcentration.However,theresultsareconflicting among the two models While the model ofTurnoversuggests that stock liquidity is a convex quadratic function of ownership concentration, the model ofVolumesuggests a concave quadratic function for therelationship.

The relationship between ownership concentration and stock liquidity could be re- examined through a breakdown of ownership identities For this purpose, I have regressed liquidity proxies on ownership blocks decomposing into insider versus outsider blocks, foreign versus domestic blocks, and institutional versus individual blocks.ResultsfortheseregressionsarerespectivelyreportedinTablesS16,S17and S18ofAppendixD.Ingeneral,theresultsshownodifferencesintheimpliedimpacts of block identities on stock liquidity through all regressions In other words, blockholder identities do not matter to the liquidity-concentration relations that have been discovered in section 4.3.2.

Indeed, all signs of paired blockholder identities in Tables S16, S17, and S18 are consistent with the previously estimated signs of combined block holdings (e.g Table4.18) 34 Conclusively, the main findings in this dissertation are robust and consistent.

Summary

Intial analyses start with delving into the relationship between ownership structure andfirmperformanceinVietnam.Specifically,Ifindessentiallynon-linearrelations between ownership concentration and firm performance (both accounting-based and market- based measures of firm performance) While the u-sharped relation between ownership concentration and firm profitability is observable, the relation between concentrated ownership and firm valuation is non-monotonic or log-linear These findings from several robust estimations support the evidenced linkage between ownership structure and firm performance in the context of Vietnamese listed firms (e.g., Phung and Mishra, 2016; Nguyen et al., 2015a) On the other side, the results do not show a significantly straightforward association of ownership concentration with firm profitability (an accounting-based measure of firm performance) and with firm valuation (a market-based measure of firm performance), advocating the argument about an endogenous structure of ownership (e.g., Demsetz and Lehn, 1985; Chen et al.,2005).

Intensively, I examine the risk-taking nature of the ownership concentration– performance relationship in order to determine whether firm risk-taking activities

34 Estimated coefficients of some blockholder identities in the models ofAmihudare statistically insignificant; however, these coefficients are all positive as expected. shape the relationship By measuring risk-taking behavior as unexpected (and standardized) volatility in accounting performance, I find no evidence of the connection between ownership concentration and corporate risk-taking incentives, implying that ownership concentration might affect firm performance through much more complex mechanisms Nevertheless, using unexpected volatility in market performance(i.e.,Tobin’sQ)asameasureofrisk-takingdoesspecifyanintriguingly nonlinear relation With the nonlinear concentration–profitability relationship to be previously shaped, this risk-taking effect may be regarded as a market recognization of the nonlinear impact of ownership concentration on accountingperformance.

Finally,robustresultshavebeenfoundfortherelationshipbetweenownership concentration and stock liquidity I find that shares of firms with concentrated ownershiparemoreilliquidintermsoflowertradingvolumeandhigherpriceimpact, implying that the impact of ownership concentration on stock liquidity is via both real friction and information friction channels In other words, variations in ownership structure affect stock liquidity through consequent changes in both behavior of trading and information environment of the market I attribute this tothe fact that large shareholders are usually institutional investors who have long-term investment horizons in the market Interestingly, I find that such an effect of concentration does not depend on the identity of blockholders, that is, insiders or outsiders, foreign or domestic investors, and institutional or individual investors Finally, these main findings in addition to the afore-mentioned findings infer that it is possible for a trade-off between the positive monitoring effect and the liquidity- reducing effect when it comes to choosing a concentrated structure ofownership.

Remarksandfindings

This dissertation investigates the mechanisms through which corporate governance affects corporate performance Specifically, the thesis emphasizes the importance of concentrated ownership structure as one of the significant dimensions of corporate governance To the best of my knowledge, this work is the first simultaneously considering both accounting-based and market-based measures of firm performance for examining the risk-taking mechanism through the Glejser heteroskedasticitytest.

Stockliquidityistheothermechanismoftheconcentration-performancerelationship, which can imply evidence of real friction and/or information friction of the immediacyoftransferringownership.Purposely,Vietnamistheessentialcontextfor researchdesignbecauseithasanequitymarketcharacterizedbyhighlyconcentrated and illiquid stockholdings and weak investorprotection.

In Chapter 2, I survey a web of the related literature on corporate governance and firm performance Through identifying some research gaps in the literature, I have developed empirically testable hypotheses in emerging markets Chapter 3 presents a research design with a modeling framework and empirical methods for achieving research objectives: (i) to investigate the firm performance impacts of concentrated ownership structure as an important mechanism of corporate governance; (ii) to investigate the impacts of ownership concentration on firm risk- takingactivitymeasuredbytheriskinessoffirmperformance;and(iii)toinvestigate theimpactsofownershipconcentrationonstockliquidityasadeterminantofmarket valuation.

The research results from Chapter 4 have thoroughly answered the respective questions for the three objectives At first, I have found that the relationshipbetween ownership concentration and firm performance in the Vietnamese emerging market is statistically significant for the alternative measures of performance Thef i n d i n g thus supportsHypothesis 1developed for testing in the dissertation Regarding the accounting-based measure of firm performance,ROA, I find no evidence of a linear impact of ownership concentration but evidence of a non-linear effect This is generally in line with the findings by Demsetz and Lehn (1985) and Chen et al.

(2005), who also find no positive (linear) relation between ownership concentration and firm profitability in U.S public corporations and Hong Kong family companies, respectively In other words, a firm’s diffuse or concentrated ownership structure doesnotaffectthefirm’saccountingprofitrateinastraightforward way.Thereason is that ownership concentration should reflect opting for decisions made by shareholders relying on their own profit-maximizing interests (Demsetz and Lehn, 1985) Once it is truly treated as an endogenous variable, no systematic relation between ownership concentration and firm performance should be detected Nevertheless, the nonlinear effect of ownership concentration on firm profitability could bring about alternative ideas for future research.

Furthermore, this dissertation suggests another interpretation of transmission mechanisms through which ownership concentration drives firm performance As one potential approach, this dissertation also investigates corporate risk-taking incentivesalongwiththepresenceofblockholdersinordertotrytoexplaintherisk- taking mechanism of the ownership concentration–performance relationship Using several different approaches to risk-taking measurement, I find a non-linear relation between ownership concentration and the riskiness of market performance This finding, which supportsHypothesis 2, is consistent with the argument that large shareholders owning controlling equity stakes promote the firm’s risk-taking activities by weakening the strategic roles of risk-averse managers (Shleifer and Vishny, 1986;

Paligorova, 2010) In Vietnam’s weak institutional framework, the empirical evidence advocates that private benefits appeal to dominant shareholders and encourage them to engage in risk-taking activities at the expense of minority investors The earlier finding of a nonlinear relationship between ownership concentrationandfirmprofitabilitycouldbeaninterpretationofsuchvariabilityin firm value realized by market investors For example, the riskiness in speculating on firm value increases with a proliferation of tunneling distortions of earnings and assets On the other hand, the effect of concentrated ownership on risk-taking behavior in terms of unexpected volatility of profitability appears inconclusive This may be an indication of a much more complicated nexus between ownership concentration and accounting-based performance through risk-taking activities.

Regardingthemarket-basedmeasureoffirmperformance,Tobin’sQ,Ifound intriguing evidence of a non-monotonic influence of ownership concentration Therefore, this finding further supportsHypothesis 1in the aspect of non-linearly empirical specifications Specifically, I find that the valuation effect is non-linearly and positively monotonic when ownership of blockholders exceeds a certain level,𝜂(between 25 and 35 percent), for Vietnamese firms However, there is no significant valuation effect in the (0.05–𝜂] interval of concentrated equity holdings.

The segmented regression analysis in the dissertation brings about a reconciliation of seemingly conflicting findings shown previously by Nguyen et al (2015a) and Tran and Le (2020) Although these results fundamentally support the argument of the agency theory about the monitoring effect of large shareholders in the context of a frontier market, a more thorough investigation into the trade-off effect between the monitoring and expropriation effects in lower levels of ownership concentration is critical to consider a phenomenon that both effects can cancel each other Also, delving into the concentrated structure of ownership types can cast more insight into the exponential increase of the valuation effect at the higher end of combined ownership distribution Future research on these would promise a more insightful interpretation of the concentration–valuation relation in frontier/emerging markets.

From the perspective of research methodology, the approach in this dissertation impliesthatobservingnon-lineareffectswithinsegmentedownershipintervalsofthe piecewise specification could help reconcile conflicting evidence that isomnipresent in the corporate governanceliterature.

The findings in the dissertation prove that there are differences betweenusing accountingprofitabilityasameasureoffirmperformanceandusingmarketvaluation as a measure of firm performance In the case of Vietnamese firms, connections between concentration and performance and between concentration and risk-taking linked to performance are found existent in different paths corresponding to the two alternatives of performance measurement.

This can be interpreted as a reflection of capital market imperfections distorting investors’ realization of a firm’strueperformance, resulting in essential distortions in their reactions to variations in the firm’s ownership concentration Following the argumentation of Demsetz and Villalonga (2001), this dissertation raises the necessity of considering both accounting- and market-based measures of performance, specifically in emerging markets research This, which has been neglected by researchers, could give a more accurate, comprehensive picture of the ownership structure–performance/risk-taking relation.

Understanding the relationship between ownership concentration and firm value requires examining ownership structures more closely Managerial ownership, for instance, suggests interest-convergence (Jensen and Meckling, 1976) and entrenchment effects (Demsetz, 1983; Fama and Jensen, 1983) The association between firm valuation and ownership concentration may be influenced by these two effects While entrenchment has a negative impact beyond the 25% managerial ownership threshold (Morck et al., 1988), interest alignment benefits increase as ownership increases.

Ownership concentration in firms positively impacts their value, with a stronger increase at higher ownership levels This premium may stem from potential acquirers paying for control rights through management's equity stakes, which management resists selling at undervalued prices Additionally, managerial ownership concentration can prevent takeover attempts, highlighting a positive effect of entrenchment The concentration-valuation relationship diminishes between 5% and 25% ownership, but the non-linear relationship between ownership concentration and firm valuation becomes more pronounced, showcasing an exponential increase in value with concentration in Vietnamese firms Non-linearity also influences the risk-taking mechanism through which ownership concentration affects firm performance.

Another huge body of literature has so far studied the relationship between ownership concentration and equity liquidity in developed markets, but particularly absent in the literature is research on such a relationship in emerging markets with regard to the two influence channels Previous research has focused on the impactof foreign shareholders, rather than blockholders, on stock liquidity because of foreign investors’ important role during the economic liberalization and internationalization processes in emerging markets (Rhee and Wang, 2009; Syamala et al., 2014; Vo, 2016b; Ding et al., 2017; Dang et al., 2018) Recent empirical studies, such as Prommin et al (2016), AI-Jaifi (2017), Leaủo and Pedraza (2018) and Chia et al (2020) investigate the liquidity impacts of ownership concentration in emerging markets, but none explicitly examines the two channels of theinfluence.

The current dissertation has filled the research gap by investigating the different channels of the impact of ownership concentration on stock liquidity in emergingmarkets.RegardingHypothesis3establishedfortestingsuchanimpact,the results from the dissertation imply that the liquidity mechanism through which ownershipconcentrationaffectsfirmperformanceissignificantlychanneledviaboth realfrictionandinformationalfrictioncomponentsofliquidity.ThisimpliesthatbothHypothesis

3aandHypothesis 3bare confirmed In other words, Vietnamese firms with a more concentrated structure of ownership have more illiquid stocks Such illiquidityisemergingfromincreasingadverseselectionorinformationasymmetries and from increasing transaction costs hurting tradingactivity.

The findings further shed light on the existing literature by examining a frontier emerging market where firms tend to have highly concentrated ownership andhavetheirminorityshareholderrightsweaklyprotected.TheVietnamesemarket, in which the liquidity role of foreign investors has been limited and the information asymmetry is persistently high, shows that ownership concentration discourages trading activity and price discovery I suggest that it is from the fact that large shareholders are usually institutional investors who have long-term investment horizons Finally, the results infer that it is possible for a trade-off between the positive monitoring effect and the liquidity-reducing effect when a firm comes to choose a concentrated structure ofownership.

Researchcontributions

Thedissertationhassofarcontributedtoenrichingtheexistingliteratureoncorporate governance practices in emerging markets in general and frontier markets in particular by investigating the performance-driving effects of ownership concentration As a work of scholarship, the dissertation has brought several lines of argumentation forward at the current research landscape.

The key argument is about the essence of the nexus between ownership concentration and firm performance as well as its fundamental mechanisms in terms of risk-taking activity and stock liquidity Based on the systematic reviews, I validate that the relationship is susceptible to the measures of firm performance and its effective channeling mechanisms in different contexts.

First, my research provides empirical evidence of the influences of ownership concentration on firm performance in Vietnamesefirms, contemporaneously through risk-taking and liquidity mechanisms.

Research on corporate governance in frontier markets, exemplified by Vietnam, contributes to our understanding of this area in emerging economies The study reveals a nonlinear positive monotonic pattern in the relationship between ownership concentration and firm valuation, reconciling conflicting findings from previous studies In frontier markets with underdeveloped institutional environments and weak governance systems, ownership coordination becomes increasingly effective at higher concentration levels, suggesting an efficient internal governance mechanism This non-monotonic relationship has practical implications for investment and policy in frontier markets, and highlights the potential for learning from corporate practices in advanced emerging economies.

Another significant contribution from the dissertation to the literature is the methodological approaches utilized to investigate the mechanisms of the concentration-performance relationship In the aspect of measurement, technically advanced analyses in the dissertation have confirmed essential differences in using the two alternatives of performance measurement, which raises the necessity of considering concurrently both measures for corporate governance research in the future, specifically in the context of emerging markets Also, the liquidity-related analyses implyAmihudandVolumeare respectively the most effective order-based andtrade-basedmeasuresofstockliquidityinVietnam’sequitymarket.Besides,the dissertation’s research approaches – including the argument about the usage of the Glejser (1969) heteroskedasticity in search of the effect of ownership concentration on the riskiness of firm performance and the analyses on econometric methods to handle endogeneity problems in corporate governance – contribute a new analytical frameworkofthenexusbetweenownershipconcentrationandfirmperformance/risk- taking as well as an in-depth econometric approach to testing for the specific specifications of the extant literature of corporate governance As corporate governancer e s e a r c h e r s s h o u l d p a y g r e a t a t t e n t i o n t o t h e e n d o g e n e i t y n a t u r e a n d structural dynamics of the governance–performance/risk-taking relation, the approach can provide a technical path.

Furthermore, the argumentation lines from the dissertation could set up potential research paths relating to the unanswered question of how ownership concentration adds value to frontier-market firms For instance, the dissertation acknowledges the indirect value-affecting mechanism of corporate risk-taking behaviors In the case of the Vietnamese frontier market with the intrinsic illiquidity ofequities,itisobservablethatthepositiveimpactofconcentratedownershiponfirm valuation might be channeled through trade activities by market investors.

Accordingly,thedissertationinvitesscholarstoinvestigatethehypothesisthatmarket investors can expect an illiquidity premium in their required returns for investing in firms with concentrated ownership Since the hypothesis is out of scope for this dissertation, I expect further attempts to examine it in thefuture.

Implications

Ultimately, the dissertation provides practitioners and policymakers in frontier markets with important implications As a typical case of frontier equities, Vietnamese firms have a high degree of ownership concentration and stock illiquidity.

Management implications : The evidence implies that ownership concentration can act as an effectively value-enhancing governance mechanism, which may be directly evaluated by market investors Such a valuation process reflectsapotentialtrade-offbetweenthepositivemonitoringeffectandtheliquidity- reducingeffectacrossthespectrumofownershipconcentration.Corporatemanagers, especially in equity markets with weak legal protection of minority shareholders, should recognize the efficient role of concentrated ownership as an internal governancemechanism.Althoughtheagencycostsofownershipconcentrationcould matter, the dissertation’s robust findings imply that such potential expropriation by controllingshareholders shouldbeoutweighed bythebenefitsofmonitoring enhancement thanks to power accumulation in large shareholders’ hands.

Ownership concentration, while reducing stock liquidity, enhances firm value by empowering shareholders to exert governance through their accumulated share blocks Market-based discipline, exercised by outside investors trading on the secondary market, complements this internal governance mechanism However, in conditions of market illiquidity, interventions by investors through liquidity shocks can lead to severe price impacts and increased risk, requiring higher returns for holding shares Thus, effective corporate governance involves a balance between internal and external mechanisms, with liquidity serving as a channel facilitating the impact of ownership concentration on firm performance These implications extend beyond the Vietnamese context and hold relevance for other inefficient and underdeveloped frontier capital markets.

Investmentpracticeimplications :Fromthemarketperspective,investorscanrealize the value of a robust mechanism of corporate governance Vietnam has an equity market infrastructure defined as weak institutional quality and poor investor protection, and ownership concentration is evidenced as an effective mechanismofgovernance.Thecostofsuchamechanismbasedonownershipconcentrationisstock illiquidity.Inotherwords,marketinvestorscanrequiremorevaluationonfirmswith ownership concentration as a compensation for the firm’s increasing risk-taking and stockilliquidity.Thispointofviewshouldbeextremelyimportantforindividualandinstitution al investors in their capital allocation and portfoliomanagement.

The dissertation’s results for the relationship between ownership concentration and stock liquidity thus have several implications for investment practice and market policy From the practice viewpoint, market investors can observe a firm’s level of ownership concentration when they consider their fund allocation into the firm’s stock Because stock liquidity is important for these investors for their short-term portfolio restructuring strategy, liquid stocks may be more attractive Moreover, investor preferences for firms with concentrated ownership structure as a result of its positive monitoring effect (implied in the main resultsfromthediscussionsofthisdissertation)havesomesacrificeofstockliquidity Because of the higher costs of holding illiquid stocks, investors should expect an illiquidity premium for their investments I suggest that this phenomenon is more noticeable in frontier/emerging markets like Vietnam Therefore, it is necessary for emerging market investors to regard the stock illiquidity caused by ownership concentrationasavaluationfactorbasedontheirrisktolerance.Thisobservationalso has an implication for future research in asset pricing models for emergingmarkets.

Althoughtheevolutionofinstitutionalenvironmentsintheseunder-developed markets might take a long time before external governance mechanisms would become effective, investors can embrace opportunities coupled with governance- related risks that ownership concentration is a key consideration For instance, internationalinvestorscanexpectavaluationpremiumfromholdingilliquidequities of ownership- concentrated firms in frontier markets In a typical frontier market like Vietnam,investinginstockswithhigherconcentratedownershipcouldprovidemore profitability at the expense of more illiquidity Therefore, long-term investment strategies should be more reasonable in this case In the practice of corporate governance, firms can accept ownership concentration as a monitoring device tot h e extent that the risk of wealth expropriation by controlling shareholders is factored into consideration.

Also, frontier capital market regulators can allow the under-diversification of equity blockholders for a more efficient environment of corporate governance In inefficientcapitalmarkets,thisshouldbeacrucialstepinreducinginformationcosts apart from the expected regulatory progress in investor protection Indeed, policymakers should realize the importance of strategic block holdings in advancing firm management efficiency and thus facilitating market-level improvements in governance quality For example, the recent reforms in Vietnam tend to lead to concentrated structures of corporate ownership (Tran and Le, 2020) Thisinteresting phenomenon can be interpreted as a recognition of the positive monitoring consequence of ownership concentration Vietnam’s policy moves should aim to boost its legal environment and thus stock market liquidity In the context of an imperfect capital market such as Vietnam (Tran and Le, 2017), minority investor rights have to be protected more strongly in order to reduce related agency costs Likewise, Vietnam’s regulators can incrementally relax restrictions on foreign investment involvement in local companies by raising the foreign ownership cap (currently, 49 percent), which could take advantage of efficient governance experiences carried by large foreign investors from advanced markets.

Policy implications : From the policy perspective, the results have a clear implication that market liquidity will be improved with ownership dispersion For attracting international investors, one of the most important goals of frontier/emerging markets is boosting their liquidity Therefore, the findings in this dissertation indicate that reducing ownership concentration is an effective policy measure for increasing stock liquidity Indeed, the results confirm the robustness of the liquidity-enhancing effect through a more disperse structure of ownership,rather than through a more active participation of institutional investors This finding is novel for the current literature on the factors for stock liquidity improvement in emergingmarkets.EventhisresearchforVietnamismorecrucialforpolicymakers in frontier markets with the progress in upgrading toward the higher tier in the classification of emerging markets.

Policymakers in Vietnam are increasingly regulating several dimensions of corporate governance for listed Vietnamese firms For example, the 2019 Law on Securities (No 54/2019/QH14, promulgated by the National Assembly andeffective from January 2021) forces majority shareholders in listed firms to stop using their advantages of block holding to harm minority shareholders This practice should be regarded as an important regulation for pursuing the Vietnamese Government’s scheme (Decision No 242/QĐ-Ttg approved by the Prime Minister in 2019) for restructuring securities and insurance markets, which has an essential goal of upgrading its capital market from the frontier tier to secondary tier of the emerging market classifications (e.g provided by FTSE Russell or MSCI) The results from Chapter 3 of this dissertation suggest a further measure that policymakers should enact liquidity-boosting solutions driven by reducing ownership concentration in firms However, such an effort should also be considered with its expenseofpotentially depreciating the performance effect of ownership concentration This trade-off warrants further investigation in thefuture.

Because liquidity can play its role as an environmental catalyst that increases the effectiveness of the governance mechanism, policymakers need to further question how to increase the liquidity of capital markets Promoting ownership dispersion should be set at the top of the government’s agenda Albeit the government’s “equitization” scheme of its state capital divestiture (Boubaker et al., 2022), the statistics from Chapter 2 of this dissertation show that block holdings are increasingly accumulated in the Vietnamese equity market One of the most importantmeasureswidelyrecognizedinfrontiermarketsistorelaxlegalregulations relatedtoforeignownership.Theheavierinvolvementofforeigninvestors,especially foreign institutional investors, would increase the stock liquidity as well as boostthe market efficiency.

The presence of foreign ownership significantly impacts the market's overall governance quality In Vietnam, the precise role of institutional and foreign investors remains unclear, warranting further research The current state of corporate governance mechanisms in the country calls for immediate action to enhance governance quality and elevate the capital market from frontier market status to emerging market status.

Since Vietnamese firms share common characteristics with frontier-market equities, the above-mentioned implications should also be generalized to other frontier markets.

Limitations

The dissertation has some limitations An obvious limitation is in my choice of the research sample of Vietnamese listed firms for investigating the nexus between ownership concentration and firm performance The sampling of datasets from 2008 to 2020 has some questionable problems Firstly, this period covers the aftermath of the 2008 global financial crisis, and the results from the liquidity-related regressions may potentially be affected I have tried to cope with this problem by removing observations in 2008 (and 2009 for further) from the sample, but the untabulated results remain consistent This comes from the fact that the number of observations in 2008 (or both 2008 and 2009) in available datasets used for related regressions is relatively small compared to the total number of observations The unbalanced structure of the longitudinal data as described in Table 3.1 is consonant with suchan assertion Additionally, there are a lot of variables in the dissertation’s empirical modelsmeasuredastherelativetermsofthecurrentdifferencesfrompreviousyears This has resulted in consequent drops in firm-year observations in the year 2008 for somevariables.

For a similar line of reasoning, I have not included the period from 2021 related to the aftermath of the COVID-19 pandemic so that the results can get rid of being affected by risk-taking and liquidity shocks Although the potential effects of suchshockscouldbepartlycapturedbydummyvariables,unobservabledisturbances can exaggerate the inherent endogeneity issues of corporate governance Further regression approaches, such as quasi-experiments (e.g., Shen et al., 2020) should be considered for a complete analysis Besides, my ignorance of testing the potential effectoftheoutbreakinourspecificationscomesfromotherreasons.Oneofthemost influential motives for me to simply delve into the period of 2008-2020 is that there have been some significant changes in the regulations of corporate governance in Vietnam since 2020 Firstly, the Vietnamese government has implemented several schemesforrestructuringSOEsinrecentdecades.However,theequitizationprocess was gradual and halting during the previous schemes before 2021 Based on the disappointing results of the previous restructuring process, the Vietnamese government decided to approve the scheme for actively restructuring SOEs in the 2021-2025 period (Decision No 360/QĐ-Ttg approved by the Prime Minister in 2022) As state ownership remains dominant in Vietnamese enterprises, the equitization program’s recent changes should exert remarkable impacts on the structure of ownership concentration Such exogenous shock of the government divestment could result in a drift of the interested relationship away from the systematic pattern For example, Boubaker et al (2022) imply thatthe divestment of state assets increases with the development of capital markets Increasing liquidity during the financial bubbles in 2007 and 2021 may hasten the process of mass state- capital divestment While the objective relationship could be efficiently detected through a strictly quasi-experimental design, it is not necessary to extend the sample period to invite more unobservable noise to the researchmodel.

The Vietnamese government’s reform of corporate governance in the sector of publicly listed companies is also the reason for discouraging me from extending thesamplebeyondthe2008-2020period.SinceJanuary2021,Vietnamesefirmshave had to comply withCircular No 116/2020/TT-BTC of the Ministry of Finance whichistheguidanceforthe2019SecuritiesLaw’sDecreeNo.155/2020/NĐ-CP regulating the management of public companies The policy reform in corporate governance would invite more disturbancestothe research models whichare currently not designed to efficiently control for such a policy shock.For instance, the effective enforcement of this Circular (compared to the previous Circular No.

95/2017/TT-BTC) is manifested in some regulations on some aspects of ownership structure Considerable modifications are the relaxation of the restriction time for executing shareholder rights by investors with an equity holding percentage of 5 percent or greater as well as the stricter requirements on the minimum level of concentrated ownership (10 percent or greater) for nominating board members The shareholders’ increasing demand for ownership concentrationforproxyfightscanenablemarketincentivestoacquiremoreequity stakesintheconditionofpositiveliquidityduringthe2021stockmarketrecovery However, this observation is consistent with the blockholder theory (Edmans, 2011), which would predict serious endogeneity problems in the current research design of this dissertation In other words, this is an analytical limitation fromthe research perspective of the dissertation but a potential conceptual framework for futureresearch.

For another reason, it is practically observed that the Vietnamese equity market was relatively stable from 2008 to 2020, in comparison with the 2007 height of the global financial crisis and the 2021 height of the post-pandemic rally The extreme volatility of equity markets responding to these shocks can distort the essential effects of the relationships primarily examined in this dissertation,especially for risk-taking and liquidity-related behaviors For a balanced solution, I would like to investigate the effect of ownership concentration on firm performance duringthesilentperiodratherthanacceptthemarginalbenefitofasampleexpansion at the expense of the identification strategy Undoubtedly, the disturbances of the shocks such as the government’s mass disinvestment of capital, the global financial crisis, and the unprecedented COVID-19 pandemic should effectively be extracted by advanced econometric techniques Therefore, I believe that comprehensive designso f u t t e r l y i n v e s t i g a t i n g t h e e f f e c t s o f t h e s e s h o c k s o n t h e i n h e r e n t relationships between corporate governance and firm governance should be put forward for future research.

Finally,thedissertationhasalimitationonthemonotonyofmodelingtherisk- taking mechanism of the relationship between ownership concentration and firm performance The Glejser (1969) test for heteroskedasticity provides a justifiable method of illustrating the way ownership concentration affects firm performance through its ramifications on the firm’s behavioral variation in selecting investment projects affecting firm growth (in profitability or valuation, for example) Corporate risk-taking essentially is the riskiness of attaining expected benefits from corporate investment activities The Glejser test empirically regresses the estimated residuals of performance on ownership concentration and other control variables Economically, the riskiness in corporate investment decisions should capture projected fluctuations in micro and macro business environments The risk-taking measureintermsoftheheteroscedasticvarianceoffirmperformanceisendogenously estimated from the systematic effect of ownership concentration on firm performance,whichshouldimplyapurportedassociationofrisk-takingactivitywith ownership concentration Therefore, the idea is to use the Glejser test to cast lighton the implied relationship between ownership concentration and firm performance through the risk-taking mechanism Using the Glejser test is purely based on the indispensable argument about the governance determinants of firm performance I can suggest an augmented approach throughMachado & Silva’s (2000) revised Glejser test; however, the principle of capturing the risk-taking activity remains the same Ultimately,future researchers could discover more innovative approaches to the testing for the corporate risk-takingmechanism.

Tran, N H., & Le, D C (2022) Ownership concentration and firm valuation in a typicalfrontiermarket.Afro-AsianJournalofFinanceandAccounting,12(4), 427-454.

Tran, N H., & Le, C D (2020) Ownership concentration, corporate risk-takingand performance: Evidence from Vietnamese listed firms.Cogent Economics&Finance, 8(1),1732640.

Lê Đạt Chí và Trần Hoài Nam (2017) đã phân tích mối quan hệ giữa tập trung quyền sở hữu, tính độc lập của ban quản trị và hành vi chấp nhận rủi ro tại các công ty niêm yết trên Sở Giao dịch Chứng khoán Thành phố Hồ Chí Minh Nghiên cứu của họ cho thấy rằng sự tập trung quyền sở hữu cao có liên quan đến hành vi chấp nhận rủi ro cao hơn, trong khi tính độc lập của ban quản trị có tác động tích cực đến hành vi chấp nhận rủi ro.

Adams, R., Almeida, H., & Ferreira, D., (2005) Powerful CEOs and their impacton corporate performance.Review of Financial Studies 18,1403-32.

Admati, A R., & Pfleiderer, P (1988) A theory of intraday patterns: Volume and price variability.The Review of Financial Studies, 1(1), 3-40.

Admati, A.R., Pfleiderer, P & Zechner, J (1994) Large shareholder activism, risk sharing, and financial market equilibrium,Journal of Political

Agarwal, P (2007) Institutional ownership and stock liquidity Working paper.

Cornell University, Ithaca, New York.

Ahn, H.-J., Cai, J., Hamao, Y., & Ho, R Y (2005) Adverse selection, brokerage coverage, and trading activity on the Tokyo Stock Exchange.Journal ofBanking & Finance, 29(6), 1483-1508.

Al Farooque, O., Buachoom, W., & Sun, L (2020) Board, audit committee, ownershipandfinancialperformance– emergingtrendsfromThailand.PacificAccounting Review,32(1),54-81.

Alangar, S., Bathala, C T., & Rao, R P (1999) The Effect of Institutional Interest on the Information Content of Dividend‐Change Announcements.Journal ofFinancial Research, 22(4), 429-448.

Al-Jaifi, H A (2017) Ownership concentration, earnings management and stock market liquidity: evidence from Malaysia.Corporate

Alkurdi, A., Hamad, A., Thneibat, H., & Elmarzouky, M (2021) Ownership structure’seffectonfinancialperformance:AnempiricalanalysisofJordanian listed firms.Cogent Business & Management,8(1),1939930.

Amihud, Y (2002) Illiquidity and stock returns: cross-section and time-series effects.Journal of financial Markets, 5(1), 31-56.

Amihud, Y., & Mendelson, H (1986) Asset pricing and the bid-ask spread.Journalof Financial Economics, 17(2), 223-249.

Amihud, Y., Hameed, A., Kang, W., & Zhang, H (2015) The illiquidity premium:

International evidence.Journal of financial economics, 117(2), 350-368.

Amihud, Y., & Mendelson, H (1988) Liquidity and asset prices: Financial management implications.Financial Management, 5-15.

Amihud, Y., Mendelson, H., & Lauterbach, B (1997) Market microstructure and securities values: Evidence from the Tel Aviv Stock Exchange.Journal ofFinancial Economics, 45(3), 365-390.

Amihud, Y., Mendelson, H., & Uno, J (1999) Number of shareholders and stock prices: Evidence from Japan.The Journal of finance, 54(3), 1169-1184.

Anderson,T.W.,&Hsiao,C.(1982).Formulationandestimationofdynamicmodels using panel data.Journal of econometrics, 18(1),47-82.

Arosa, B., Iturralde, T., & Maseda, A., (2010) Ownership structure and firm performance in non-listed firms: Evidence from Spain.Journal of

Bagehot, W (1971) The only game in town.Financial Analysts Journal, 27(2), 12-

Bai, C.E., Liu, Q., Lu, J., Song, F.M & Zhang, J (2004) Corporate governance and market valuation in China.Journal of Comparative Economics, Vol 32No.4, pp.599-616.

Baker, H K., & Anderson, R (Eds.) (2010).Corporate governance: A synthesis oftheory, research, and practice(Vol 8) John Wiley & Sons.

Balsmeier, B & Czarnitzki, D (2017) Ownership concentration, institutional development and firm performance in Central and Eastern Europe.Managerial and Decision Economics,38(2), 178-192.

Barclay, M J., & Holderness, C G (1991) Negotiated block trades and corporate control.The Journal of Finance, 46(3), 861-878.

Barclay, M J., & Smith Jr, C W (1988) Corporate payout policy: Cash dividends versus open-market repurchases.Journal of Financial Economics, 22(1), 61- 82.

Bartov, E., & Bodnar, G M (1996) Alternative accounting methods, information asymmetry and liquidity: Theory and evidence.Accounting review, 397-418.

Bartov, E., Radhakrishnan, S., & Krinsky, I (2000) Investor sophistication and patterns in stock returns after earnings announcements.The

Becht, M (1999) European corporate governance: Trading off liquidity against control.European Economic Review, 43(4-6), 1071-1083.

Beiner, S., Drobetz, W., Schmid, M.M & Zimmermann, H (2006) An integrated framework of corporate governance and firm valuation.European

Bekaert, G., Harvey, C R., & Lundblad, C (2007) Liquidity and expected returns:

Lessons from emerging markets.The Review of Financial Studies, 20(6), 1783-1831.

Benston, G J., & Hagerman, R L (1974) Determinants of bid-asked spreads in the over-the-counter market.Journal of Financial Economics, 1(4), 353-364.

Berger, D., Pukthuanthong, K & Yang, J (2011) International diversification with frontier markets’,Journal of Financial Economics.101, 227-242.

Berle, A., & Means, G (1932).The modern corporation and private property New

Bethel, J E., Liebeskind, J P., & Opler, T (1998) Block share purchases and corporate performance.The Journal of finance, 53(2), 605-634.

Bettis, J C., Coles, J L., & Lemmon, M L (2000) Corporate policies restricting trading by insiders.Journal of Financial Economics, 57(2), 191-220.

Bhide, A (1993) The hidden costs of stock market liquidity.Journal of

Blundell,R.&Bond,S.(1998).Initialconditionsandmomentrestrictionsindynamic panel data models.Journal of Econometrics,87(1),115-143.

Bolton, P., & Von Thadden, E L (1998) Blocks, liquidity, and corporate control.

Booth, J R., & Chua, L (1996) Ownership dispersion, costly information, and IPO underpricing.Journal of Financial Economics, 41(2), 291-310.

Boubaker, S., Cuong, L K., & Tran, N H (2022) Trade credit in transition economies: does state ownership matter?Post-Communist Economies, 34(3), 293-327.

Boubaker, S., Nguyen, P., & Rouatbi, W (2016) Multiple large shareholders and corporaterisk‐ taking:evidencefromFrenchfamilyfirms.EuropeanFinancialManagement,22(4),697- 745.

Boubakri, N., Chen, R R., El Ghoul, S., Guedhami, O., & Nash, R (2020) State ownership and stock liquidity: Evidence from privatization.Journal ofCorporate Finance, 65, 101763.

Boubakri, N., Cosset, J.C & Guedhami, O (2005), Postprivatization corporate governance: the role of ownership structure and investor protection,Journalof Financial Economics,76(2), 369-399.

Bousnina, A., Gana, M R., & Dakhlaoui, M (2022) Foreign ownership and liquidity: evidence from a frontier market.EuroMed Journal of Business.

Bowsher, C.G (2002) On testing overidentifying restrictions in dynamic panel data models.Economics Letters 77(2), 211-220.

Brockman,P.,&Chung,D.Y.(1999).Ananalysisofdepthbehaviorinanelectronic, order- drivenenvironment.JournalofBanking&Finance,23(12),1861-1886.

Brockman,P.,Chung,D.Y.,&Yan,X.S.(2009).Blockownership,tradingactivity, and market liquidity.Journal of Financial and Quantitative Analysis, 44(6), 1403-1426.

Buallay, A., Hamdan, A., & Zureigat, Q (2017) Corporate governance and firm performance:evidencefromSaudiArabia.AustralasianAccounting,Businessand

Butt, H A., Demirer, R., Sadaqat, M., & Suleman, M T (2022) Do emerging stock markets offer an illiquidity premium for local or global investors?.TheQuarterly Review of Economics and Finance,86, 502-515.

Byun,H.Y.,Hwang,L.S.,&Lee,W.J.(2011).Howdoesownershipconcentration exacerbate information asymmetry among equity investors?Pacific-BasinFinance

Cao, C., Field, L C., & Hanka, G (2004) Does insider trading impair market liquidity? Evidence from IPO lockup expirations.Journal of Financial andQuantitative Analysis, 39(1), 25-46.

Castro Martins, H (2020) The Brazilian bankruptcy law reform, corporate ownership concentration, and risk‐taking.Managerial and

Chan, L K., & Lakonishok, J (1993) Institutional trades and intraday stock price behavior.Journal of Financial Economics, 33(2), 173-199.

Chen, Z., Cheung, Y.L., Stouraitis, A & Wong, A.W (2005), Ownership concentration, firm performance, and dividend policy in Hong Kong,Pacific-

Cheng, L., Firth, M., Leung, T Y., & Rui, O (2006) The effects of insider trading on liquidity.Pacific-Basin Finance Journal, 14(5), 467-483.

Chia, Y E., Lim, K P., & Goh, K L (2020) More shareholders, higher liquidity?

Evidence from an emerging stock market.Emerging Markets Review,44, 100696.

Chiang, R., & Venkatesh, P (1988) Insider holdings and perceptions ofinformation asymmetry: A note.The Journal of finance, 43(4),1041-1048.

Cho, M.H (1998) Ownership structure, investment, and the corporate value: an empirical analysis.Journal of Financial Economics,47(1), 103-121.

Chung, K H., Elder, J., & Kim, J.-C (2010) Corporate governance and liquidity.

Journal of Financial and Quantitative Analysis, 45(2), 265-291.

Claessens, S & Yurtoglu, B.B (2013) Corporate governance in emerging markets: a survey’,Emerging Markets Review, 15, 1-33.

Claessens, S (1997) ‘Corporate governance and equity prices: Evidence from the

Czech and Slovak Republics’,The Journal of Finance, Vol 52 No 4, pp.1641-1658.

Claessens, S., & Djankov, S (1999) Ownership concentration and corporate performance in the Czech Republic.Journal of Comparative

Claessens, S., Djankov, S and Pohl, G (1997)Ownership and corporategovernance: Evidence from the Czech Republic Policy, Research working paper no WPS 1737, World Bank, Washington,

[online]http://documents.worldbank.org/curated/en/317991468770745611/

Ownershi p-and-corporate-governance-evidence-from-the-Czech- Republic(Accessed8

Claessens, S., Djankov, S., Fan, J P., & Lang, L H., (2002) Disentangling the incentive and entrenchment effects of large shareholdings.The Journal ofFinance, 57(6), 2741-2771.

Coffee, J C (1991) Liquidity versus control: The institutional investor as corporate monitor.Columbia law review, 91(6), 1277-1368.

Coles, J.L., Daniel, N.D., Naveen, L., 2006 Managerial incentives and risk-taking.

Coles, J.L., Lemmon, M.L., Meschke, J.F., 2012 Structural models andendogeneity in corporate finance: the link between managerial ownership and corporate performance.Journal of Financial

Connelly, J T., Limpaphayom, P., Nguyen, H T., & Tran, T D (2017) A tale of two cities: Economic development, corporate governance and firm value in Vietnam.Research in International Business and Finance, 42, 102-123.

Copeland, T E., & Galai, D (1983) Information effects on the bid‐ask spread.TheJournal of finance, 38(5), 1457-1469.

Corker, Katherine S (2022) Strengths and Weaknesses of Meta-Analyses, in Lee

Jussim, Jon A Krosnick, and Sean T Stevens (eds), Research Integrity:

BestPractices for the Social and Behavioral Sciences(New York, 2022; online edn, Oxford Academic, 21 Apr 2022).

Corwin, S A., & Schultz, P (2012) A simple way to estimate bid‐ask spreads from daily high and low prices.The Journal of finance, 67(2), 719-760. Đặng,R.,Le,N.T.,Reddy,K.,&Vu,M.C.(2022).Foreignownershipandcorporate risk-taking: Panel threshold evidence from a transactional economy.FinanceResearch

Dang, T L., Nguyen, T H., Tran, N T A., & Vo, T T A (2018) Institutional ownership and stock liquidity: International evidence.Asia‐Pacific

Dann, L Y., Mayers, D., & Raab Jr, R J (1977) Trading rules, large blocks andthe speed of price adjustment.Journal of Financial Economics, 4(1),3-22.

Demsetz, H & Villalonga, B (2001) Ownership structure and corporate performance,Journal of Corporate Finance,7(3), 209-233.

Demsetz, H (1968) The cost of transacting.The Quarterly Journal of

Demsetz, H (1983) The structure of ownership and the theory of the firm,TheJournal of Law and Economics, 26(2), 375-390.

Demsetz, H (1986) Corporate control, insider trading, and rates of return.TheAmerican Economic Review, 76(2), 313-316.

Demsetz, H., & Lehn, K (1985) The structure of corporate ownership: Causes and consequences.Journal of Political Economy, 93(6), 1155-1177.

Ding, M., Nilsson, B., & Suardi, S (2017) Foreign institutional investment, ownership, and liquidity: Real and informational frictions.Financial

Durnev,A.,Morck,R.,&Yeung,B.,(2004).Value‐enhancingcapitalbudgetingand firm‐ specific stock return variation.The Journal of Finance,59(1),65-105.

Easley, D., & O'hara, M (1987) Price, trade size, and information in securities markets.Journal of Financial Economics, 19(1), 69-90.

Easley, D., & O'hara, M (1992) Time and the process of security pricea d j u s t m e n t

Easley, D., & O'hara, M (2004) Information and the cost of capital.The Journal offinance, 59(4), 1553-1583.

Edmans, A., Fang, V W., & Zur, E (2013) The effect of liquidity on governance.

The Review of Financial Studies, 26(6), 1443-1482.

Ehikioya, B.I (2009) ‘Corporate governance structure and firm performance in developing economies: evidence from Nigeria’,Corporate Governance:

TheInternational Journal of Business in Society, Vol 9 No.3, pp.231-243.

EL Houcine, R (2023) Impact of ownership structure on stock liquidity in financial crisis.Journal of General Management, 03063070231220197.

Faccio, M., Marchica, M.T., Mura, R., 2011 Large shareholder diversification and corporate risk-taking.The Review of Financial Studies 24(11), 3601-3641.

Faccio,M.,Marchica,M.T.,Mura,R.,2016.CEOgender,corporaterisk-taking,and theefficiencyofcapitalallocation.JournalofCorporateFinance39,193-209.

Fama, E.F and Jensen, M.C (1983) ‘Separation of ownership and control’,TheJournal of Law and Economics, Vol 26 No 2, pp.301-325.

Filatotchev, I., Jackson, G and Nakajima, C (2013) ‘Corporate governance and national institutions: a review and emerging research agenda’,Asia

PacificJournal of Management, Vol 30 No 4, pp.965-986.

Finckh, A., & Tramèr, M R (2008) Primer: strengths and weaknesses of meta- analysis.Nature clinical practice Rheumatology, 4(3), 146-152.

Finnerty, J E (1976) Insiders and market efficiency.The Journal of finance, 31(4),

Fong, K Y., Holden, C W., & Trzcinka, C A (2017) What are the best liquidity proxies for global research?Review of Finance, 21(4), 1355-1401.

Foster, F D., & Viswanathan, S (1996) Strategic trading when agents forecast the forecasts of others.The Journal of finance, 51(4), 1437-1478.

Gainsborough, M., 2009 Privatisation as state advance: private indirect government in Vietnam.New Political Economy 14(2), 257-274.

Gharbi,S.,&Othmani,H.(2022).Thresholdeffectintherelationshipbetweenfamily ownership and firm performance: A panel smooth transition regression analysis.Cogent Economics &

Ginglinger, E., & Hamon, J (2012) Ownership, control and market liquidity.

Finance, Presses universitaires de Grenoble,33(2), 61-99

Ginglinger, E., Matsoukis, L., & Riva, F (2013) Seasoned equity offerings: Stock market liquidity and the rights offer paradox.Journal of Business Finance

Glejser, H., 1969 A new test for heteroskedasticity.Journal of the

Glosten, L R., & Harris, L E (1988) Estimating the components of the bid/ask spread.Journal of Financial Economics, 21(1), 123-142.

Glosten,L.R.,&Milgrom,P.R.(1985).Bid,askandtransactionpricesinaspecialist market with heterogeneously informed traders.Journal of FinancialEconomics, 14(1),71-100.

Goyenko, R Y., Holden, C W., & Trzcinka, C A (2009) Do liquidity measures measure liquidity?Journal of Financial Economics, 92(2), 153-181.

Gugler, K., Mueller, D.C & Yurtoglu, B.B (2004) Corporate governance and the returns on investment,The Journal of Law and Economics,47(2), 589-633.

Gunasekarage, A., Hess, K & Hu, A.J (2007) The influence of the degree of state ownership and the ownership concentration on the performance of listed Chinese companies,Research in International Business and Finance,21(3), 379-395.

Han, K.C & Suk, D.Y (1998) The effect of ownership structure on firm performance: additional evidence,Review of Financial Economics,7(2),143- 155.

Hansen, L.P., 1982 Large sample properties of generalized method of moments estimators.Econometrica: Journal of the Econometric Society, 1029-1054.

Hasbrouck,J.(2009).TradingcostsandreturnsforUSequities:Estimatingeffective costs from daily data.The Journal of finance, 64(3),1445-1477.

He, L., 2008 Do founders matter? A study of executive compensation, governance structure and firm performance.Journal of Business Venturing 23(3), 257- 279.

Hearn, B (2011) Size and liquidity effectsi n J a p a n e s e r e g i o n a l s t o c k m a r k e t s

Journal of the Japanese and International Economies, 25(2),157-181.

Hedberg L (2014)Navigating emerging and frontier markets with

CorporateGovernance, East Captial white paper

[online]http://www.eastcapital.com/Documents/White_Paper- Corporate_Governance_September_2014.pdf(Accessed 8 May2018).

Heflin, F., & Shaw, K W (2000) Blockholder ownership and market liquidity.

Journal of Financial and Quantitative Analysis, 35(4), 621-633.

Hermalin, B.E and Weisbach, M.S (1991) ‘The effects of board composition and direct incentives on firm performance’,Financial Management, Vol 20 No.

Hermalin, B.E., Weisbach, M.S., 1988 The determinants of board composition.TheRAND Journal of Economics, 589-606.

Heugens, P.P., van Essen, M and van Oosterhout, J.H (2009) ‘Meta-analyzing ownership concentration and firm performance in Asia: Towards a morefine- grained understanding’,Asia Pacific Journal of Management, Vol 26 No 3,pp.481-512.

Himmelberg, C., Hubbard, R.G and Palia, D (1999) ‘Understanding the determinants of managerial ownership and the link between ownership and performance’,Journal of Financial Economics, Vol 53 No 3, pp.353-384.

Ho, T., Phung, D N., & Nguyen, Y N (2021) State ownership and corporate risk‐ taking: Empirical evidence in Vietnam.Australian Economic

Holden, C W (2009) New low-frequency spread measures.Journal of financialMarkets, 12(4), 778-813.

Holden, C W., & Subrahmanyam, A (1992) Long‐lived private information and imperfect competition.The Journal of finance, 47(1), 247-270.

Holderness, C.G., Kroszner, R.S and Sheehan, D.P (1999) ‘Were the good olddays thatgood?Changesinmanagerialstockownershipsincethegreatdepression’,The Journal of Finance, Vol 54 No 2,pp.435-469.

Holthausen, R W., Leftwich, R W., & Mayers, D (1987) The effect of large block transactions on security prices: A cross-sectional analysis.Journal ofFinancial Economics, 19(2), 237-267.

Hu,H.W.,Tam,O.K.andTan,M.G.S.(2010)‘Internalgovernancemechanismsand firmperformanceinChina’,AsiaPacificJournalofManagement,Vol.27No.4,pp.727- 749.

Hu,Y.andIzumida,S.(2008)‘Ownershipconcentrationandcorporateperformance: a causal analysis with Japanese panel data’,Corporate Governance: AnInternational

Huang, G., An, Z., & Li, D (2023) Foreign institutional ownership and corporate risk‐taking: International evidence.Corporate Governance: An

Iwasaki, I., & Mizobata, S (2020) Ownership concentration and firm performance in European emerging economies: A meta-analysis.Emerging

Iwasaki, I., Ma, X., & Mizobata, S (2022) Ownership structure and firm performance in emerging markets: A comparative meta-analysis of East European EU member states, Russia and China.Economic Systems,46(2), 100945.

Jacoby, G., & Zheng, S X (2010) Ownership dispersion and market liquidity.

International Review of Financial Analysis, 19(2), 81-88.

Jaffe, J F (1974) Special information and insider trading.The Journal of

Jaffe, J F., & Winkler, R L (1976) Optimal speculation against an efficient market.

Jensen, M C., & Meckling, W H (1976) Theory of the firm: Managerial behavior, agency costs and ownership structure.Journal of Financial Economics, 3(4), 305-360.

Jiang, C X., Kim, J.-C., & Zhou, D (2011) Liquidity, analysts, and institutional ownership.International Review of Financial Analysis, 20(5), 335-344.

John, K., Litov, L., Yeung, B., 2008 Corporate governance and risk‐ taking.TheJournal of Finance 63(4), 1679-1728.

Johnson, S., La Porta, R., Lopez-de-Silanes, F., Shleifer, A., 2000.T u n n e l i n g

Jumreornvong, S., Treepongkaruna, S., Prommin, P., & Jiraporn, P (2020) The effects of ownership concentration and corporate governance on corporate risk-taking: The case of Thailand.Accounting Research Journal,33(1), 252- 267.

Kao, M F., Hodgkinson, L., & Jaafar, A (2019) Ownership structure, board of directors and firm performance: evidence from

Taiwan.CorporateGovernance: The international journal of business in society,19(1),189-216.

Kapopoulos, P and Lazaretou, S (2007) ‘Corporate ownership structure and firm performance: evidence from Greek firms’,Corporate Governance:

AnInternational Review, Vol 15 No 2, pp.144-158.

Keim, D B., & Madhavan, A (1996) The upstairs market for large-block transactions: Analysis and measurement of price effects.The Review ofFinancial Studies, 9(1), 1-36.

Keim, D B., & Madhavan, A (1997) Transactions costs and investment style: an inter-exchange analysis of institutional equity trades.Journal of

Kharabsheh,B.,Suwaidan,M.andRamadanE.(forthcoming)‘Nonlinearassociation between controlling shareholders and leverage: evidence from Jordan’,Afro-Asian Journal of

Kini, O., & Mian, S (1995) Bid‐ask spread and ownership structure.Journal ofFinancial Research, 18(4), 401-414.

Koerniadi, H., Krishnamurti, C., Tourani-Rad, A., 2014 Corporate governance and risk-taking in New Zealand.Australian Journal of Management 39(2), 227-245.

Kothare, M (1997) The effects of equity issues on ownership structure and stock liquidity: A comparison of rights and public offerings.Journal of

Kraus, A., & Stoll, H R (1972a) Parallel trading by institutional investors.Journalof Financial and Quantitative Analysis, 7(5),2107-2138.

Kraus, A., & Stoll, H R (1972b) Price impacts of block trading on the New York

Stock Exchange.The Journal of finance, 27(3),569-588.

Kyle, A S (1985) Continuous auctions and insider trading.Econometrica:

La Porta, R., Lopez-de-Silanes, F., Shleifer, A and Vishny, R.W (2000) ‘Investor protection and corporate governance’,Journal of Financial Economics, Vol.

La Porta, R., Lopez‐de‐Silanes, F., Shleifer, A., 1999 Corporate ownership around the world.The Journal of Finance,54(2), 471-517.

La Porta, R., Lopez‐de‐Silanes, F., Shleifer, A., Vishny, R.W., 1997 Legal determinants of external finance.The Journal of Finance 52(3), 1131-1150.

Lakonishok, J., & Lee, I (2001) Are insider trades informative?The Review ofFinancial Studies, 14(1), 79-111.

Lakonishok, J., Shleifer, A., & Vishny, R W (1992) The impact of institutional trading on stock prices.Journal of Financial Economics, 32(1), 23-43.

Le, T.M and Walker, G (2008) ‘Corporate governance of listed companies in

Vietnam’,Bond Law Review, Vol 20 No 2, pp.1-80.

Leaủo, M., & Pedraza, A (2018) Ownership concentration and market liquidity:

Evidence from a natural experiment.Economics Letters,167, 56-59.

Lee, C M., Mucklow, B., & Ready, M J (1993) Spreads, depths, and the impactof earnings information: An intraday analysis.The Review of Financial Studies,6(2),345- 374.

International Review of Economics & Finance, 54, 311-325.

Lesmond, D A (2005) Liquidity of emerging markets.Journal of

Lesmond, D A., Ogden, J P., & Trzcinka, C A (1999) A new estimate of transaction costs.The Review of Financial Studies, 12(5), 1113-1141.

Lin, J C., & Howe, J S (1990) Insider trading in the OTC market.The Journal offinance, 45(4), 1273-1284.

Lins, K.V (2003) ‘Equity ownership and firm value in emerging markets’,Journalof Financial and Quantitative Analysis, Vol 38 No 1, pp.159-184.

Ma, S., Naughton, T and Tian, G (2010) ‘Ownership and ownership concentration: which is important in determining the performance of China’s listed firms?’,Accounting & Finance, Vol 50 No 4, pp.871-897.

Madhavan, A., & Cheng, M (1997) In search of liquidity: Block trades in the upstairsanddownstairsmarkets.TheReviewofFinancialStudies,10(1),175-203.

Makhija, A.K and Spiro, M (2000) ‘Ownership structure as a determinant of firm value: Evidence from newly privatized Czech firms’,Financial Review, Vol.

Makhija, M.V (2004) ‘The value of restructuring in emerging economies: the case of the Czech Republic’,Strategic Management Journal, Vol 25 No 3, pp.243-267.

Manawaduge,A.andDeZoysa,A.(2013)‘Thestructureofcorporateownershipand firm performance: Sri Lankan evidence’,Journal of Corporate Ownership &Control, Vol 11 No 1, pp.723-734.

Machado, J A., & Silva, J S (2000) Glejser's test revisited.Journal ofEconometrics,97(1), 189-202.

Marshall,B.R.,Nguyen,N.H.,&Visaltanachoti,N.(2013).Liquiditymeasurement in frontier markets.Journal of International Financial Markets, Institutionsand Money,

Maug, E (1998) Large shareholders as monitors: Is there a trade‐off between liquidity and control?The Journal of finance, 53(1), 65-98.

McConnell,J.J.,&Servaes,H.(1990).Additionalevidenceonequityownershipand corporate value.Journal of Financial Economics, 27(2),595-612.

McConnell, J.J., Servaes, H., 1990 Additional evidence on equity ownership and corporate value.Journal of Financial Economics 27(2), 595-612.

Mehran, H (1995) ‘Executive compensation structure, ownership, and firm performance’,Journal of Financial Economics, Vol 38 No 2, pp.163-184.

Merton,R.C.(1987).Asimplemodelofcapitalmarketequilibriumwithincomplete information.The Journal of finance, 42(3),483-510.

Mikkelson,W.H.,&Partch,M.M.(1985).Stockpriceeffectsandcostsofsecondary distributions.Journal of Financial Economics, 14(2),165-194.

Morck,R.,Shleifer,A.,&Vishny,R.W.(1988).Managementownershipandmarket valuation:

An empirical analysis.Journal of Financial Economics, 20, 293- 315.

Nashier, T., & Gupta, A (2023) Ownership concentration and firm performance in

Ng, A., Yuce, A., Chen, E., 2009 Determinants of state equity ownership, and its effect on value/performance: China’s privatized firms.Pacific-Basin

Ng,L.,Wu,F.,Yu,J.,&Zhang,B.(2015).Foreigninvestorheterogeneityandstock liquidity around the world.Review of Finance, 20(5),1867-1910.

Nguyen, N P A., & Dao, T T B (2022) Liquidity, corporate governance and firm performance: A meta-analysis.Cogent Business & Management,9(1), 2137960.

Nguyen, P (2011) Corporate governance and risk-taking: Evidence from Japanese firms.Pacific-Basin Finance Journal, 19(3), 278-297.

Nguyen, P., 2012 The impact of foreign investors on the risk-taking of Japanese firms.Journal of the Japanese and International Economies 26(2), 233-248.

Nguyen,T.,Locke,S.,&Reddy,K.(2015a).Ownershipconcentrationandcorporate performance from a dynamic perspective: Does national governance quality matter?

International Review of Financial Analysis, 41,148-161.

Nguyen, T., Locke, S., & Reddy, K., (2015b) Does boardroom gender diversity matter? Evidence from a transitional economy.International Review ofEconomics & Finance 37, 184-202.

O'Brien, P C., & Bhushan, R (1990) Analyst following and institutional ownership.

Paligorova, T., 2010 Corporate risk taking and ownership structure Unpublished

Working Paper, Bank of Canada.

Paniagua, J., Rivelles, R., & Sapena, J (2018) Corporate governance and financial performance: The role of ownership and board structure.Journal of

Pham,P.K.,Suchard,J.A.andZein,J.(2011)‘Corporategovernanceandalternative performance measures: evidence from Australian firms’,Australian Journalof

Pham,P.M.T.,&Dao,B.T.T.(2022).Ameta-analysisofrisktakingandcorporate performance.Cogent Business & Management, 9(1),2064263.

Phung, D.N., Mishra, A.V., 2016 Ownership structure and firm performance: evidence from Vietnamese listed firms.Australian Economic Papers 55(1), 63-98.

Prommin,P.,Jumreornvong,S.,Jiraporn,P.,&Tong,S.(2016).Liquidity,ownership concentration,corporategovernance,andfirmvalue:EvidencefromThailand.Global

Prowse, S.D., 1992 The structure of corporate ownership in Japan.The Journal ofFinance47(3), 1121-1140.

Rhee, S G., & Wang, J (2009) Foreign institutional ownership and stock market liquidity: Evidence from Indonesia.Journal of Banking & Finance, 33(7), 1312-1324.

Rock, K (1996) The specialist’s order book and price anomalies.Review ofFinancial Studies, 9, 1-20.

Roe, M J (1990) Political and legal restraints on ownership and control of public companies.Journal of Financial Economics, 27(1), 7-41.

Roll, R (1984) A simple implicit measure of the effective bid‐ask spread in an efficient market.The Journal of finance, 39(4), 1127-1139.

Roodman, D (2009) A note on the theme of too many instruments.Oxford

Rubin, A (2007) Ownership level, ownership concentration and liquidity.Journalof financial Markets, 10(3), 219-248.

Sakawa, H., Ubukata, M., & Watanabel, N (2014) Market liquidity and bank- dominated corporate governance: Evidence from Japan.International

Sakawa, H., Watanabel, N., Duppati, G., & Faff, R (2021) Institutional ownership andcorporaterisk-takinginJapaneselistedfirms.AppliedEconomics,53(16), 1899- 1914.

Schmid, M.M & Zimmermann, H (2008) Should chairman and CEO beseparated?

Leadership structure and firm performance in Switzerland.SchmalenbachBusiness Review, 60(2),182-204.

Scholes, M S (1972) The market for securities: Substitution versus price pressure andtheeffectsofinformationonshareprices.TheJournalofBusiness,45(2), 179- 211.

Schultz, E.L., Tan, D.T & Walsh, K.D (2010) Endogeneity and the corporate governance-performance relation.Australian Journal of Management, 35(2),145-163.

Seyhun,H.N.(1992).Theeffectivenessoftheinsider-tradingsanctions.TheJournalof Law and

Shen, H., Fu, M., Pan, H., Yu, Z., & Chen, Y (2020) The impact of the COVID-19 pandemic on firm performance.Emerging Markets

Shleifer, A & Vishny, R.W (1986) Large shareholders and corporate control’,

Short, H & Keasey, K (1999) Managerial ownership and the performance offirms:

Evidence from the UK.Journal of Corporate Finance, 5(1),79-101.

Slovin, M B., Sushka, M E., & Lai, K W (2000) Alternative flotation methods, adverse selection, and ownership structure: evidence from seasoned equity issuance in the UK.Journal of Financial Economics, 57(2), 157-190.

Smith Jr, C W (1986) Investment banking and the capital acquisition process.

Staglianò, R., La Rocca, M., & Gerace, D (2018) The impact of ownership concentrationandanalystcoverageonmarketliquidity:Comparativeevidence from an auction and a specialist market.Economic Modelling,70,203-214.

Stulz, R (1988) Managerial control of voting rights: Financing policies and the market for corporate control.Journal of Financial Economics, 20, 25-54.

Subrahmanyam,A.(1991).Riskaversion,marketliquidity,andpriceefficiency.TheReview of Financial Studies, 4(3),417-441.

Sun,Q.,Tong,W.H.,&Tong,J.(2002).Howdoesgovernmentownershipaffectfirm performance?

Evidence from China’s privatization experience.Journal ofBusiness Finance &

Syamala,S.R.,Chauhan,Y.,&Wadhwa,K.(2014).Institutionalinvestorsandstock liquidity:EvidencefromIndianStockMarket.GlobalBusinessReview,15(3), 461-476.

Szewczyk, S H., Tsetsekos, G P., & Varma, R (1992) Institutional ownership and the liquidity of common stock offerings.Financial Review, 27(2), 211-225.

Thai, A & Hoang, T.M (2019) The impact of large ownership on capital structure of Vietnamese listed firms.Afro-Asian Journal of Finance and

Thomsen,S.&Pedersen,T.(2000).Ownershipstructureandeconomicperformance in the largest European companies.Strategic Management Journal,21(6), 689-705.

Thomsen, S., & Pedersen, T., (2000) Ownership structure and economic performance in the largest European companies.Strategic

Tran, L T H., Hoang, T T P., & Tran, H X (2018) Stock liquidity andownership structure during and after the 2008 Global Financial Crisis: Empirical evidence from an emerging market.Emerging Markets Review, 37,114-133.

Tran, N H., & Le, C D (2020) Ownership concentration, corporate risk-takingand performance: Evidence from Vietnamese listed firms.Cogent Economics&Finance, 8(1),1732640.

Tran, N H., & Le, C D (2022) Ownership concentration and firm valuation in a typicalfrontiermarket.Afro-AsianJournalofFinanceandAccounting,12(4), 427-454.

Tran, N.H & Le, C.D (2017) Financial conditions and corporate investment: evidence from Vietnam,Pacific Accounting Review,29(2),183-203.

Vo, X V (2016b) Foreign ownership and stock market liquidity-evidence from

Vietnam.Afro-Asian Journal of Finance and Accounting, 6(1),1-11.

Evidence from Vietnam.Research in International

Vo, X.V (2016a) Foreign investors and corporate risk taking behavior in an emerging market.Finance Research Letters 18, 273-277.

Wang, K., & Shailer, G (2015) Ownership concentration and firm performance in emergingmarkets:Ameta‐analysis.JournalofEconomicSurveys,29(2),199- 229.

Wei, G., (2007) Ownership structure, corporate governance and company performance in China.Asia Pacific Business Review 13(4), 519-545.

Wei, Z., Varela, O., (2003) State equity ownership and firm market performance: evidencefromChina’snewlyprivatizedfirms.GlobalFinanceJournal14(1), 65-82.

Wei, Z., Xie, F., Zhang, S., (2005) Ownership structure and firm value in China’s privatized firms: 1991–2001.Journal of Financial and Quantitative

GMM estimators.Journal of Econometrics 126(1),25-51.

Wintoki, M.B., Linck, J.S & Netter, J.M (2012) Endogeneity and the dynamics of internal corporate governance,Journal of Financial Economics,105(3), 581- 606.

World Bank (2013)Corporate Governance Country Assessment: Vietnam.

[online]http://openknowledge.worldbank.org/handle/10986/20587 (Accessed 8 May 2018)

Wright,P.,Ferris,S.P.,Sarin,A.,&Awasthi,V.,(1996).Impactofcorporateinsider, blockholder, and institutional equity ownership on firm risk taking.Academyof Management

Xu,X.&Wang,Y.(1999).OwnershipstructureandcorporategovernanceinChinese stock companies.China Economic Review,10(1),75-98.

Yu, M., (2013) State ownership and firm performance: Empirical evidence from

Chinese listed companies.China Journal of Accounting Research,6(2), 75- 87.

Zhou, X., (2001) Understanding the determinants of managerial ownership and the link between ownership and performance: comment.Journal of

Zingales, L., (1995) What determines the value of corporate votes?The

APPENDICES Appendix A A summary of previous studies on the relationship between ownership concentration and firm performance

Author(s) Sample Period Measuresof performance Measuresofconcentration Found effect ofconcentration on Concentration treated as

EBIT) Valuation(Q;M/B) Others (Stock returns, etc.) endogenous

Insider ownership Outside block ownership

Servaes (1990) U.S 1976, 1986 Tobin's Q Insitutional ownership + No

Prowse (1992) Japan 1979-1984 ROE Large ownership (Top5) + (insign.)

Managerial ownership Outside block ownership

Tobin's Q, ROA (not reported) Managerial ownership

(not reported) similar to those on valuation

+/-/- (thres 5%, 25%) (insign.) inverted U-shaped Yes

Chen et al (2005) Hong Kong 1995-1998 ROA, ROE, M/B Family ownership

Demsetz and Large ownership (Top5) + (insign.)

Villalonga (2001) U.S 1976-1980 Tobin's Q Managerial ownership - (insign.) Yes

EBIT, EAT), EquityInsider large ownership + (insign.) + (insign.) - (insign.)

Schultz et al (2010) Australia 2000-2007 return Outsider largeownership + (insign.) + (insign.) + (insign.) Yes

Insider ownership Institutional block ownership Tobin'sQ,EVA Non-institutional blockownership

Xu & Wang (1999) China 1993, 1994, 1995 M/B, ROE, ROA

Large ownership (Top5, Top10) Herfindahl index

State ownership Institutional ownership Individual ownership (A-shares)

Claessens and Djankov (1999) Czech Republic1992-1997

Large ownership: Top5 Ownership types

Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Taiwan, and

Thailand 1996 Tobin's Q Large ownership: Largest + No

Vietnam 2008-2011 Tobin's Q Large ownership + Yes

Large ownership: Largest Large ownership: Top5 Large ownership: Top10 Balance ratio: Largests2-5/Largest Sate ownership

Institutional ownership Individual ownership (A&B-shares)

- (seemingly U-shaped) - (Q: seemingly U-shaped; M/B: insign.)

Hu et al (2010) China 2003-2005 Tobin's Q Large ownership: Largest - No

Han and Suk (1998) U.S 1988-1992 Stock returns

Insider ownership Number of insdiers Institutional ownership inverted U-shaped inverted U-shaped (weak)

Austria, Belgium, Denmark, Finland, France, Germany, the U.K., Italy, the Netherlands, Norway, Spain and Sweden

M/B, ROA, Sales growth Large ownership inverted U-shaped inverted U-shaped inverted U-shaped (Sales growth: insign.) No

Asset), Tobin's Q Government ownership inverted U-shaped No

(2008) Switzerland 2002 Tobin's Q Managerial ownership inverted U-shaped No

Arosa et al (2010) Spain 2006 ROA

Family ownership Non-family ownership inverted U-shaped (w/ first generation) inverted U-shaped (insign.) No

28 Central and Eastern European transition economies 2002-2009

Employment growth Large ownership inverted U-shaped (Employment growth: w/ non-EU countries or weak institions) No

Morck et al (1988) U.S 1980 Tobin's Q Managerial ownership +/-/+ (thres 5%, 25%) No

1971, 1974, 1977, 1980, 1983 Tobin'sq,EBIT Managerial ownership

Cho (1998) U.S 1991 Tobin's Q Insider ownership ?/+/+ (thres 7%, 38%) (insign.) Yes

Gugler et al (2004) 61 countries 1985-2000 Tobin'sq Insider ownership +/-/+ (thres 22%, 68%) (U.S.) No (?)

(2008) Japan 1980-2005 Tobin's Q, ROA Large ownership: Top5, Top10 U-shaped U-shaped (insign w/ Top5) Yes

State ownership Institutional ownership (domestic) International ownership

Wei et al (2005) China 1991-2001 Tobin's Q

State ownership Institutional ownership Foreign ownership

Ng et al (2009) China 1996-2003 Tobin's Q

State ownership: All State ownership: Top5 Herfindahl index

Q State ownership U-shaped U-shaped (?) No

Buallay et al (2017)Saudi Arabia 2012-2014

Large ownership: Top1 Large ownership: Top3

ROA, ROE, Tobin’s Q, MBVE (market-to-book value of equity)

Block ownership Institutional ownership Foreign ownership Family ownership

Tobin’s Q, RET (return on stock)

Managerial ownerhsip Family ownership Concentration ownership

Alkurdi et al (2021)Jordan 2007-2019 ROA, Tobin’s Q

Managerial ownerhsip Institutional ownership Concentration ownership

(2022) France 2009-2017 ROA Family ownership -/+ (below and above 37.62%) Yes

(2023) India 2007-2014 Tobin’s Q, ROA Herfindahl’s index + + Yes

Hong et al (2023) Vietnam 2010-2019 Tobin’s Q

(Private) institutional ownership (State) institutional ownership

+ Yes a insign denotes insignificance at 10%; b weak denotes significance at 10%

Appendix B.A summary of previous studies on the relationship between ownership concentration and firm risk-taking

Author(s) Sample Period Measures of risk-taking Measures of concentration

Found effect of concentration on risk-taking Concentration treated as endogenous relating to profitability

(1996) U.S 1986, 1992 The standard deviation of analysts' forecast

Large ownership Managerial ownership Institutional ownership

? (insign a ) + (=7%) + (firms w/ growth opport.); ? (firms w/o growth opport.) No

39 countries, including U.S 1992-2002 Time-series standard deviation of ROA Large ownership ? (insign.) Yes

The country- and industry- adjusted standard deviation ofROA

Direct and indirect large ownership: largest

The standard deviation of monthly stock return, systematic risk, idiosyncratic risk, Relative idiosyncratic risk

Large ownership: Top5 Herfindahl index

Mishra (2011) 9 countries in East Asia 1996-2005 the standard deviation of the market-adjusted firm- level earnings (EBITDA) scaled by total assets

Multi Large shareholders (dividend rights/ voting rights)

+ (presence/voting rights of multi large shareholders) Yes

New Zealand 2004-2008 The standard deviation of monthly raw return Large ownership + Yes

Boubaker et al (2016) France 2003-2012 ROA, Tobin’s Q, stock returns, R&D intensity

Multi Large shareholders (dividend rights/ voting rights) + + Yes

Vo (2016a) Vietnam 2017-2014 ROA/ROE over standard deviation of ROA/ROE Foreign ownership + (implying a negative risk-taking/owp relation) No

(2020) Brazil 1995-2015 ROA Large ownership - (after the reform) Yes

Jumreornvong stock return volatility, (standard deviation of daily returns for each firm Ownership et al (2020) Thailand 2006-2009 in a given year) concentration - Yes

The standard deviation of ROE/ industry-adjusted ROE

- (weak/insign., mitigating State owp)

Idiosyncratic risk, total risk, market beta

Tobin’Q / ROA Institutional ownership + + Yes

42 economies, including Vietnam (unclear) (unclear)

Foreign institutional (FF)ownership Stateownership

- (mitigated by FF owp) (unclear) a insign denotes insignificance at 10%

Panel C1 Variables in the models of ownership concentration, firm performance, and risk-taking

Firm performance ROA Profitability: the ratio of earnings before interest and taxes (EBIT) during a year to total assets at the beginning of the year

Q Tobin’sQ: the market value of equity plus the book value of debt, all divided by the book value of total assets lnQ The natural logarithm ofQ

Industry adjustedROA The difference of the a firm’sROAwith its industry meanROA Industry adjustedQ The difference of the a firm’sQwith its industry meanQ

|e(ROA)| The absolute deviation ofROAfrom its expected value (i.e., absolute residuals estimated from the performance regression model (3.1))

|e(Q)| The absolute deviation ofQfrom its expected value (i.e., absolute residuals estimated from the performance regression model (3.1)) sigma(ROA) The standard deviation of industry-adjustedROAover 3 years (i.e., following John et al (2008)) sigma(return) The standard deviation of monthly stock returns

Block holding The accumulated percentage of shareholdings by all large investors who own at least 5 percent of a firm’s outstanding shares

Block holding (0.05 0.28] = block holding minus 0.05 if 0.05 ≤ block holding < 0.28,

Block holding (0.28 1.00) = 0 if block holding < 0.28,

= block holding minus 0.28 if block holding ≥ 0.28 CEO duality A dummy variable equal to 1 if the chairman and the chief executive officer (CEO) are the same person, and zero otherwise Board size The number of directors on the firm’s board

Board independence The proportion of outside (non-executive) directors on the board Gender diversity The proportion of female directors on the board

Leverage Financial leverage: the ratio of total debt to total assets Firm size The natural logarithm of total assets

Capex Capital expenditures divided by sales

Age The natural logarithm of the number of years since the date of listing Tangibility The ratio of fixed to total assets

Sales growth Annual growth rate in sales

Panel C2 Variables in the models of ownership concentration and stock liquidity

Block holding The accumulated percentage of shareholdings by all large investors (blockholders) who own at least 5% of a firm’s outstanding shares

CEO duality A dummy variable equal to 1 if the chairman and the chief executive officer (CEO) are the same person, and zero otherwise Board size The number of directors on the firm’s board [in logarithm]

Board independence The proportion of outside (non-executive) directors on the board Gender diversity The proportion of female directors on the board

(Il)liquidity measures Cost-per-dollar-volume proxy

High-low spread Corwin and Schultz (2012)

FHT Fong, Holden, and Trzcinka (2017)

Zeros Lesmond, Ogden, and Trzcinka (1999)

Zeros2 Goyenko, Holden, and Trzcinka (2009)

VolumeS Average daily share volume

VolumeD Average daily volume in billion dongs

Turnover Share volume divided by the number of shares outstanding

Price Share price in thousand dongs

Firm size The market value in billion dongs of the firm’s equity: the share price times the total number of outstanding shares [in logarithm]

Volatility The standard deviation of daily stock returns

Institutional ownership (IOWN) Institutional ownership: a dummy variable equal to 1 if there is a fraction of the firm's equity that is held by institutions, and zero otherwise

Age The number of years since the firm’s share appears on

Stock return Yearly stock return rate

Profitability (ROA) Profitability: the ratio of earnings before interest and taxes

(EBIT) during a year to total assets at the beginning of the year Leverage Financial leverage: the ratio of total debt to total assets

Capital expenditure (Capex) Capital expenditures divided by salesTangibility (Tang) The ratio of fixed to total assets

Dependent variable Ownership structure and governance Main controls

Table S2 Ownership concentration and stock liquidity: AH-2SLS regressions

Spread Amihud Zeros FHT Amivest Turnover Volume

Year fixed eff~s Yes Yes Yes Yes Yes Yes Yes

Robust standar~s Yes Yes Yes Yes Yes Yes Yes

* p