Relationship between ownership concentration and dividend policy evidence from listed companies in HOSE

RELATIONSHIP BETWEEN OWNERSHIP CONCENTRATION AND DIVIDEND POLICY: EVIDENCE FROM LISTED COMPANIES IN HOSE In Partial Fulfillment of the Requirements of the Degree of MASTER OF BUSINESS ADMINISTRATION In finance By Ms: Tran Thu Phuong ID: MBA04029 International University - Vietnam National University HCMC August 2013 RELATIONSHIP BETWEEN OWNERSHIP CONCENTRATION AND DIVIDEND POLICY: EVIDENCE FROM LISTED COMPANIES IN HOSE In Partial Fulfillment of the Requirements of the Degree of MASTER OF BUSINESS ADMINISTRATION In finance By Ms: Tran Thu Phuong ID: MBA04029 International University - Vietnam National University HCMC August 2013 Under the guidance and approval of the committee, and approved by all its members, this thesis has been accepted in partial fulfillment of the requirements for the degree. Approved: ---------------------------------------Chairperson --------------------------------------Committee member ---------------------------------------Committee member --------------------------------------Committee member ---------------------------------------Committee member --------------------------------------Committee member Acknowledgement To complete this thesis, I have been benefited from the following people. First of all, I would like to express my special thanks to my advisor – PhD. Nguyen Kim Thu – who recommended the research idea to me and for all of her enthusiastic instruction and encouragement during the time I do this thesis. Besides, I would like to dedicate my gratitude to IU lecturers who communicated abstruse knowledge to me during MBA program, and the members of the Examination Committee for taking time and giving valuable comments to improve this study. I also want to give my sincere thanks to my friends and my classmates who are my inspiration and always encouraged me during the past time. Last but not least, I want to express my loving thanks to my family who always stand beside me. My greatest gratitude is to my mother, Trinh. My MBA program in IU - VNU would have not been completed without her love and encouragement. HCM City, August 2013 TRAN THU PHUONG i Plagiarism Statements I would like to declare that, apart from the acknowledged references, this thesis either does not use language, ideas, or other original material from anyone; or has not been previously submitted to any other educational and research programs or institutions. I fully understand that any writings in this thesis contradicted to the above statement will automatically lead to the rejection from the MBA program at the International University – Vietnam National University Ho Chi Minh City. ii Copyright Statement This copy of the thesis has been supplied on condition that anyone who consults it is understood to recognize that its copyright rests with its author and that no quotation from the thesis and no information derived from it may be published without the author’s prior consent. © Tran Thu Phuong / MBA04029 / 2013 iii Table of Contents Chapter 1 – Introduction ........................................................................................... 1 1.1. Background of the Study ............................................................................... 1 1.2. Problem Statement ........................................................................................ 2 1.3. Rationale of the Research .............................................................................. 4 1.4. Importance of the Research ........................................................................... 6 1.5. Research Question ......................................................................................... 6 1.6. Research Objective ........................................................................................ 7 1.6.1. General objective ................................................................................... 7 1.6.2. Specific objective ................................................................................... 7 1.7. Scope and Limitation of the Research ........................................................... 7 1.8. Research Approach ........................................................................................ 8 1.9. Thesis Structure ............................................................................................. 9 Chapter 2 – Literature Review ............................................................................... 10 2.1. Related Theories .......................................................................................... 10 2.1.1. Dividend theories ................................................................................. 10 2.1.2. Effect of Ownership concentration on dividend policy ....................... 23 2.2. Previous empirical studies ........................................................................... 25 2.2.1. Abroad .................................................................................................. 25 2.2.2. Vietnam ................................................................................................ 30 Chapter 3 – Research Methodology ....................................................................... 33 3.1. Data Collection ............................................................................................ 33 3.2. Research Model ........................................................................................... 34 3.2.1. Variable definition and empirical studies ............................................ 34 3.2.2. Model and hypothesis .......................................................................... 38 Chapter 4 – Data analysis ........................................................................................ 43 4.1. Descriptive Statistics ................................................................................... 43 4.2. Analysis of the results ................................................................................. 45 4.2.1. Pearson Correlation .............................................................................. 45 4.2.2. Pooled OLS and Random Effect Model (REM) .................................. 48 4.2.3. Model (1) and Model (2) with Pooled OLS analysis ........................... 52 4.2.4. Model (3) and Model (4) with REM .................................................... 52 4.2.5. Tobit analysis ....................................................................................... 53 iv Chapter 5 – Discussion and Conclusion ................................................................. 57 5.1. Discussion ................................................................................................... 57 5.1.1. Ownership concentration and dividend policy..................................... 57 5.1.2. Firm’s characteristics and dividend policy .......................................... 58 5.1.3. Ownership concentration types and dividend policy ........................... 59 5.2. Conclusion ................................................................................................... 62 5.3. Recommendation ......................................................................................... 62 v List of Tables Table 2.1 Correlation relationship results between dividend policy and independent variables in Vietnam firms ......................................................................................... 32 Table 3.1 Definitions of variables .............................................................................. 38 Table 3.2 Empirical result of the effect of government and foreign investors on dividend policy ........................................................................................................... 41 Table 4.1 Ownership concentration types of the sample firms. ................................. 44 Table 4.2 Descriptive statistic of the sample firms .................................................... 45 Table 4.3 Partial covariance analysis ......................................................................... 46 Table 4.4 Pearson Correlation .................................................................................... 47 Table 4.5 Pooled OLS ................................................................................................ 49 Table 4.6 Random effect model ................................................................................. 50 Table 4.7 Breusch-Pagan test ..................................................................................... 51 Table 4.8 Breusch-Godfrey Serial Correlation LM test ............................................. 52 Table 4.9 Tobit analysis ............................................................................................. 56 vi List of Figures Figure 1.1 Cash dividend/par value of listed companies in HOSE in 2011 and 2012 . 5 Figure 2.1 Definition of Variable. .............................................................................. 29 vii List of Abbreviation Abbreviation Equivalence FCFF Free Cash Flow to Firm FEM Fixed Effect Model LM test Lagrange multiplier test Obs. Observations OLS Ordinary Least Square Pooled OLS Pooled Ordinary Least Square REM Random Effect Model Std. Dev. Standard Deviation viii Abstract The main purpose of this research is to study the relationship between ownership concentration and dividend policy in term of cash dividend of listed companies in HOSE. The sample consisted of 154 listed firms in HOSE in two years 2011 and 2012. The sample was divided into 5 groups of ownership concentration in order to achieve the different relation of ownership concentration types with dividend policy. Pooled OLS, random effect model and Tobit model were used to test the hypotheses. The results show that ownership concentration has negative and significant relationship with dividend policy in general. Different types of ownership concentration have different impact on dividend policy. Keywords: Ownership concentration, dividend policy ix MBA04029 – TRAN THU PHUONG Chapter 1 – Introduction In order to make clear why this study was conducted, chapter 1 brings an overview of the research. Background of the Study generally raises the issue about dividend policy and ownership concentration as the start point of the Problem Statement in which the arguments about this relationship are controversial. Vietnam market reality also is described in this section as the support reason for the researcher to choose this topic. The Scope and Limitation of this research are also provided. 1.1. Background of the Study Dividend policy has been one of the topical issues in financial management because dividends are a major cash outlay for many corporations. It is the decision on how much profits will be paid out as dividend to shareholders and how much will be kept as retained earnings to reinvest in the company. According to Miller and Modigliani (1961) dividend irrelevance proposition, dividend policy does not matter in a tax-free world. The argument was that if the firm pays dividend to their shareholders, the firm doesn’t have enough retained earnings to reinvest, they would borrow funds, and the loss in value of existing share would be exactly equal to the dividend paid out as a result of borrowing instead of using internal fund (Davies, Boczko & Chen, 2008). Thus shareholders are indifferent between dividend and capital gain. However, this argument has been challenged at present. If dividends are irrelevant, why companies still pay dividends and why investors are aware of dividends. In reality, there are many theories and research support to the dividend relevant argument such as Bird-in-hand theory by Gordon and Walter (1963), Agency 1 MBA04029 – TRAN THU PHUONG theory by Jensen and Meckling (1976), Tax preference hypothesis by Brennan (1971), Transaction cost theory. These theories showed that, a change in dividend policy will influence the stock value, by that, affecting the market value of the firm. These theories will be summarized in Literature Review part. Consequently, if paying dividends is important for companies, then we need to identify factors influencing the dividends policy. Following theories of dividend policy, we can see that dividend policy has a significant effect on shareholders’ benefit, thus they should control the dividend policy to act on their best interest. Their pressure on managers may make them follow their willing to pay or not to pay dividend and how much of the profit of the company should be distributed as well as how much of it should be invested in the form of accumulated profit in the company. However, different investors will have a different perspective about dividend. Some ask for high dividend, some want the firm to keep retain-earning to continue invest, while others just think that there is no difference between dividend and capital gain. Therefore, this thesis aims to identify the relationship between dividend policy and the ownership concentration factor with evidence from HOSE stock exchange. 1.2. Problem Statement The ownership of a firm involves many investors, and the ownership structure is divided to two main structures: concentrated and dispersed. According to T. X. T. Nguyen (2010) and Ullah, Fida and Khan (2012), the number of large-block owners and the total percentage of the company's shares that they own define ownership concentration (large-block shareholders are investors who typically own at least five percent (5%) of the company's shares). And the company with dispersed ownership is 2 MBA04029 – TRAN THU PHUONG defined as has large number of shareholders with smallholdings (www.openlearningworld.com). According to the agency cost theory, the more dispersed the ownership structure is, the more severe the agency problem is, therefore, the need for monitoring managers also increases. Monitoring managers’ behavior is more difficult when the ownership structure is widely dispersed. If shareholders involve in the monitoring, they have to incur the full cost of monitoring, while they just gain the benefit according to their relative share of ownership, which is very small. The monitoring activity would be more effective if there were some agents who monitored managers on shareholders’ behalf. If dividends can act as a monitoring mechanism by reducing cash available for managers’ perquisite consumption, a positive relationship between ownership dispersion and dividend payout ratio is expected (Chen & Dhiensiri, 2009) However, according to Jensen and Meckling (1976), Anwar and Tabassum (2011), large owners have stronger incentive and better opportunities to exercise control over managers than small shareholders. In that case, they may force managers to have a high dividend payout ratio, so as to reduce cash available to managers, and to transfer wealth from bondholders to shareholders, especially when firms are in financial distress. The controversial between two arguments is still unsolvable, thus the relationship between ownership concentration and dividend policy is unpredicted. 3 MBA04029 – TRAN THU PHUONG 1.3. Rationale of the Research According to The Decision No.127/1998/QDD-TTg dated July 11th 1998, the Securities market of Vietnam was established in 2000. Ho Chi Minh stock exchange was implemented the first transaction on July 28th 2000. Listed firms in Vietnam usually pay dividend 2 times per year: - The first time (usually in March and April): Most of firms, at this time (after the end of financial year), already had the result of last year operating and audit report, they will announce to distribute the profit and dividend that approved by shareholders through general meeting of shareholders. - The second time (usually in July and August): Firms had result of half-year operating usually pay dividend in advance based on target and results achieved in half a year. Follow D.L Nguyen (2008) in his research about dividend policy of listed companies in Vietnam stock market from 2000 to first quarter 2008, at the time when companies announce dividend payment, price of share tend to increase. He explained that there were plenty of different reasons for the increase of stock price such as the good condition of Vietnam macro economic in those years, investor’s “herd” psychological, the rumors about achieving profitable in the stock purchase, the information about the sale of the foreign investors to name just a few. He concluded that dividend policy is still a factor affecting stock price in Vietnam market, although the level of impact and how the impact is different for different stock and different market. By the data obtained from HOSE stock exchange, we have the overall look on the dividend payment of Vietnam companies. 4 MBA04029 – TRAN THU PHUONG Number of Companies Cash dividend/par value of listed companies in HOSE 90 80 70 60 50 40 30 20 10 0 Year 2011 Year 2012 Cash dividend/par value (Source: Calculated by researcher) Figure 1.1 Cash dividend/par value of listed companies in HOSE in 2011 and 2012 More than 50 companies out of 273 listed companies in HOSE in 2011 did not have clearly information about their dividend rate. This number increased even more in 2012, from more than 50 companies to nearly 80 companies out of 273 listed companies in HOSE. Besides those companies, we also see that Vietnam companies have quite diversified dividend policies. We have companies that pay dividend from 0% to 70% on capital. However, the ratio from 0% to 20% is preferred by most companies. There were approximately 60% of companies in HOSE choose to pay dividend from 0% to 20% on their capital, and only about 10% in total 273 listed companies in HOSE pay dividend from 21% to 30%. There were very least companies pay dividend above 30%. Why does our market have such kind of dividend policies diversification? Is there any effect from the ownership concentration types on it? To find out, this thesis: 5 MBA04029 – TRAN THU PHUONG “THE RELATIONSHIP BETWEEN OWNERSHIP CONCENTRATION AND DIVIDEND POLICY: EVIDENCE FROM LISTED COMPANIES IN HOSE in two years 2011 and 2012” is conducted. 1.4. Importance of the Research The relationship between dividend policy and firm’s ownership structure has been researched by several studies within the agency theory framework for different countries. In Vietnam, it is important to examined this relationship because of the variety of owners in Vietnam companies, for example: government-controlling, foreign-holding, equal share holding by government and foreign investor, institutions, family owners, or mixed of institution, family, foreign and government,… These types of shareholders may have different preferences for dividend payouts. The importance of this thesis stems from the role of dividend policy to attract more capitals and investment and protect the right of minority shareholders. Besides, the lack of empirical studies to prove the relationship between ownership concentration and dividend policy in emerging markets and particularly in Vietnam provides one of the motivations for this thesis. 1.5. Research Question This study seeks to answer the following questions: - Is there any relationship between ownership concentration and dividend policy within the companies which are listed in HOSE? If yes then it is negative or positive effect. 6 MBA04029 – TRAN THU PHUONG - Does different type of ownership concentration have different impact on dividend policy? 1.6. Research Objective 1.6.1. General objective The general objective of this thesis is to clarify the relationship between ownership structure and dividend policy. It will employ an ownership frame work and compare the dividend policy of companies with different ownership concentration types within the companies which are listed in HOSE. 1.6.2. Specific objective - Defining whether the effect of ownership concentration on dividend policy is negative or positive. - Defining the specific correlation between government-controlling firm, foreign- controlling firm with their dividend policies - Defining which relationship has negative correlation, which has positive correlation - Using theories and realities of Vietnam market to explain these relationships 1.7. Scope and Limitation of the Research This research focuses on Joint Stock Companies listed in HOSE in 2011 and 2012. 7 MBA04029 – TRAN THU PHUONG Data are collected from annual reports, financial reports, company websites or websites of other securities companies. Those data may not show the true value due to the lack of transparency of some company reports and the inconsistence in information disclosed by companies and information on websites. This research is only based on data and the fact that there was a lack of survey to get the perspective of investors on dividend policy and number may not show every aspect of the issue. Only two recent years are researched, therefore, the result will not show the trend of dividend policy through time. One more limitation is the limited understanding of researcher about statistic technique and statistic software. 1.8. Research Approach The Quantitative Method is used in this study. Theories and empirical studies are used to orient and determine variables in the beginning. EVIEW 6.0 is used to run model and get data analysis. Along with theories and empirical studies, the real situation of Vietnam is also taken into consideration when analyzing and explaining data. 8 MBA04029 – TRAN THU PHUONG 1.9. Thesis Structure The thesis is expected to cover 5 chapters as follows: Chapter 1 – Introduction: Describes the overview of this study, why the author chose this topic, the purpose and the benefit of the study. The scope and limitation of the research also are shown in this section. Chapter 2 – Literature Review: In this chapter, a literature overview of dividend policy and ownership concentration will be provided. The section starts by summarizing different theories supporting / ruling out the effect of dividend policy – the controversial arguments. After this, some empirical studies will be given as support evidence of the theories. Chapter 3 – Research Methodology: Explains how this study is conducted, method of collecting data, and the variables that are used to study, the tools and method that are used to analyze data. In this part, hypothesis also is given. Chapter 4 – Data analysis: After in put data in EVIEW 6.0, the results of Pooled OLS, REM and Tobit regression will be given. Statistical analysis will be used to analyze these outcomes. Chapter 5 – Discussion and Conclusion: After have the result of regression, empirical studies, theories and practical of Vietnam market are used to explain the relationships between dividend and other factors, especially concentrate on the effect of ownership concentration and ownership concentration types on dividend policy. 9 MBA04029 – TRAN THU PHUONG Chapter 2 – Literature Review To understand the controversial in the relationship of ownership concentration and dividend policy, the literature on dividend policy, the effect of ownership concentration on dividend and some empirical studies over the world and Vietnam are reviewed. 2.1. Related Theories Dividend is the portion of company’s profit after tax, decided by the Board of Directors, distributed to its shareholders. Dividend policy is the policy a company uses to decide how much it will pay out to shareholders in dividends and how much will be kept as retained earnings to reinvest in the company. 2.1.1. Dividend theories Over the last fifty years, dividend policy has always been a controversial issue. Lots of theories and empirical researches have been conducted and studied to solve this contentious puzzle. There are three main contradictory views: (1) dividend policy has no effect on the market value of the firm, (2) an increase in dividend paid out would increase firm’s value, and (3) a rise in dividend payment reduces firm’s value. Theories that support to these views are briefly described below: 10 MBA04029 – TRAN THU PHUONG 2.1.1.1. Dividend irrelevance theories – Dividend policy has no effect on the market value of the firm The most well-known argument supporting this view was published in 1961 by Miller and Modigliani “Dividend policy, growth and the valuation of shares” (Journal of Business). To prove their argument, an idealized world of perfect markets and rational investors are assumed that: (1) no tax difference between dividends and capital gains, (2) no transaction costs on securities trading, (3) investors have the equal and costless access to the same information, (4) no transactions is large enough to affect the price. According to MM, the value of a company is only determined by the earning power of its assets and investments. They figure out only cash flow created by investment decisions or its earning power and business risks affect firm’s value not by the decisions on how to distribute that income. Therefore, shareholders are indifferent between dividend and capital gain. Numerous studies were conducted and had the same result of no relevant outcomes of dividend and stock prices. In 1959, Gordon collected price, dividend and earnings data of companies in four industries (Chemicals, Foods, Steels and Machine Tools) and tested if there was a relationship between stock prices and dividends and income of these firms. However, the coefficients were too low to have a real impact. Another research by Black and Scholes (1974) extended the capital asset pricing model (CAPM), which was developed by Sharpe (1964) and Lintner (1965) in their research of dividend yield effects based on 25 portfolios of common stocks listed on the New York Stock Exchange [Cited by Kinkki, 2001]. The objective of this study is to determine the effect of dividend policy on stock price and they founded that there is no influence of 11 MBA04029 – TRAN THU PHUONG high yield or low yield pay out policy on stock price. Other evidences support for Dividend Irrelevance Hypothesis was presented in studies of Miller and Scholes (1982), Hess (1982), Miller (1986), Bernstein (1996). [Cited by Kinkki, 2001; Malkawi, Rafferty & Pillai, 2010] However, it is obvious that those assumptions are unrealistic in the world we are living. Thus, if we apply this argument in real world, it may not reflect the true importance of dividend policy. As a result, there are reasons to believe that dividend policy has impact on firm’s value. Next, we will go through theories support to dividend relevant view. 2.1.1.2. Dividend relevance theories – Dividend policy affect the stock price. 2.1.1.2.1. High dividend payout increases stock value Bird-in-hand theory In 1963, Gordon and Walter developed their theory as a counterpoint to M&M dividend irrelevant theory. According to the bird-in-hand theory investors prefer the certainty of dividend payments to the possibility of substantially higher future capital gains. They argued that investors are risk averse and they consider current dividend payments to be more trustworthy than the promise of a higher capital gain in the future because it contained risky. Hence dividend payments are preferred than future capital gains due to minimizing risk. Stated another way is “bird in the hand is worth more than two in the bush”. Lintner (1962) and Gordon (1963) have implied that return from the 12 MBA04029 – TRAN THU PHUONG dividend is less risky than the future growth rate. As a higher current dividend reduces uncertainty about future cash flows, a high payout ratio will reduce the cost of capital, and hence increase share value. Studies that provide support for this theory include Gordon and Shapiro (1956) Gordon (1959, 1963), Lintner (1962), and Walter (1963). [Cited by Malkawi, Rafferty & Pillai, 2010]. However, M&M showed that the Bird-in-hand theory has a fallacy. M&M (1961) argued that the firm’s risk is determined by the riskiness of its operating cash flows, not by the way it distributes its earnings. After M&M, Bhattacharya (1979) also suggested that the reasoning underlying this theory is fallacious. He claimed that the riskiness of a firm’s cash flow influences its dividend payments, but not the other way (increases in dividends will not reduce the risk of the firm). Friend and Puckett (1964) found that firms with greater uncertainty of future cash flow (risk) tend to adopt lower payout ratios. Rozeff (1982) also found a negative relationship between dividends and firm risk (the higher risk, the lower dividend payment).Recently, Baker, Powell and Veit (2002) surveyed managers of NASDAQ firms including the view of Bird-in-hand theory. The question was that: “investors generally prefer cash dividends today to uncertain future price appreciation”. Out of 186 responses, there was only 17.2% approving the view of Bird-in-hand theory. [Cited by Kinkki, 2001; Malkawi, Rafferty & Pillai, 2010] There is limited number of empirical supports for Bird-in-hand, and it has been challenged especially by M&M (1961) with many other strong support studies. Nevertheless, the initial reasoning of Gordon (1961), that is, dividend received today is much preferred than highly uncertain capital gains from questionable future investments, is still sited. 13 MBA04029 – TRAN THU PHUONG Agency theory In 1976, Jensen and Meckling developed the agency theory which describes the conflict of interests between agents (managers) and the principals (shareholders and other stakeholders). They claim that the different incentives between managers and holders can cause problems. According to M&M’s perfect capital market assumptions, there are no conflicts of interests between managers and shareholders. However, in practice where owners and managers of firms are separated, these differences really cause problems. The condition of perfect market in these cases become impossible, managers are always imperfect agents of shareholders. This is because, even though maximize shareholder wealth is the primary objective of a business, managers’ interests are not necessarily the same as shareholders’ interests. Therefore, managers may not act on the best interest of shareholders. As the managers have the effective control of the firm, they have the incentive and the ability to consume benefits that are costly to shareholders. For example, when company has surplus cash, managers may over-invest in negative net present value projects. Agency cost are an implicit cost from the potential interests conflicting between agent and principal and the payment of dividend to shareholder is seen as the effective control to lowering the agency cost of equity by reducing the discretionary funds available to managers (Rozeff, 1982; Easterbrook, 1984; Jensen, 1986; Alli, Khan & Ramirez, 1993). In case of bondholders, shareholders are considered as the agent, there might be conflict occur between shareholders’ and bondholders’ interests. When a firm pay high dividend to shareholders, it reduce debt payments. This action is considered as 14 MBA04029 – TRAN THU PHUONG shareholders expropriating wealth from bondholders, the result of reduced cash flows are not a healthy sign for a bondholder (Jensen & Meckling, 1976). Thus, bondholders prefer to constraint the dividend payments to secure their interests. Conversely, for the same reasons, shareholders prefer high dividend payments (Ang, 1987) [Cited by Kinkki, 2001; Malkawi, Rafferty & Pillai, 2010]. Following Easterbrook (1984), there are two forms of agency costs: (1) The cost of monitoring of managers: Because the number of shareholders is large and the dispersion of ownership structure, it would be wealthier if there were some people monitoring managers on shareholders’ behalf. The collective actions, however, make the monitoring more difficult and the agency problem more severe. The dividend payment can reduce the extent of managers and lower the agency costs (Al-Najjar & Hussainey, 2009) (2) Risk aversion on the part of managers: Easterbrook claimed that, shareholders are well-diversified investors will only be concerned about non-diversifiable risk or in other way we can said that shareholders tend to want risky projects because they have diversified away their systematic risk. Managers, though, often have substantial part of their personal investment tied up in their firm, if the firms do poorly or go bankrupt, managers will lose their jobs. Therefore, managers will be concerned about total risk and they will not invest in risky projects. By altering firm’s mix of projects and its debt-toequity ratio, managers can change the risk of the firm. The lower the ratio of debt-toequity, the lower the chance of bankruptcy. Once again, there will be conflicts between shareholders and bondholders. Shareholders, hence, want high dividend payment to avoid advantage-taking by bondholders just as bondholders want to limit dividend to prevent being taken advantage by shareholders. 15 MBA04029 – TRAN THU PHUONG Easterbrook also showed that dividend could be used to reduce the free cash flow into the hands of managers. He argued that paying high dividend will constrain managers to acquire external financing to raise additional funds. In this case, firm will be under the strict control of investment professionals such as bankers, financial analysts or institutional investors. This suggests that by increasing dividend payment, it increase management scrutiny by outsiders and reduce the freedom of managers. Therefore, shareholders are able to monitor managers at lower cost and minimize any collective action problems. However, increasing dividend payments might force managers to take undesirable actions like increasing firm leverage, which may sometimes increase the riskiness of the firm. Another explanation for why firms pay dividends based on agency theory is given by Jensen (1986). He stated that when firm has excess cash flow, managers tend to using funds in their own wealth instead of shareholders’ best interests. Managers want to enlarge their firm size rather than paying dividends since they expect to increase their compensations or excessive salaries they will gain in comparison with the small firms (Gaver & Gaver, 1993). Thus, extracting the surplus cash by paying dividend will reduce the free cash flow under managers’ control, thereby preventing managers to undertake negative NPV projects. As a result, paying more dividends will reduce the agency costs between managers and shareholders. However, accepting that paying dividend can solve the agency problem, at the same time, shareholder should be will to accept that firm being more indebted and they have to paying higher personal tax rates on dividend. 16 MBA04029 – TRAN THU PHUONG 2.1.1.2.2. Low dividend payout increase stock value Tax-effect hypothesis State the opposite perspective with Bird-in-hand hypothesis, tax-effect hypothesis suggests that low dividend payment decrease the cost of capital and increase the stock price. Back to the perfect capital market assumptions of M&M which assumed that there is no difference in tax treatment between dividends and capital gains, this theory really brings a tough challenge to M&M’s irrelevance hypothesis (1961). Tax, in the real world, is a very important issue that needs to be concerned. Due to the different in tax treatment between corporate tax and personal tax, its existence may have significant impact on dividend policy and the value of the firm. Shareholders may prefer firms to retain their earning to reinvest and then return in form of capital gains with lower tax rate rather than dividends which charge with higher personal tax rate. Besides, dividends are taxed immediately while taxes on capital gains are deferred until the stock is actually sold. Low dividend payments, hence, attract investors who have favorable tax treatment on capital gains. Therefore, a low dividend payout ratio will lower the cost of equity and increases the stock price. Base on the fact that in many countries, dividend as personal income is taxed at higher rate than capital gains. Thus, investors who have to bear high tax rate might require higher pre-tax return to hold stocks with higher dividend yield in compensate for the tax disadvantage of dividend income. The relationship between pre-tax return and dividend yield is the basis concern of tax-effect hypothesis. 17 MBA04029 – TRAN THU PHUONG To test this relationship, Brennan (1970) developed an after-tax version of capital asset pricing model (CAPM). He found out that a stock’s pre-tax returns should be positively and linearly related to its dividend yield and to its systematic risk. It means that stocks have higher pre-tax return also has higher dividend yield to compensate investors for the tax disadvantage of these returns. The suggestion is that, with other things remain the same, stock with higher dividend yield will sell at lower price to uphold the same after tax rate of return. Using Brennan’s model (1970), there were many studies support to his argument such as Litzenberger and Ramaswamy (1979), Blume (1980), Poterba and Summers (1984), Kalay and Michaely (2000). This hypothesis, however, still contain some weakness. Using the same model as Brennan (1970), Black and Scholes (1974) found no evidence of tax effect. They conclude that low or high dividend yield stock has no impact on stock’s return either before or after tax. In addition, Miller and Scholes (1982) debated that positive yield-return relation is due to information effects but not tax effects. [Cited by Kinkki, 2001; Malkawi, Rafferty & Pillai, 2010] Transaction cost theory Transaction cost is the cost incurred when buying or selling securities. As the fact that firm with low transaction cost on equity or debt issuance is more likely to pay high dividend, transaction cost theory is another explanation for why firms pay dividend. Transaction cost may influence different clienteles’ preference toward dividend policy. For small investors such as retirees, income-oriented investors, and so on, who consider dividend as a primary source of income for their consumption needs, high and stable dividend stock might be attractive because the transaction costs associated with 18 MBA04029 – TRAN THU PHUONG selling stock might be significant for such investors. On the other hand, some wealthy investors who don’t consider dividend as the needs of liquidity, low dividend stocks are preferred to avoid the transaction costs (Bishop et al., 2000). The transaction cost theory incurred in making an economic exchange really criticized M&M’s notion of homemade dividend. The existence of such cost in the real world brings a strong argument that dividend policy is not irrelevant. Another consequence of transaction cost when paying dividend is that firm may need to raise external fund such as issue new stock or bond to restore the cash paid out as dividend to meet the firm requirement in a new investment opportunities. The cost of issuing new equity or debt might be significant, hence firms are most likely to retain a high proportion of their earning to invest rather than rely on external source of fund. This argument also explains why firm (in developing or developed capital market) use their retained earnings as the major source of finance (Fazzari, Hubbard & Petersen, 1988). To reduce or avoid such significant cost, firm can lower their dividend pay-out ratio or not paying at all. As a result, a negative relationship is expected between transaction costs and dividend policy. In the researches of Higgins (1972), Cruthchley and Hansen (1989), Alli et al. (1993), they also had the same conclusion. However, in practice, we still see that many firms choose to pay dividend and issuing new equity and debt at the same time. Therefore, other factors also has effect on dividend policy are suggested. 19 MBA04029 – TRAN THU PHUONG 2.1.1.2.3. Other theories of dividend policy Clientele theory Clientele theory suggests that different groups of investors will have different preference about the type of shares to invest in based on the fact that investors have to face different tax treatments for dividend and capital gains, and transaction costs will be incurred when they trade securities. M&M (1961) pointed out that this preference might be impacted by the imperfections of market such as tax regime, transactions costs or government regulations. Therefore, clientele effect might influence a firm’s dividend policy to attract certain clienteles. However, they still maintained their point of view that in a perfect market condition, each clientele is “as good as another”, thus the value of firm is not affected and dividend policy remains irrelevant. The result of the research by Allen, Bernardo and Welch (2000) had brought a significant proof of clientele theory. Their result suggest that clienteles such as low-tax institutional investors tend to be attracted by dividend paying firms because of the institutional charters such as the “prudent man rule”1 that prevent them from investing in non-paying or low-dividend stocks. On the aspect of firms, good quality firms also prefer to pay dividend to attract institutional clienteles because institutional shareholders are better informed than individual investors and have more ability to monitor or detect 1 Prudent man rule: the requirement that a trustee, investment manager of pension funds, treasurer of a city or county, or any fiduciary (a trusted agent) must only invest funds entrusted to him/her as would a person of prudence, i.e. with discretion, care and intelligence. Thus solid "blue chip" securities, secured loans, federally guaranteed mortgages, treasury certificates, and other conservative investments providing a reasonable return are within the prudent man rule. Some states have statutes which list the types of investments allowable under the rule. Unfortunately, the rule is subjective, and some financial managers have put funds into speculative investments to achieve higher rates of return, which has resulted in bankruptcy and disaster as in the case of Orange County, California (1994). Definition from http://legal-dictionary.thefreedictionary.com/prudent+man+rule 20 MBA04029 – TRAN THU PHUONG firm quality, which boosts equity value to a higher level than that of non (or less) dividend paying firms. They conclude that “…these clientele effects are the very reason for the presence of dividends..” Signaling theory Signaling theory was developed by Bhattacharya (1979), Miller and Rock (1985) and John and Williams (1985) [Cited by Kinkki, 2001; Malkawi, Rafferty & Pillai, 2010]. This theory is based on the fact that, there always is an existence of asymmetric information between the insiders (such as managers and directors) and the outsiders (such as shareholders and bondholders). Managers usually have more information about the firm’s performance and future prospects than which is outsiders possessed. These gaps of information between managers and investors may cause the market makes a wrong estimation about firm’s true intrinsic value. If so, share price may not always be an accurate measurement of the firm’s value, hence, the stocks might be traded undervalue. To solve out this problem, managers tend to share their internal information to the market so they can estimate more accurately the true value of the firm. Because of this asymmetric information, the outsiders have to assess the market value of the securities based on the actual cash flows (Baskin & Miranti, 1997). For this reason, dividend seems to be a useful tool for managers to convey their private information to investors. According to signaling theory, by choosing a dividend pay-out ratio, managers send implicit information about firm’s performance. Usually, announcements of increasing dividend signal positive information about firm’s profitability, stability and future prospect. In contrast, a dividend decrease is considered as a negative signal about 21 MBA04029 – TRAN THU PHUONG future earning prospect and produces a decrease in share price. Therefore, managers should firstly well estimate about firm’s prospects before share this information to the market. Secondly, the internal information of the firm should be true. If not, a poor performance firms can not maintain its dividend payment in the future. It has to cut down the dividend soon or late, and this action, as we mention before, sends a bad signal to investors. This theoretical point was also supported by Lintner (1956), Lipson, Maquieira and Megginson (1998), unless managers believe in the long-run sustainable earning, they don’t tend to raise dividend [Cited by Malkawi, Rafferty & Pillai, 2010]. This is also known as the “dividend-smoothing hypothesis”. Hence, if these two conditions are fulfilled, the market can rely on the signal and should react favorably to the increasing of dividend and unfavorably otherwise (Ang, 1987, Koch & Shenoy, 1999) [Cited by Malkawi, Rafferty & Pillai, 2010]. Even though signaling theory may sound sensibly, sometime dividend policy can also send a false signal to the market. When a firm reduces its dividend payment, as a result, market will see that as a negative signal about firm’s performance and its future prospect. However, this firm in fact decides to retain its earning to invest in a new project that would increase its future value. The case of FPL Group, the parent company of Florida Power and Light Company is a typical case about this market mistaken. Soter, Brigham and Eavanson (1996), according to this case show that, market actually did respond negatively with the dividend cut down and the share price of FPL dropped [Cited by Malkawi, Rafferty & Pillai, 2010]. However, after realizing the reason for the dividend reduction, its stock price recovered. This case not only showed the market false about signaling but also the positive relationship between signaling effects and dividend policy. 22 MBA04029 – TRAN THU PHUONG There are many studies supporting signaling theories such as studies of Petit (1972), Aharony and Swary (1980), Woolridge (1983), Asquith and Mullins (1983, 1986), Kalay and Lowenstein (1985), Healy and Palepu (1988), Michaely, Thaler and Womack (1995). They found that market reacts positively (increase) to dividend initiations and negatively (decrease) to dividend omissions. Recently, there are some findings in favor of signaling theory such as Nissim and Ziv (2001), Travlos, Trigeorgis and Vafeas (2001) [Cited by Kinkki, 2001; Malkawi, Rafferty & Pillai, 2010]. However, some studies also showed that dividend changes may not a good assessment of firm’s future. Watts (1973), Gonedes (1978) and Benartzi et al. (1997) found that dividend changes reflected the past growth of firm’s earning rather than signal the change in future earnings [Cited by Kinkki, 2001]. 2.1.2. Effect of Ownership concentration on dividend policy In corporate policies, the level and the type of ownership concentration is very significance as they can use their rights (for example voting right) to influence the important decisions of the firm such as dividend policy. Ownership concentration refers to the amount of stocks held by large shareholders. Large shareholders or blockshareholders are investors who own equal or greater than 5% of a firm’s stocks (Ullah, Fida and Khan, 2012; T. X. T. Nguyen, 2010). 2.1.2.1. Higher the ownership concentration, higher the dividend payment Jensen and Meckling (1976), Anwar and Tabassum (2011) supported for the viewpoint that large owner have stronger incentive and more opportunities to monitor managers than small shareholders. Therefore, in case those large shareholders are not 23 MBA04029 – TRAN THU PHUONG insiders, to set managers under their control and act on shareholders interest, they may force the firm to pay high dividend. Claessens and Djankov (1999) claimed that the high concentration of owners reduce managers’ intentions to invest in low return project, hence more cash flows can be pay-out as dividends. Kouki and Guizani (2009) showed that Tunisian firms having high level of ownership concentration pay-out more dividends. Ramli (2010) with the evidence of Malaysian listed companies found a positive relationship between ownership concentration and dividend payment because controlling shareholders have greater influence over the dividend payout policy. 2.1.2.2. Higher the ownership concentration, lower the dividend payment On the other hand, there are many studies which had been conducted to define this relationship and had the conclusion that the higher the level of ownership concentration, the lower the dividend pay-out ratio. Based on agency cost theory, more concentration in ownership reduces agency conflicts. Hence, high dividend payment for the purpose of controlling managers’ action is not necessary. In fact, several studies suggest that firms with large concentrated ownership have low dividend pay-out ratio. According to Shleifer and Vishny (1986), concentrated ownership creates the incentives for large shareholders to control the firm’s management with the purpose of protecting their investment. Ownership concentration controls the free-rider problem 2 associated 2 Free-rider problem (Definition from: http://www.investopedia.com/terms/f/free_rider_problem.asp) (1) In economics, the free rider problem refers to a situation where some individuals in a population either consume more than their fair share of a common resource, or pay less than their fair share of the cost of a common resource. (2) In the context of a brokerage firm, a free rider problem refers to a situation where a client has been allowed to purchase shares without actually paying for them, and then subsequently sells the shares (ideally for profit). 24 MBA04029 – TRAN THU PHUONG with ownership dispersion (dispersed ownership refers to large number of small shareholders who own less than 5% of a firm’s stock). In addition, because large shareholders play an important role in firm’s decision, managers will also give them preferences. Farinha (2003), Chen et al. (2005) showed that firms in US, UK and Hong Kong respectively, ownership concentration (especially concentrated insider ownership) have the negative effect on dividend policy. When interests of shareholders and managers are close, less dividend are paid out. The result of the research by Maury and Pajuste (2002), Gugler and Yutoglu (2003) showed that firms with the existence of high ownership concentration tend to pay lower dividends. Most recently, Harada and Nguyen in their studies about "Ownership concentration and dividend policy in Japan" in 2011 also showed the negative effect of ownership concentration on dividend payment. 2.2. Previous empirical studies 2.2.1. Abroad In general, dividend policy is still an unsolvable issue and many researches have been conducted to understand which determinant effect on dividend decision, how dividend policy effect on firm value, and why firm choose that payout ratio. In particular, there also are plenty of studies to prove the correlation of ownership concentration and dividend policy. Some recently studies will be briefly described in this section. Khan (2006) presented an analysis of 330 large quoted firms on UK stock exchange from 1985 to 1997 to figure out the relationship between ownership structure 25 MBA04029 – TRAN THU PHUONG and dividend policy. An econometric model of company dividend was used analyze the relationship: Di,t = α + βΠi,t + γSi,t + φLevi,t + θOi,t-1 + ui,t ui,t = Si,t where ηi + υi,t In which: Di,t is the level of gross dividend paid by firm i in period t Si,t is sales Πi,t is net profits Levi,t is financial leverage Oi,t-1 is the relevant ownership variable, it is measured towards the end of the previous financial year. is the composite error term ηi is the unobserved firm specific effects υi,t is the idiosyncratic shock The result showed a negative effect of ownership concentration on dividend policy. Renneboog and Trojanowski (2005) also came up with the same conclusion [Cited by Khan, 2006]. Further more, Khan claimed that the identity of shareholders also play an important role, a positive relationship between dividend and insurance companies ownership, and negative with individual ownership. Harada and Nguyen (2011) tested the effect of Ownership concentration on dividend policy in Japanese firms. They examined listed firms on Tokyo Stock Exchange from April 1995 to March 2002. The total observations are 6397. Two proxies 26 MBA04029 – TRAN THU PHUONG were used to evaluated dividend policy are dividend pay-out (PAYOUT) and dividend yield (DIVEQTY). PAYOUT is the total dividend payments to operating income and DIVEQTY is measure by dividends to book value of equity. Ownership concentration was calculated by summing the squared percentage of shares controlled by the five largest shareholders. Control variables are firm size (SIZE), Profitability (ROA), current growth (GROW), growth opportunities (Q), financial leverage (DEBT). Dummy variables consist of year dummies, DLOSS dummy disclose that ROA is negative, and finally KD dummies are business group dummies. A logit regression was used to analyze data. The result of this study is a negative relationship between ownership concentration and dividend payment. Harada and Nguyen also found that firms with dominant shareholders reluctant to increase dividends even when profitability increases and tend to ignore dividend when investment opportunities improve. However, when debt is high, they increase dividend. Mirzaei (2012) conducted a research “A survey on the relationship between ownership structure and dividend policy in Tehran stock exchange”. The main purpose in this article is to study the relationship between Ownership Structure and Dividend Policy of Companies Listed at Tehran Stock Exchange. The ownership structure as independent variables were divided to 4 categories: INSO: institution ownership, JO: joint ownership, MO: managerial ownership and OC: ownership concentration. Also the effect of profit growth rate (G) and dividend policy variables (Di-1) of the previous year was controlled and multiple linear regressions were used. The model was used in this study is the multiple regression patterns which are commonly show as follow: 27 MBA04029 – TRAN THU PHUONG Yi = β0 + β1INSO + β2G + β3Di-1 + ε (1) Yi = β0 + β1JO + β2G + β3Di-1 + ε (2) Yi = β0 + β1MO + β2G + β3Di-1 + ε (3) Yi = β0 + β1OC + β2G + β3Di-1 + ε (4) H0: β1 = β2 = 0 H1: β1 ≠ β2 = 0 If the presupposition H0 disapproved, H1 will be accepted. This means that, there is a meaningful relationship between dependent and independent variables being tested. The findings of studying 88 companies during the time period between 2004 and 2009 showed that Joint ownership affects the ratio of dividends of firms accepted in Tehran Stock Exchange positively and Institution ownership affects it negatively. However, there are some reasons which show there does not meaningful relationship between Management Ownership and the amount of Ownership Concentration with dividend policy. Thanatawee (2013) worked on the research “Ownership Structure and Dividend Policy: Evidence from Thailand”. This paper examines the relationship between ownership structure and dividend policy in Thailand in a sample of 1,927 observations over the period 2002-2010. To examine the relation between ownership structure and dividend policy, the following regression is estimated: DPR = α + β1OwnershipStructure + β2FirmCharacteristics + ε 28 MBA04029 – TRAN THU PHUONG Which variable were defined as: (Source: Thanatawee, 2013) Figure 2.1 Definition of Variable. The ownership variable TOP and TOP5 indicate the ownership concentration. The results show that Thai firms are more likely to pay dividends when they have higher ownership concentration and firms pay higher dividends when the largest shareholder, especially an institution, holds more percentage of shares. It is also found that both the likelihood of paying dividends and the magnitude of dividend payouts increase (decrease) with higher institutional (individual) ownership, the findings mostly driven by the ownership of domestic investors. 29 MBA04029 – TRAN THU PHUONG 2.2.2. Vietnam In Vietnam, there are only a few researches studying about dividend policy. These researches mostly concentrate on the effect of dividend policy to firm performance and what determinants as firm characteristic effect on payout ratio, the effect of ownership structure on dividend policy is only grazed. D. L. Nguyen (2008) had a study on “Dividend policy of listed companies in Vietnam stock market”.150 listed companies in HOSE from 2002 - 2007 and 133 listed companies in HASTC from 2005 - 2007 were used to collect data. This research mainly bring out an over view of dividend policy in Vietnam. Follow his conclusion, the ability to pay dividend, a stable payout ratio and an increasing dividend payment signal a potential growth in future of a company. Dividend can bring to investor the sense of true value of a company and dividend policy is considered to maximize firm value. He claimed that dividend payment in listed firm in Vietnam stock market is quite high compare with national market. This may create disadvantage to firm even though that firm is on high growth rate. Therefore, the choosing of high payout rate must be a signal for a wealthy firm and high growth rate to attract investors. In the future, he suggested when Vietnam market grows up, investors have a more judicious view about dividend importance, then the tax system work, and so firms have to choose a more suitable dividend policy. T. X. T. Nguyen (2010) conducted a research on 116 listed firms on HOSE and HNX in 2009 in Vietnam. The purpose of this study is to examine the determinants of dividend policy in Vietnam. Firms’ characteristics and corporate governance were used 30 MBA04029 – TRAN THU PHUONG to test the effect on dividend pay-out. The author used multiple regressions to analyze data: DPS = a + b1ROA + b2LoA + b3DtA + b4Cur + b5TANGtA + b6MBV + b7BETA + b8MOdum + b9NuLS + b10INDtD Where: Dependent variable: DPS is dividend per share Independent variables: ROA is Return on Assets LoA is Logarithm of assets that measure firm size DtA is total debt to total assets ratio Cur is current ratio measuring liquidity TANGtA is total tangible assets to total assets ratio MBV is the ratio of market value of equity to book value of equity BETA is Beta coefficient standing for business risk MOdum is the proportion of equity being owned by directors NuLS is number of large shareholders holding 5% of stocks and over, stand for ownership concentration INDtD is the ratio of independent non-executive directors to total directors showing the board composition Industry types (INTdum) and audit quality (AuSdum) were used as dummy variables. 31 MBA04029 – TRAN THU PHUONG The result was summarized in the table below: Table 2.1 Correlation relationship results between dividend policy and independent variables in Vietnam firms Variable Previous empirical evidence from other authors Result from this paper ROA (Profitability) Positive Positive LoA (Firm size) Positive/Negative No relation DtA (Debt ratio) Positive/Negative/No relation No relation Cur (Liquidity) Positive/Negative/No relation No relation TANGtA (Asset structure) Positive/Negative No relation INTdum (Industry type) Have relation Have relation MBV (Growth opportunities) Negative/No relation No relation BETA (Business risk) Negative Negative Modum (Management ownership) Negative No relation NuLS (Ownership concentration) Positive/Negative/No relation No relation INDtD (Board of directors) Positive/Negative No relation AuSdum (Audit quality) Positive Positive (Source: from T. X. T. Nguyen, 2010) Seen there is lack of studies has been examined on dividend policy in Vietnam, we need to conduct more research in this issue. 32 MBA04029 – TRAN THU PHUONG Chapter 3 – Research Methodology To develop and employ theories and hypotheses, quantitative research method is applied in this study. The quantitative analysis of this research will be conducted by using EVIEW 6.0. This chapter show how the researcher collects data, the definition of all variables and the hypotheses of research models. 3.1. Data Collection The data source is collected from securities website such as hsx.vn, cophieu68.com, cafef.vn Information about shareholder based on annual reports, shareholders structure on website cafef.vn and cophieu68.com, and the large shareholders and insider trade on cafef.vn. Data of dividend payment were based on annual reports and Resolutions of Annual Meeting of Shareholders Data for control variables (characteristic of the firms) were collected form financial statement of listed companies in HOSE in 2011 and 2012. These reports were audited. Size of the data: From 294 listed companies in HOSE, 15 companies in financial, banking and insurance industries are excluded because of the industry’s special characteristic. The data is collected in 2 year 2011 and 2012 therefore, only companies that listed in both years are observed and also companies without enough information 33 MBA04029 – TRAN THU PHUONG about dividend payment are eliminated. The number of companies are used to test on this study is 154 listed companies and the total observation is 308 for 2 years. 3.2. Research Model 3.2.1. Variable definition and empirical studies 3.2.1.1. Dependent variable The dependent variable is the company’s dividend policy. This research uses 2 ratios to represent for cash dividend policy is dividend pay-out ratio (DPR) (Hommel, 2011; Mirzaei, 2012; Thanatawee, 2013) and dividend yield (DIVY) (Harada & Nguyen, 2011). DIVY = cash dividend / par value DPR = cash dividend per share / earning per share 3.2.1.2. Independent variable The independent variables in this research are ownership concentration of Vietnam firms. According to Mirzaei (2012) and Thanatawee (2013), the percentage of first controlling stock – the largest shareholder (TOP1) is used to measure the ownership concentration. Following Khan (2006), Harada and Nguyen (2011) and Thanatawee (2013) the percentage of shares owned by five largest shareholders (TOP5) is calculated as proxy for ownership concentration. The less amount of this percentage (TOP1 and TOP5) shows the dispersion of ownership. 34 MBA04029 – TRAN THU PHUONG 3.2.1.3. Control variable Seven characteristics of firm are using as control variables: ROA: Return on assets, the ratio of operating income to total assets, is used to control for firm’s profitability. Firms with higher profitability tend to pay higher dividends than firms with lower profitability. Therefore, a positive relationship between ROA and dividends is predicted. FCF: FCF = Free Cash Flow to Firm / Total Assets. Free cash flow to firm (FCFF) was divided by total assets to eliminate the size effect. The relationship between FCF and dividends implies agency cost theory (Jensen, 1986; Lee and Xiao, 2003) and signaling theory (La Porta et al., 2001; Faccio et al., 2002) [Cited by Bradford, Chen and Zhu (2005)]. If dividends are used to control agency problems, firms with higher free cash flows tend to pay more dividends. On the other hand, if managers don’t act on shareholders’ interest, a negative relationship between free cash flows and dividends is expected. FCF was calculated by the equation: SIZE: Firm size is the logarithm of total assets. Large firms tend to be more mature and have higher free cash flows, therefore tend to have high dividends. A positive relationship between firm size and dividends is expected. AGE: Firm age is the logarithm of the years count from when firm establish. Firm with long time operating tend to be more mature and have stable growth, hence a positive relationship between firm age and dividends is expected. 35 MBA04029 – TRAN THU PHUONG FGRO: According to Thanatawee (2013), market-to-book ratio is used as a proxy for future investment opportunities, when firm is growing, it needs capital to reinvest thus tend to pay fewer dividends. A negative relationship between growth and dividends is expected because firms with higher growth opportunities are more likely to retain cash for future investments. LEVE: Leverage is total debt divided by book value of total assets. Since firms with higher debt are more likely to be financially constrained and should be less able to pay dividends, a negative relationship between leverage and dividend payments is expected accordingly. RETE: the ratio of retained earnings to book value of equity. According to DeAngelo and Stulz (2006), Denis and Osobov (2008), the ratio of retained earnings to book value of equity has a significant positive relationship with corporate dividend policy in many developed countries [Cited by Thanatawee, 2013]. 3.2.1.4. Dummy variable Years and ownership concentrations are used as dummy variables. These types of ownership concentrations are separated depend on Vietnam firms’ owner characteristic and based on legal framework. DYEAR: DYEAR = 0 if data was collected in 2011, DYEAR = 1 if data was collected in 2012 DGOV1: DGOV1 = 1 if firms under government control. According to the law on state owned enterprise of Vietnam, chapter I, article 3, clause 5 and clause 7, government or state-owned enterprise that hold more than 50% of share capital of a firm has control right on that firm. 36 MBA04029 – TRAN THU PHUONG DGOV2: DGOV2 = 1 if firms with government holding from 30% to 50% of total shares, the remaining shares are held by other owners (foreign investors, institutions, managers, family owners,…) and these investors held less than 30% of total shares. DBAL: DBAL = 1 if firms are under the influence of both government and foreign investor. The ownership structure of the firm is: government own more than 30% of total share and foreign investor own more than 30% of total share. 30% of total share is choose as milestone because the importance of shareholders is indicated by the fact that this shareholder now controls over 30% of the shares in company (http://www.openlearningworld.com) DFOR: DFOR = 1 if firms that has more than 30% of shares is held by foreign investors and no other investors own more than 30% of total shares. According to the decision about the proportion of foreign participation in Vietnamese stock market of Prime Minister, article 1a, Organizations and foreign individuals is only allowed to hold a maximum of 49% of the total number of shares of a listed company, registered for trading on the Stock Exchange Center. However, in the observation companies, there is one firm (TYA – Vietnam TAYA Electric Wire and Cable Joint Stock Company) that has foreign investor held more than 60% of shares in both year 2011 and 2012. Non-government controlling firms, non-foreign concentrated firms and other ownership concentration types (institution, managers, family holders,…) or dispersed firms are considered as basis category. 37 MBA04029 – TRAN THU PHUONG Table 3.1 Definitions of variables Variables Definitions Dependent variables DIVY Dividend yield (cash dividend/par value) DPR Dividend pay out ratio (Cash dividend per share/earning per share) Independent variables TOP1 Percent of shares held by the largest shareholder TOP5 Percent of shares held by the 5 largest shareholders Control variables ROA Return on assets (operating income/total assets) FCF FCFF/total assets SIZE Firm size (logarithm of total assets) AGE Firm age (logarithm of firm age since establish) FGRO Firm growth rate (market to book ratio of equity) LEVE Leverage (total debt/book value of total assets) RETE Retained earning to equity (retained earnings/book value of equity) Dummy variables DYEAR Year dummy (2011: DYEAR = 0, 2012: DYEAR = 1) DGVO1 Firms with government held >50% of total shares, DGOV1 = 1 DGOV2 DBAL DFOR Firms with government held from 30% to 50%, no other investors held more than 30% of shares, DGOV2 = 1 Firms with both government and foreign investors held more than 30%, no other investors held more than 30% of shares, DBAL = 1 Firms with foreign investors held more than 30%, no other investors held more than 30% of shares, DFOR = 1 3.2.2. Model and hypothesis The statistical methods used in this study are OLS and Tobit analysis model and EVIEW 6.0 software is used to run multiple liner regression. There are 4 multiple regression models are shown as follows: 38 MBA04029 – TRAN THU PHUONG (1) DPR = β0 + β1TOP1 + β2ROA + β3FCF + β4SIZE + β5AGE + β6FGRO + β7LEVE + β8RETE + β9DYEAR + β10DGOV1 + β11DGOV2 + β12DBAL + β13DFOR + ε (2) DPR = β0 + β1TOP5 + β2ROA + β3FCF + β4SIZE + β5AGE + β6FGRO + β7LEVE + β8RETE + β9DYEAR + β10DGOV1 + β11DGOV2 + β12DBAL + β13DFOR + ε (3) DIVY = β0 + β1TOP1 + β2ROA + β3FCF + β4SIZE + β5AGE + β6FGRO + β7LEVE + β8RETE + β9DYEAR + β10DGOV1 + β11DGOV2 + β12DBAL + β13DFOR + ε (4) DIVY = β0 + β1TOP5 + β2ROA + β3FCF + β4SIZE + β5AGE + β6FGRO + β7LEVE + β8RETE + β9DYEAR + β10DGOV1 + β11DGOV2 + β12DBAL + β13DFOR + ε Hypothesis 1: There is correlation between ownership concentration and dividend policy (β1≠0). Dividend policy affects directly on investors’ interest and by voting right, shareholders could effort managers and decide the dividend policy. Therefore, the relationship between owners and dividend policy is almost obvious. Besides, dividend is used as a controlling factor of shareholders to manager. There are two opposite views of this relationship between ownership concentration and dividend payout ratio. According to agency cost theory, if firm has the dispersed ownership structure, there is a high potential of agency problem, and hence, high dividend is paid out as a high cost of monitoring. In such case, the more dispersed the ownership structure, the higher dividend payout ratio is expected. Thus, in general a 39 MBA04029 – TRAN THU PHUONG negative correlation between ownership concentration and dividend policy is expected (Chen & Dhiensiri, 2009). The second opinion state by Jensen and Meckling (1976) argue that, the owners who hold large portion of the company’s capital will have more right and stronger effect on managers to force manager act on their benefit. Therefore, a significant correlation between ownership concentration and dividend payment is expected. According to the clientele effect, different groups of investors desire different levels of dividends. Some groups (wealthy individuals, for example) have an incentive to pursue low-payout (or zero-payout) stocks, other groups (corporations, for example) have an incentive to pursue high-payout stocks. Hence, we came up with hypothesis 2. Hypothesis 2: There are differences in the dividend policy among different types of ownership concentration (β10 ≠ β11 ≠ β12 ≠ β13) In the issue of ownership concentration and dividend policy relationship, researcher also tried to clarify the different impacts of different types of investors on dividend policy. There are plenty types of ownership concentration has been used by previous studies such as: government, family, corporation, institution (financial, insurance, …), insider (general managers or directors), foreign investors (foreign institutional shareholders or foreign individual share holders), … By the scope and limitation of this study, the researcher only concentrated in two main types of shareholders: government, foreign and the mix up of government and foreign investors. Some empirical results, which the researcher found, of the effect of government and foreign are shown in the table below: 40 MBA04029 – TRAN THU PHUONG Table 3.2 Empirical result of the effect of government and foreign investors on dividend policy Relationship Supporting author Government Positive Evidence from Gugle (2003) Austria Bradford, Chen and Zhu (2005) China Wang, Manry and Wandler (2011) China Sulong and Nor (2008) Malaysia D. L. Nguyen (2008) Vietnam Dahlquist and Robertsson (2001) Sweden Douglas and Jin (2006) Korea Sulong and Nor (2008) Malaysia D. L. Nguyen (2008) Vietnam Chai (2010) Korea Ullah, Fida and Khan (2012) Pakistan Al-Nawaiseh (2013) Jordan Kumar (2003) India Negative Foreign Positive No relation According to signaling theory, when a firm wants to inform to the market that it is performing well and getting high profit, it will pay higher dividend. In case of Vietnam market, firms with high portion of government holding usually are good firms and are the key companies, and to confirm their position in the market, these firms will pay high dividend (D. L. Nguyen, 2008). Beside, following Jensen and Meckling (1976) with the opposite views with agency cost, they argue that large owners have stronger power of influences to managers than small shareholder, hence, they can force managers to pay high dividend to reduce cash on hand of mangers. Moreover, based on the practical of Vietnam securities market, firms with high percent of government as their ownership usually pay high dividend. Following one article on the website 41 MBA04029 – TRAN THU PHUONG http://kinhdoanh.vnexpress.net/tin-tuc/chung-khoan/co-dong-nha-nuoc-huong-co-tucbac-ty-2811106.html (June 7th, 2013), dividend to government shareholders is up to billions per year. This is an impressive number. Even though, according to an article on the website http://www.saigondautu.com.vn/Pages/20130611/Nha-nuoc-bo-quen-co-tucngan-ti.aspx (June 11th, 2013), government did not withdraw dividend out of the firms, positive relationship between ownership concentrations in firms with high portion of government shareholding with dividend policy is expected. For firms with high percent of ownership are foreign investors, to control the action of managers, they usually prefer dividend paying firms (Douglas & Jin, 2006). The evidence is that when collected data, the research observed that firms with foreign investors as their large holder pay dividend frequently. However, when invest in an emerging market, foreign investors usually aim to growth firms and wish to keep their money within the firm so it could growth fast. Therefore, a negative effect of foreign investors with dividend policy is expected. 42 MBA04029 – TRAN THU PHUONG Chapter 4 – Data analysis After collecting raw data of listed companies, using excel to calculate variables then input these data to EVIEW 6.0 under dated balanced panel data structure to analyze. The result of descriptive statistic, Pearson correlation, Pooled OLS, REM and Tobit regression are shown in this section. Some significant coefficients are found in the regression models. 4.1. Descriptive Statistics Table 4.1 reports the classified of the sample into 5 types of ownership concentration. As the result show on the table, the ownership structure of listed firms on HOSE was stable. In 2012, BMP (Binh Minh Plastics Joint Stock Company) changed its ownership structure to concentration by foreign owners and KHA (Khan Hoi Import Export Joint Stock Company) changed from group OTHER to group GOV2. There are 40 companies out of 154 companies (about 26%) in the sample under the control of government (group DGOV1), 8% of the sample companies have 30% to 50% of shares held by government or foreign owners (group DGOV2 and DFOR). Only 4 firms in the total 154 firms have the approximate amount of share held by government and foreign owners (group DBAL). 54.5% companies don’t satisfy the condition of 4 groups above are considered as dispersed companies or the concentrated by individuals or organization aren’t belong to government and foreign owners (group OTHER). The stability in ownership concentration of listed firms on HOSE is also expressed through their TOP1 and TOP5 ratio. The majority owners are reluctant to buy or sell their shares. 43 MBA04029 – TRAN THU PHUONG Table 4.1 Ownership concentration types of the sample firms. Year 2011 2012 Total Obs. 154 154 308 DGOV1 41 41 80 DGOV2 12 13 27 DBAL 4 4 8 DFOR 12 13 25 OTHER 85 83 168 Table 4.2 presents the descriptive statistic of all variables used in the analysis. The table reports the mean, median, maximum, standard deviation and the number of observation in two year 2011 and 2012 for each dependent and independent variables. The average dividend pay-out ratio (DPS/EPS) is 0.58 which is significant high compare with 0.47 for Thai firms in the research of Thanatawee (2013) and 0.33 for Japanese firms reported by Harada and Nguyen (2011). It means that Vietnamese firms tend to pay high percentage of earnings to their shareholders in dividend. The maximum ratio of DPR 3.57 presents that some company pay dividend even much higher than its earning. The average dividend yield (dividend per share / par value) equal 0.17. This number, though, still not presents a low ratio. The maximum DIVY is remarkable. The dividend yield of NNC is 70% in both years 2011 and 2012. According to the mean of TOP5 56.3% and 64% of observations have TOP5 ratio higher than 50% and 91.5% of observations have TOP5 ratio higher than 30%, we can conclude that Vietnamese firms are highly concentrated. 44 MBA04029 – TRAN THU PHUONG Table 4.2 Descriptive statistic of the sample firms DPR DIVY TOP1 TOP5 ROA FCF SIZE AGE FGRO LEVE RETE Mean Median 0.5754 0.1734 0.3539 0.5628 0.1087 0.0665 13.7657 1.2487 1.1643 0.4846 0.1789 0.5450 0.1500 0.3512 0.5672 0.0769 0.0658 13.6250 1.2800 0.8600 0.5000 0.1700 Maximum Minimum 3.5700 0.7000 0.7880 0.9732 1.7450 1.0431 16.8000 2.0200 9.0200 4.7100 0.5700 0.0000 0.0000 0.0349 0.0102 -0.0340 -0.4062 11.4800 0.4800 -0.0800 0.0000 -0.2300 Std. Dev. 0.4590 0.1251 0.1821 0.1886 0.1328 0.1602 1.0777 0.3069 1.0746 0.3218 0.1191 Obs. 308 308 308 308 308 308 308 308 308 308 308 4.2. Analysis of the results 4.2.1. Pearson Correlation Table 4.3 shows the result of Pearson Correlation under the controlling of firm characteristics (ROA, FCF, SIZE, AGE, FGRO, LEVE, and RETE). According to this method, ownership concentration has significant negative correlation on DIVY. 45 MBA04029 – TRAN THU PHUONG Table 4.3 Partial covariance analysis Partial Covariance Analysis: Ordinary Sample: 2011 2012 Included observations: 308 Partial analysis controlling for: ROA FCF SIZE AGE FGRO LEVE RETE Correlation Probability DPR DPR 1.000000 ----- DIVY TOP1 DIVY 0.271243 0.0000 1.000000 ----- TOP1 -0.036579 0.5273 -0.125367 0.0297 1.000000 ----- TOP5 0.011574 0.8415 -0.160573 0.0052 0.704590 0.0000 TOP5 1.000000 ----- Table 4.4 represents the Pearson correlation results for pair of variables. No significant evidences are found on the relationship between ownership concentration and dividend policy. ROA and RETE have significant and positive correlation with both DPR and DIVY. No other significant relations are found between firms’ characteristic and DPR. FCF, AGE, FGRO also have positive and reliable relationship with DIVY. LEVE is the only facto has significantly negative correlation with DIVY. The findings on ROA, LEVE and FGRO are in line with T. X. T. Nguyen (2010). Her Pearson test also has the outcome of no significant relationship between TOP5 and DIVY. However, her conclusion of no significant correlation between ownership concentration and dividend policy was not strong enough when she only conducted Pearson Correlation test. 46 MBA04029 – TRAN THU PHUONG Table 4.4 Pearson Correlation Covariance Analysis: Ordinary Sample: 2011 2012 Included observations: 308 Correlation Probability DPR DPR 1.000000 ----- DIVY TOP1 TOP5 ROA FCF SIZE AGE FGRO LEVE DIVY 0.107072 0.0605 1.000000 ----- TOP1 -0.041825 0.4646 -0.035428 0.5356 1.000000 ----- TOP5 -0.002970 0.9586 -0.019515 0.7330 0.711237 0.0000 1.000000 ----- ROA -0.116860 0.0404 0.545041 0.0000 0.071882 0.2084 0.107536 0.0594 1.000000 ----- FCF -0.038536 0.5004 0.269269 0.0000 0.058788 0.3038 0.127690 0.0250 0.461304 0.0000 1.000000 ----- SIZE -0.018648 0.7445 -0.062228 0.2763 0.018193 0.7505 0.005216 0.9274 -0.208411 0.0002 -0.186679 0.0010 1.000000 ----- AGE -0.001657 0.9769 0.174155 0.0022 -0.157465 0.0056 -0.086105 0.1316 0.150889 0.0080 0.023014 0.6875 -0.085122 0.1361 1.000000 ----- FGRO -0.084076 0.1410 0.346691 0.0000 -0.007184 0.9001 0.059093 0.3012 0.487261 0.0000 0.133091 0.0195 0.045898 0.4222 0.167491 0.0032 1.000000 ----- LEVE -0.014962 0.7937 -0.220958 0.0001 -0.048573 0.3956 -0.067185 0.2397 0.253222 0.0000 0.128927 0.0236 0.144207 0.0113 -0.013934 0.8076 -0.071014 0.2139 1.000000 ----- RETE -0.147379 0.0096 0.383281 0.0000 0.001532 0.9786 0.046469 0.4164 0.325291 0.0000 0.091388 0.1094 0.151903 0.0076 -0.012316 0.8296 0.289124 0.0000 -0.094403 0.0982 RETE 1.000000 ----- 47 MBA04029 – TRAN THU PHUONG 4.2.2. Pooled OLS and Random Effect Model (REM) Because all 4 models used in this research are included dummy variables, fixed effect model could not apply since this effect will eliminate these dummies. Pooled OLS and random effect model will also be taken into consideration. The Pooled OLS method assumes that there is no autocorrelation; and assumes there is neither significant cross-sections nor significant period effects. We could pool all of the data and run an ordinary least squares (OLS) regression. Those assumptions could hardly be met in reality. However the advantage of this method is its simplicity and the result can be used for reference. Table 4.5 and 4.6 show the result of 4 model when run regressions with Pooled OLS and REM. 48 MBA04029 – TRAN THU PHUONG Table 4.5 Pooled OLS Method: Pooled Least Squares Sample: 2011 2012 Included observations: 2 Cross-sections included: 154 Total pool (balanced) observations: 308 Variable C TOP1 TOP5 ROA FCF SIZE AGE FGRO LEVE RETE DYEAR DGOV1 DGOV2 DBAL DFOR R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Model 1 DPR 0.744520* -0.307513 Model 2 DPR 0.680863* Model 3 DIVY -0.109253 -0.090900** Model 4 DIVY -0.097171 -0.219779 0.023423 0.004316 -0.010366 -0.001904 -0.029836 -0.496577** -0.021016 0.112320 0.090168 0.014724 -0.072228 0.010823 -0.276794 0.034660 -0.001193 0.028582 -0.002729 -0.012649 -0.460145* -0.025896 0.019681 0.041510 -0.033205 -0.074996 0.605057*** 0.057156 0.019291*** 0.040884** -0.002767 -0.160211*** 0.121840** -0.016687 0.009313 0.009604 -0.063903* -0.067878*** -0.070672** 0.600985*** 0.064466* 0.018573*** 0.046501*** -0.002621 -0.159309*** 0.129162*** -0.015661 -0.005764 0.007075 -0.072985** -0.063291*** 0.038305 -0.004219 0.459952 62.19747 -190.6661 0.900788 0.552694 0.031500 -0.011325 0.461577 62.63759 -191.7520 0.735555 0.727480 0.516622 0.495248 0.088847 2.320773 315.7497 24.17076 0.000000 0.517563 0.496231 0.088760 2.316253 316.0498 24.26204 0.000000 “*, **, ***” denote statistically significant at the 10%, 5% and 1% levels respectively. 49 MBA04029 – TRAN THU PHUONG Table 4.6 Random effect model Method: Panel EGLS (Cross-section random effects) Sample: 2011 2012 Cross-sections included: 154 Total panel (balanced) observations: 308 Variable C TOP1 TOP5 ROA FCF SIZE AGE FGRO LEVE RETE DYEAR DGOV1 DGOV2 DBAL DFOR Model 1 DPR 0.754161* -0.310909 -0.178059 -0.024786 0.003890 -0.012579 -0.005753 -0.019981 -0.514332* -0.020496 0.114798 0.091821 0.015355 -0.065469 Model 2 DPR 0.687667 0.015062 -0.235492 -0.014416 -0.001688 0.026994 -0.006411 -0.002149 -0.479374* -0.025595 0.020469 0.042206 -0.033814 -0.068730 Model 3 DIVY -0.126046 -0.087571* Model 4 DIVY -0.117763 0.571592*** 0.041389 0.021284*** 0.039197* -0.001332 -0.177966*** 0.122790** -0.016342** 0.010659 0.010629 -0.047098 -0.059227** -0.062455* 0.571674*** 0.043308 0.020653*** 0.044832** -0.001594 -0.176924*** 0.128093** -0.015483** -0.004691 0.007400 -0.056136 -0.054505** 0.439537 0.414754 0.055534 17.73585 0.000000 0.440093 0.415335 0.055443 17.77592 0.000000 0.510700 0.511298 Weighted Statistics R-squared Adjusted R-squared S.E. of regression F-statistic Prob(F-statistic) 0.036053 -0.006571 0.427388 0.845841 0.611171 0.029826 -0.013073 0.428013 0.695266 0.767809 Un-weighted Statistics R-squared 0.038175 0.031381 “*, **, ***” denote statistically significant at the 10%, 5% and 1% levels respectively. 50 MBA04029 – TRAN THU PHUONG To choose which method is more suitable, the Breusch-Pagan will be conducted. For Breusch and Pagan LM test, the null hypothesis that the pooled OLS model is more suitable, low p-value indicates that the random effects model alternative. The result in table 4.7 shows that Pooled OLS will be apply for model (1) and (2) and REM will be apply for model (3) and (4) Table 4.7 Breusch-Pagan test Breusch-Pagan Lagrange multiplier (LM) test for panel data Total panel observations: 308 Probability in ( ) Null (no rand. effect) Alternative Model 1 Model 2 Model 3 Model 4 Cross-section One-sided 2.1816 (0.1397) 2.3522 (0.1251) 49.8341 0.0000 49.6440 0.0000 Period One-sided 1.0065 (0.3157) 1.0065 (0.3157) 1.0065 (0.3157) 1.0065 (0.3157) Both 3.1881 (0.0742) 3.3587 (0.0669) 50.8406 0.0000 50.6505 0.0000 Suitable Effect Pooled OLS Pooled OLS REM REM The Breusch-Godfrey serial correlation LM test at lags 1 include also came up with the same result as Breusch-Pagan test. 51 MBA04029 – TRAN THU PHUONG Table 4.8 Breusch-Godfrey Serial Correlation LM test Breusch-Godfrey Serial Correlation LM Test: Obs*Rsquared Prob. Chi-Square(1) Auto Correlation Suitable Effect Model (1) 1.505893 0.2198 No Pooled OLS Model (2) 1.965633 0.1609 No Pooled OLS Model (3) 49.60187 0.0000 Yes REM Model (4) 49.70347 0.0000 Yes REM 4.2.3. Model (1) and Model (2) with Pooled OLS analysis With Pooled OLS, in model (1) and model (2), only ratio of retained earnings to book value of equity (RETE) is found to have significant correlation with dividend payout ratio at 5% and 10% respectively. No statistical significant in the relationship between ownership concentration and dividend policy are found. However, the Rsquared3 and the Prob(F-statistic) show that these 2 models might not be reliable. 4.2.4. Model (3) and Model (4) with REM The results from REM regression in table 4.6 show that there is a 10% significant negative correlation between ownership concentration (TOP1 and TOP5) and dividend yield. The β1 equal -0.088 and -0.062 of TOP1 and TOP5 respectively indicated that the higher the ownership concentration the lower the dividend paid out and the highest 3 R-squared is the ratio of the explained variation compared to the total variation, and thus it is interpreted as the fraction of the sample variation in y that is explained by x Definition by Jeffrey M. Wooldridg, 2002, Introductory Econometrics, 2nd edition 52 MBA04029 – TRAN THU PHUONG ownership concentration (TOP1) has stronger effect on dividend policy than the ownership concentration share by few shareholders. According to the R-squared ratio and Prob(F-statistic), model (3) and (4) are models in which dividend policy represented by DIVY is better explained by independent variables. In model (3) and (4), among control variables return on assets (ROA), free cash flow (FCF), firm size (SIZE), firm age (AGE) and retained earning to equity (RETE) have significant positive impact on DIVY, suggesting that firms with higher profitability, more excess cash, larger size, higher age and more retained earnings are more likely to pay higher dividend. Leverage ratio (LEVE) has a significant negative effect on DIVY, which show that higher portion of debt lower dividend paid out. The result in table 4.6 also shows that period (year dummies) has significant effect on dividend policy at 5% level of significant. The negative correlation of 0.015 shows that firms in year 2012 tend to pay 0.015 less dividend than in year 2011. The coefficients on DFOR in model (3), (4) with 5% of significant level imply that, holding control variable fixed, firm under the influence of foreign owners had on average 0.06 less DIVY compare with base firms. It means that, those foreign owned firms tend to pay lower dividend than base firms (group OTHER). 4.2.5. Tobit analysis Ordinary Least Square is the commonly method for analyzing in economic researches, however, because there are numbers of firms did not pay dividend (dividend yield and dividend pay out ratio equal 0), OLS estimates may be biased. Thence, Tobit regression is applied since it eliminates biases form OLS estimates when the dependent variable are censored (Harada & Nguyen, 2011; Thanatawee, 2013) 53 MBA04029 – TRAN THU PHUONG Table 4.9 reveals the results from Tobit estimation. According to Tobit regression, ownership concentration has a significant effect on dividend policy in both represent dividend pay-out ratio and dividend yield. In which, TOP1 ratio in model (1) has the coefficient of -0.43 at 10% significant level. The impact of TOP1 on DPR is quite higher than its effect on DIVY (only -0.12). However, the finding in model (3) is more significant at 1%. Model (2) shows no significant relationship between TOP5 and DPR and model (4) point out that compare with TOP1, the effect of TOP5 on DIVY is a bit lower but still significant at 1% (the coefficient of TOP5 on DIVY is -0.09). The results in model (3), (4) and (5) indicate that if the ownership of the company only concentrated on one representative (more concentrated), firms are likely to pay less dividend. Model (1) and (2) show no other reliable relationship between dividend policy and control variables. Meanwhile, model (3) and (4) present that coefficients on ROA, SIZE, AGE, and RETE are positive and significant meanwhile those on LEVE are significantly negative. The results suggest that firms with higher profitability, larger size, more age and more retained earning pay higher dividend whereas firms with higher debt ratio pay lower dividend. Model (4) also has a 10% significant and positive relation between free cash flow (FCF) and dividend yield (DIVY), which means if a firm has higher cash flow, they will pay higher dividend yield. Besides the significant finding in ownership concentration, model (1) shows a significant positive relation between DGOV1 and DPR at 10%. This is the only model in both OLS and Tobit regression show a significant impact of government on dividend policy. The positive correlation indicates that firms with government held more than 50% of share pay higher level of dividend pay out ratio than base firms about 17%. The 54 MBA04029 – TRAN THU PHUONG strongly significant at 1% of DFOR in model (3) and (4) show that foreign investors have negative impact on dividend yield, which implies that foreigners prefer low dividend policy. One more relationship was found significant at 10% between balanced shareholding concentration and dividend policy. Those firms under both effect of government and foreign shareholders also tend to pay less dividend than base firms about 0.07. Model (3) has significant results of the correlation between period and dividend. A negative coefficient of DYEAR show that in 2012, firm pay less dividend yield about 0.018 compare with its number in 2011. The Tobit analysis of model (3) and (4) also have the same conclusion as the OLS analysis that firms with higher concentrate by foreign owner and firms with balance holding by government and foreign pay lower dividend than base firms. The coefficients of these dummies are negative and significant. Besides, the impacts of these concentration types are slightly different. 55 MBA04029 – TRAN THU PHUONG Table 4.9 Tobit analysis Dependent Variable: DPR Method: ML - Censored Normal (TOBIT) (Quadratic hill climbing) Sample: 1 308 Included observations: 308 Left censoring (value) at zero Variable C TOP1 TOP5 ROA FCF SIZE AGE FGRO LEVE RETE DYEAR DGOV1 DGOV2 DBAL DFOR Model 1 DPR 0.649552 -0.425654* -0.09033 0.033491 0.010266 -0.0127 -0.00017 -0.06555 -0.40591 -0.02858 0.170253* 0.142636 0.02945 -0.09907 Model 2 DPR 0.584313 -0.029336 -0.160416 0.050989 0.003080 0.036266 -0.001011 -0.044270 -0.365258 -0.033334 0.049294 0.082107 -0.033481 -0.095988 Model 3 DIVY -0.132126 -0.125605*** 0.630161*** 0.064316 0.020752*** 0.040940** -0.002143 -0.170250*** 0.154719*** -0.018291* 0.024416 0.022302 -0.059667 -0.078115*** Model 4 DIVY -0.119739 -0.084502** 0.622843*** 0.072991* 0.019570*** 0.049472*** -0.001984 -0.168260*** 0.162682*** -0.017127 0.001278 0.016581 -0.073116* -0.071740*** “*, **, ***” denote statistically significant at the 10%, 5% and 1% levels respectively. 56 MBA04029 – TRAN THU PHUONG Chapter 5 – Discussion and Conclusion In order to summarize and explaining the analysis result in chapter 4, this chapter uses theoretical, the evidences of empirical studies and researcher opinion and judgment. Some recommendation also is given in this last section. 5.1. Discussion 5.1.1. Ownership concentration and dividend policy To sum up, ownership concentration has negative impact on dividend policy. The higher level of concentration of ownership is, the lower dividend will be paid out. This finding is consistent with Shleifer and Vishny’s (1997), Gugler and Yutoglu (2003), Khan (2006), and Harada and Nguyen (2011). However the result of ownership concentration and dividend policy in this research contradicts with Jensen (1986), Easterbrook (1984), Thanatawee (2013), Mirzaei (2012). Agency cost is the best explanation theory in this case. Since the fact that in Vietnam market, large shareholders are usually the insiders or involve in the management of the firms (such as approve for new policies of company), hence, less agency conflicts occur thereby dividend paid out as the controlling tool of managers’ decision is not necessary. Moreover, follow Sheleifer and Vishny (1997), large shareholders, by using their controlling power, can extract private benefits from firms’ resources. Accordingly, they will prefer lower dividends, “which prevents minority investors from cashing out their fair share of the firm’s profits”. In addition, the negative effect of ownership concentration on dividend policy may be caused of the effect of adjusting dividend policy of firms in Vietnam. This effect 57 MBA04029 – TRAN THU PHUONG is due to the high level of dividend paid out of Vietnam firms (compare with other emerging market such as Thai firms (Thanatawee, 2013) or Japanese firm (Harada and Nguyen, 2011) 5.1.2. Firm’s characteristics and dividend policy Among control variables, profitability, free cash flow, firm size, firm age and retained earning to book value of equity have significant positive relationship with dividend policy. Debt has negative and significant correlation with dividend policy. Fama and French (2002), Jensen (1992) also support the positive impact of ROA, firm size and negative effect of leverage on dividend policy. The finding of positive coefficient of RETE is in line with DeAngelo (2006), Thanatawee (2013). When a firm has high profitability (show in the ratio of ROA), and more retained earning, this firm tend to pay higher dividend rate. This action could be seen as a signal for the wealthy of the companies in order to attract investors. Signaling theory could apply to explain why firm with high profitability will pay high dividend. If a firm have excess cash flow, to prevent manager acting on their own will, agency cost theory suggest that firm will pay dividend as to tool to reduce cash in hand of managers, hence control firm performing. Firms with large size and high age usually are mutual firms, they have passed the growing period when firms need large amount of money to invest and grow. Therefore, these firms also usually pay higher dividend than young and growing firms. Debt ratio is the only variable in firm’s characteristic has the negative coefficient with dividend policy. This means, when firm with more debt, it will pay lower dividend. We could easily understand this relationship because firm with higher debt usually are 58 MBA04029 – TRAN THU PHUONG under financial distress, thus less able to pay dividend. The action of trying to pay high dividend when under high debt financing may lead the firm to even worse condition. 5.1.3. Ownership concentration types and dividend policy Even model (3) and (4) with REM show the significant effect of period, the comparison of only 2 recent years can not lead to the conclusion that Vietnamese firms are going to reduce the amount of dividend paid out. Longer period consideration needs to be examined to test if there is actually the dividend paid out is reducing year by year or not. Since only model (1) with Tobit analysis show a significant positive relationship with dividend pay-out ratio at 10% and no other models show any significant relationship with DPR or DIVY, the conclusion that firm with government held more than 50% of share pay higher dividend is still not strong enough. The founding, however, consistent with Gugle (2003), Bradford, Chen and Zhu (2005), Sulong and Nor (2008), Wang, Manry and Wandler (2011) and D. L. Nguyen (2008) in Vietnam market. According to Gugle (2003) state-controlled firms in Austria “smooth” dividends, have large target payout ratio, and are most reluctant to cut dividends, despite of the potential cost involved for shareholders, this is consistent with a managerial /agency cost explanation. In the research about “The impact of government ownership on dividend policy in China” by Wang, Manry, and Wandler (2011), they found that the preference for (and likelihood of) cash dividend payouts among Chinese firms is increasing in State ownership, consistent with the State's need for cash flow as a partial motivation for continued State ownership of a significant portion of the corporate economy. While 59 MBA04029 – TRAN THU PHUONG payment of cash dividends attenuates the inherent agency problem in corporate organizations, the payment of cash dividends is also consistent with the large shareholder using its power and position to appropriate the wealth of the firm from individual investors. According to D. L. Nguyen (2008) firms with high portion of government holding usually have large size and good performance. These firms tend to have high dividend payment as a signal of high potential growth to impulse the development of Vietnam’s economy. In addition, as the comment of Mr. Phan Dang Tuat – chairman of Sabeco, the present of government shareholder guides company to expand the market more easily and increases the belief of consumers hence company can make high profit. Moreover, the needed of high dividend payment of government may come from the demand of national projects or public projects or military issue which can’t be seen clearly. However, in generally, government does not have any significant effect on dividend policy in Vietnam market (Beside the significant coefficient of DGOV1 in model (1) with Tobit analysis, there is no other significant relationship between DGOV1, DGOV2 with DPR or DIVY). Hence, the impact of government shareholders on dividend policy need to be examine further. DBAL involved firms with balance ownership between government and foreign investors also have lower dividend payment than base firms in model (4) with Tobit analysis and in model (3) and (4) with Pooled OLS (even though the LM test recommend to use REM for model (3) and (4), Pooled OLS still have the value for reference). 60 MBA04029 – TRAN THU PHUONG Firms in DFOR with the concentration of foreign investors pay lower dividend than dispersed or other ownership (institution, family,..) concentration firms. The negative relationship between TOP1 and DPR, DIVY has statistical significance in both REM and Tobit regression. Dahlquist and Robertsson (2001), Douglas and Jin (2006) and D. L. Nguyen (2008) also have the same conclusion of negative relationship between foreign ownership and dividend policy. However, the result contradicts with Ullah et al., (2012) in their research “The Impact of Ownership Structure on Dividend Policy Evidence from Emerging Markets KSE-100 Index Pakistan”. Douglas and Jin (2006) found that foreign investors in Korea – an emerging market are more attracted to dividend-payment firms. Among dividend-payment firms, however, foreign investors prefer low dividend-paying firms. They also found that a higher level of stock repurchases attracts more foreign investors. In support of the agency model, higher foreign ownership is associated with a greater dividend payout. Domestic institutional investors, however, do not play a prominent role in a firm’s payout policy. Thus, they concluded that foreign investors are more active monitors of corporate by reducing agency problems and leading firms to increase the level of payouts. In general, foreign investors prefer larger and highly profitable firms. An explanation to consider is that foreign investors when they put money in an emerging market, in this case is Vietnam market, usually they decide to invest in longterm and expect that their invested firm will grow and make profit for them. That profit will be much higher and stable when the firm mature than the instant dividend. However, foreign investors still want the firm they invested in to pay dividend but not too much. The evidence is that there are only 5 over 40 observations in 2 years of group DFOR 61 MBA04029 – TRAN THU PHUONG didn’t pay dividend. Thus, in this case, dividend is still a monitoring tool with foreign investors. In addition, tax treatment with foreign investors also plays an important role in the reason why foreign investors prefer to keep the profit as the retained earning than paid out as dividend. 5.2. Conclusion In general, ownership concentration has negative and significant relationship with dividend policy and this relationship different depend on which types of ownership concentration the companies has. While foreign investor has negative effect on dividend policy, government controlling firms show significant and positive correlation with dividend policy. To compare with other types of ownership concentrations firms besides of government and foreign investors, firms with high portion of foreign owners tend to pay lower dividend meanwhile government controlling firms show that these firm may pay high dividend however its is insignificant. Nevertheless, no matter it is the companies with high portion of foreign investor or government, those firms seem to have good performance, good monitoring, more explicit financial statement and more clearly policies and these are better for minority shareholders to understand their company conditions. 5.3. Recommendation For investors who consider dividend as a main source of income and want high cash dividend, firms with government controlling are the best choice. 62 MBA04029 – TRAN THU PHUONG For investors who aim to firms with high growth in the future, firms with the ownership concentration of foreign investors are in consideration. Moreover, when collecting data of listed companies in HOSE, the researcher realizes that firms with government controlling or have high potion of foreign investors usually provide transparency information for securities market than other types of concentration firms (dispersed, family run, institution,…). Therefore, if the investors want to ensure about their investment, the disclosure of necessary information of companies are very important. 63 MBA04029 – TRAN THU PHUONG References Alli, K. L., Khan, A. Q., & Ramirez, G. G. (1993). Determinants of corporate dividend policy: a factorial analysis. The Financial Review, 28, 523-547. Allen, F., Bernardo, A. E., & Welch, I. (2000). A theory of dividends based on tax clienteles. Journal of Finance, 55, 2499-2536. Anwar, W., & Tabassum, N. (2011). Impact of Ownership Concentration on the operating Performance of Pakistani Firms. Asian Economic and Financial Review. Chen, Z., Cheung, Y., Stouraitis, A., & Wong, A. (2005). 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International Journal of Business, Economics and Law, 1, 48-57. 66 MBA04029 – TRAN THU PHUONG APPENDIX Sample of the Research STT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 MÃ CK DPM PHR HOT ACC HRC SEC LIX SRC SVI SZL TCL HU3 TAC BCE SCD DQC UIC TIE RDP TIC CSM KHP CLW TDC VTB PJT L10 TV1 HTI VSH PPC VSI VTO VIP HVX PAC LM8 TÊN TỔ CHỨC NIÊM YẾT TỔNG CÔNG TY PHÂN BÓN VÀ HÓA CHẤT DẦU KHÍ - CTCP CTCP CAO SU PHƯỚC HÕA CTCP DU LỊCH DỊCH VỤ HỘI AN CTCP BÊ TÔNG BECAMEX CTCP CAO SU HÒA BÌNH CTCP MÍA ĐƯỜNG NHIỆT ĐIỆN GIA LAI CTCP BỘT GIẶT LIX CTCP CAO SU SAO VÀNG CTCP BAO BÌ BIÊN HÒA CTCP SONADEZI LONG THÀNH CTCP ĐẠI LÝ GIAO NHẬN VẬN TẢI XẾP DỠ TÂN CẢNG CTCP ĐẦU TƯ VÀ XÂY DỰNG HUD3 CTCP DẦU THỰC VẬT TƯỜNG AN CTCP XÂY DỰNG VÀ GIAO THÔNG BÌNH DƯƠNG CTCP NƯỚC GIẢI KHÁT CHƯƠNG DƯƠNG CTCP BÓNG ĐÈN ĐIỆN QUANG CTCP ĐẦU TƯ PHÁT TRIỂN NHÀ VÀ ĐÔ THỊ IDICO CTCP TIE CTCP NHỰA RẠNG ĐÔNG CTCP ĐẦU TƯ ĐIỆN TÂY NGUYÊN CTCP CÔNG NGHIỆP CAO SU MIỀN NAM CTCP ĐIỆN LỰC KHÁNH HÕA CTCP CẤP NƯỚC CHỢ LỚN CTCP KINH DOANH VÀ PHÁT TRIỂN BÌNH DƯƠNG CTCP VIETTRONICS TÂN BÌNH CTCP VẬN TẢI XĂNG DẦU ĐƯỜNG THỦY PETROLIMEX CTCP LILAMA 10 CTCP TƯ VẤN XÂY DỰNG ĐIỆN 1 CTCP ĐẦU TƯ VÀ PHÁT TRIỂN HẠ TẦNG IDICO CTCP THỦY ĐIỆN VĨNH SƠN SÔNG HINH CTCP NHIỆT ĐIỆN PHẢ LẠI CTCP ĐẦU TƯ VÀ XÂY DỰNG CẤP THOÁT NƯỚC CTCP VẬN TẢI XĂNG DẦU VITACO CTCP VẬN TẢI XĂNG DẦU VIPCO CTCP XI MĂNG VICEM HẢI VÂN CTCP PIN ẮC QUY MIỀN NAM CTCP LILAMA18 MBA04029 – TRAN THU PHUONG 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 PGC KSB HAI BTT D2D STG VPK HTV SVC GTA VLF PET DPR VNM DHG TRC DMC TRA TDW PVD VSC ST8 PNJ IMP KDC FPT HPG EVE 66 TMS 67 68 69 70 71 72 73 74 75 76 77 SAV DHA NHW RIC TYA BMP CMX NNC ABT DSN SRF CTCP GAS PETROLIMEX CTCP KHOÁNG SẢN VÀ XÂY DỰNG BÌNH DƯƠNG CTCP NÔNG DƯỢC HAI CTCP THƯƠNG MẠI DỊCH VỤ BẾN THÀNH CTCP PHÁT TRIỂN ĐÔ THỊ CÔNG NGHIỆP SỐ 2 CTCP KHO VẬN MIỀN NAM CTCP BAO BÌ DẦU THỰC VẬT CTCP VẬN TẢI HÀ TIÊN CTCP DỊCH VỤ TỔNG HỢP SÀI GÕN CTCP CHẾ BIẾN GỖ THUẬN AN CTCP LƯƠNG THỰC THỰC PHẨM VĨNH LONG TỔNG CTCP DỊCH VỤ TỔNG HỢP DẦU KHÍ CTCP CAO SU ĐỒNG PHÖ CTCP SỮA VIỆT NAM CTCP DƯỢC HẬU GIANG CTCP CAO SU TÂY NINH CTCP XUẤT NHẬP KHẨU Y TẾ DOMESCO CTCP TRAPHACO CTCP CẤP NƯỚC THỦ ĐỨC TỔNG CTCP KHOAN VÀ DỊCH VỤ KHOAN DẦU KHÍ CTCP TẬP ĐOÀN CONTAINER VIỆT NAM CTCP SIÊU THANH CTCP VÀNG BẠC ĐÁ QUÝ PHÖ NHUẬN CTCP DƯỢC PHẨM IMEXPHARM CTCP KINH ĐÔ CTCP FPT CTCP TẬP ĐOÀN HÕA PHÁT CTCP EVERPIA VIỆT NAM CTCP KHO VẬN GIAO NHẬN NGOẠI THƯƠNG THÀNH PHỐ HỒ CHÍ MINH CTCP HỢP TÁC KINH TẾ VÀ XUẤT NHẬP KHẨU SAVIMEX CTCP HÓA AN CTCP NGÔ HAN CTCP QUỐC TẾ HOÀNG GIA CTCP DÂY VÀ CÁP ĐIỆN TAYA VIỆT NAM CTCP NHỰA BÌNH MINH CTCP CHẾ BIẾN THỦY SẢN VÀ XUẤT NHẬP KHẨU CÀ MAU CTCP ĐÁ NÖI NHỎ CTCP XUẤT NHẬP KHẨU THỦY SẢN BẾN TRE CTCP CÔNG VIÊN NƯỚC ĐẦM SEN CTCP KỸ NGHỆ LẠNH MBA04029 – TRAN THU PHUONG 78 79 80 81 82 83 84 85 86 87 88 89 90 BMC DVP NHS NSC PGD RAL GMC VFG MPC OPC BHS SBT HVG 91 TIX 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 C47 SSC TTP CTD TNA PTB HSG GDT VCF C21 VNS HQC ELC BCI NBB AAM NTL THG CCI KHA SFI VNL SMC LBM GIL VTF CTCP KHOÁNG SẢN BÌNH ĐỊNH CTCP ĐẦU TƯ VÀ PHÁT TRIỂN CẢNG ĐÌNH VŨ CTCP ĐƯỜNG NINH HÕA CTCP GIỐNG CÂY TRỒNG TRUNG ƯƠNG CTCP PHÂN PHỐI KHÍ THẤP ÁP DẦU KHÍ VIỆT NAM CTCP BÓNG ĐÈN PHÍCH NƯỚC RẠNG ĐÔNG CTCP SẢN XUẤT THƯƠNG MẠI MAY SÀI GÕN CTCP KHỬ TRÙNG VIỆT NAM CTCP TẬP ĐOÀN THỦY SẢN MINH PHÖ CTCP DƯỢC PHẨM OPC CTCP ĐƯỜNG BIÊN HÕA CTCP BOURBON TÂY NINH CTCP HÙNG VƯƠNG CTCP SẢN XUẤT KINH DOANH XUÂT NHẬP KHẨU DỊCH VỤ VÀ ĐẦU TƯ TÂN BÌNH CTCP XÂY DỰNG 47 CTCP GIỐNG CÂY TRỒNG MIỀN NAM CTCP BAO BÌ NHỰA TÂN TIẾN CTCP XÂY DỰNG COTEC CTCP THƯƠNG MẠI XUẤT NHẬP KHẨU THIÊN NAM CTCP PHÚ TÀI CTCP TẬP ĐOÀN HOA SEN CTCP CHẾ BIẾN GỖ ĐỨC THÀNH CTCP VINACAFÉ BIÊN HÒA CTCP THẾ KỶ 21 CTCP ÁNH DƯƠNG VIỆT NAM CTCP TƯ VẤN – THƯƠNG MẠI – DỊCH VỤ ĐỊA ỐC HOÀNG QUÂN CTCP ĐẦU TƯ PHÁT TRIỂN CÔNG NGHỆ ĐIỆN TỬ VIỄN THÔNG CTCP ĐẦU TƯ XÂY DỰNG BÌNH CHÁNH CTCP ĐẦU TƯ NĂM BẢY BẢY CTCP THUỶ SẢN MEKONG CTCP PHÁT TRIỂN ĐÔ THỊ TỪ LIÊM CTCP ĐẦU TƯ VÀ XÂY DỰNG TIỀN GIANG CTCP ĐẦU TƯ PHÁT TRIỂN CÔNG NGHIỆP THƯƠNG MẠI CỦ CHI CTCP XUẤT NHẬP KHẨU KHÁNH HỘI CTCP ĐẠI LÝ VẬN TẢI SAFI CTCP GIAO NHẬN VẬN TẢI VÀ THƯƠNG MẠI CTCP ĐẦU TƯ THƯƠNG MẠI SMC CTCP KHOÁNG SẢN VÀ VẬT LIỆU XÂY DỰNG LÂM ĐỒNG CTCP SẢN XUẤT KINH DOANH XUẤT NHẬP KHẨU BÌNH THẠNH CTCP THỨC ĂN CHĂN NUÔI VIỆT THẮNG MBA04029 – TRAN THU PHUONG 118 119 120 121 122 123 124 125 126 127 128 129 130 131 VHC AGF DTL AVF HDC PAN HBC TLG IDI NAV ANV VPH SFC FMC 132 FDC 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 TS4 IJC PXS LHG OGC ACL LSS MDG VRC APC POM PXI ATA PXT KSA CTI PTL SC5 HAP CCL DXG SVT CTCP VĨNH HOÀN CTCP XUẤT NHẬP KHẨU THUỶ SẢN AN GIANG CTCP ĐẠI THIÊN LỘC CTCP VIỆT AN CTCP PHÁT TRIỂN NHÀ BÀ RỊA VŨNG TÀU CTCP XUYÊN THÁI BÌNH CTCP XÂY DỰNG VÀ KINH DOANH ĐỊA ỐC HÕA BÌNH CTCP TẬP ĐOÀN THIÊN LONG CTCP ĐẦU TƯ VÀ PHÁT TRIỂN ĐA QUỐC GIA CTCP NAM VIỆT CTCP NAM VIỆT CTCP VẠN PHÁT HƯNG CTCP NHIÊN LIỆU SÀI GÕN CTCP THỰC PHẨM SAO TA CTCP NGOẠI THƯƠNG VÀ PHÁT TRIỂN ĐẦU TƯ THÀNH PHỐ HỒ CHÍ MINH CTCP THUỶ SẢN SỐ 4 CTCP PHÁT TRIỂN HẠ TẦNG KỸ THUẬT CTCP KẾT CẤU KIM LOẠI VÀ LẮP MÁY DẦU KHÍ CTCP LONG HẬU CTCP TÂP ĐOÀN ĐẠI DƯƠNG CTCP XUẤT NHẬP KHẨU THỦY SẢN CỬU LONG AN GIANG CTCP MÍA ĐƯỜNG LAM SƠN CTCP MIỀN ĐÔNG CTCP XÂY LẮP VÀ ĐỊA ỐC VŨNG TÀU CTCP CHIẾU XẠ AN PHÖ CTCP THÉP POMINA CTCP XÂY DỰNG CÔNG NGHIỆP VÀ DÂN DỤNG DẦU KHÍ CTCP NTACO CTCP XÂY LẮP ĐƯỜNG ỐNG BỂ CHỨA DẦU KHÍ CTCP KHOÁNG SẢN BÌNH THUẬN HAMICO CTCP ĐẦU TƯ VÀ PHẤT TRIỂN CƯỜNG THUẬN IDICO CTCP ĐẦU TƯ HẠ TẦNG & ĐÔ THỊ DẦU KHÍ PVC CTCP XÂY DỰNG SỐ 5 CTCP TẬP ĐOÀN HAPACO CTCP ĐẦU TƯ VÀ PHÁT TRIỂN ĐÔ THỊ DẦU KHÍ CỬU LONG CTCP DỊCH VỤ VÀ XÂY DỰNG ĐỊA ỐC ĐẤT XANH CTCP CÔNG NGHỆ SÀI GÕN VIỄN ĐÔNG [...]... The main purpose of this research is to study the relationship between ownership concentration and dividend policy in term of cash dividend of listed companies in HOSE The sample consisted of 154 listed firms in HOSE in two years 2011 and 2012 The sample was divided into 5 groups of ownership concentration in order to achieve the different relation of ownership concentration types with dividend policy. .. retain-earning to continue invest, while others just think that there is no difference between dividend and capital gain Therefore, this thesis aims to identify the relationship between dividend policy and the ownership concentration factor with evidence from HOSE stock exchange 1.2 Problem Statement The ownership of a firm involves many investors, and the ownership structure is divided to two main... relationship between ownership structure and dividend policy It will employ an ownership frame work and compare the dividend policy of companies with different ownership concentration types within the companies which are listed in HOSE 1.6.2 Specific objective - Defining whether the effect of ownership concentration on dividend policy is negative or positive - Defining the specific correlation between government-controlling... the ownership concentration types on it? To find out, this thesis: 5 MBA04029 – TRAN THU PHUONG “THE RELATIONSHIP BETWEEN OWNERSHIP CONCENTRATION AND DIVIDEND POLICY: EVIDENCE FROM LISTED COMPANIES IN HOSE in two years 2011 and 2012” is conducted 1.4 Importance of the Research The relationship between dividend policy and firm’s ownership structure has been researched by several studies within the agency... explain the relationships between dividend and other factors, especially concentrate on the effect of ownership concentration and ownership concentration types on dividend policy 9 MBA04029 – TRAN THU PHUONG Chapter 2 – Literature Review To understand the controversial in the relationship of ownership concentration and dividend policy, the literature on dividend policy, the effect of ownership concentration. .. 50 companies out of 273 listed companies in HOSE in 2011 did not have clearly information about their dividend rate This number increased even more in 2012, from more than 50 companies to nearly 80 companies out of 273 listed companies in HOSE Besides those companies, we also see that Vietnam companies have quite diversified dividend policies We have companies that pay dividend from 0% to 70% on capital... ratio from 0% to 20% is preferred by most companies There were approximately 60% of companies in HOSE choose to pay dividend from 0% to 20% on their capital, and only about 10% in total 273 listed companies in HOSE pay dividend from 21% to 30% There were very least companies pay dividend above 30% Why does our market have such kind of dividend policies diversification? Is there any effect from the ownership. .. pay-out as dividends Kouki and Guizani (2009) showed that Tunisian firms having high level of ownership concentration pay-out more dividends Ramli (2010) with the evidence of Malaysian listed companies found a positive relationship between ownership concentration and dividend payment because controlling shareholders have greater influence over the dividend payout policy 2.1.2.2 Higher the ownership concentration, ... obtained from HOSE stock exchange, we have the overall look on the dividend payment of Vietnam companies 4 MBA04029 – TRAN THU PHUONG Number of Companies Cash dividend/ par value of listed companies in HOSE 90 80 70 60 50 40 30 20 10 0 Year 2011 Year 2012 Cash dividend/ par value (Source: Calculated by researcher) Figure 1.1 Cash dividend/ par value of listed companies in HOSE in 2011 and 2012 More than 50 companies. .. government-controlling firm, foreign- controlling firm with their dividend policies - Defining which relationship has negative correlation, which has positive correlation - Using theories and realities of Vietnam market to explain these relationships 1.7 Scope and Limitation of the Research This research focuses on Joint Stock Companies listed in HOSE in 2011 and 2012 7 MBA04029 – TRAN THU PHUONG Data are collected from ... form financial statement of listed companies in HOSE in 2011 and 2012 These reports were audited Size of the data: From 294 listed companies in HOSE, 15 companies in financial, banking and insurance... OWNERSHIP CONCENTRATION AND DIVIDEND POLICY: EVIDENCE FROM LISTED COMPANIES IN HOSE in two years 2011 and 2012” is conducted 1.4 Importance of the Research The relationship between dividend policy and. . .RELATIONSHIP BETWEEN OWNERSHIP CONCENTRATION AND DIVIDEND POLICY: EVIDENCE FROM LISTED COMPANIES IN HOSE In Partial Fulfillment of the Requirements of the Degree of MASTER OF BUSINESS ADMINISTRATION