Summary of the dissertation: Measuring the level of non-financial information disclosure and factors affecting the level of non-financial information disclosure of companies listed on the

Summary of the dissertation: Measuring the level of non-financial information disclosure and factors affecting the level of non-financial information disclosure of companies listed on the stock exchange in Vietnam.

1 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY DUONG HOANG NGOC KHUE MEASURING THE LEVEL OF NON-FINANCIAL INFORMATION DISCLOSURE AND FACTORS AFFECTING THE LEVEL OF NON-FINANCIAL INFORMATION DISCLOSURE OF COMPANIES LISTED ON THE STOCK EXCHANGE IN VIETNAM Major: Accounting Code: 9340301 SUMMARY OF THE DISSERTATION HO CHI MINH CITY – 2019 The dissertation is prepared at: University of Economics Ho Chi Minh City Professional advisor: Asso.Prof., PhD Ha Xuan Thach Critic 1: Critic 2: Critic 3: The thesis will be presented to the Thesis committee at University of Economics Ho Chi Minh City on at INTRODUCTION Research ideal Accounting information includes financial and nonfinancial information We not deny the significant role of financial information of companies in the investors’ decision making However, in a developing society, the intense production of enterprises leads to negative environmental impacts, labour exploitation to maximize profit, regardless of adverse effects on the development of sustainable economy Therefore, since the 1990s, organizations created the concept of sustainable development, thus the awareness of companies and stakeholders has improved in terms of not only financial information but also nonfinancial information, which includes information about environment, society, corporate governance, and other nonfinancial information, changed from encouraging voluntary disclosure to mandatory disclosure some types of nonfinancial information such as social and environmental information For example, when starting a project, besides providing financial information like financial position, cash flow, payback period, profit, etc., companies must also disclose nonfinancial information of the project to stakeholders such as its negative impacts on the environment, solutions for the pollution, remuneration policy and unemployment resolutions for the local workforce Only this way, companies will provide overall and sufficient information to investors so that they can make economic decisions Investors, especially international ones, are paying much attention to nonfinancial information to have an insight in the value, prestige, and sustainability of businesses If companies not attempt to lessen their negative impacts on the environment and society, they will not be possible to get and retain professional investors Besides analyzing traditional financial indicators to make business decisions, investors also analyze nonfinancial factors including environment, society and corporate governance information for the decision making of investors Nonfinancial information disclosure has been applied for a long time in developed nations worldwide in several forms with the guidelines like the Global Reporting Initiative (GRI), a framework of the Carbon Disclosure Project, or other guidelines Nonfinancial information, which plays an important role in accounting information system, has the potential to add significant value (Fraser, 2012), the nonfinancial information disclosure makes companies develop more sustainably, enable the value of enterprises to be recognized by the society and enhance the competitiveness of companies worldwide In Vietnam, companies mostly pay attention to financial information, and some types of nonfinancial information which present in the notes of financial statements are used to explain and support for financial information, not the nonfinancial information about the environment, society, etc However, some companies listed on the stock exchange are aware of the important role of nonfinancial information disclosure according to international standards like the G4 guideline of Global Initiative Organization (GRI4) such as Vinamilk joint stock company, Hau Giang pharmaceutical joint stock company, Imexpharm pharmaceutical joint stock company… As a results, these companies are greatly trusted by both national and international investors and their value is internationally recognized Vietnam has been a member of many organizations worldwide like WTO, AFTA, AEC…, so there is a greater need for economic integration to attract foreign investors Moreover, when sustainable development are becoming more and more competitive, Vietnamese accounting reports also need to disclose mandatory nonfinancial information, especially social and environmental information, etc Therefore, in the year 2015, the Ministry of Finance issued Circular No 155/2015/TT-BTC regarding information disclosure on securities market The circular 155 requires listed companies to report on their impacts on the environment and society After a year of the implementation, companies which disclose nonfinancial information according to the G4 guideline apply easily the circular 155/BTC While the others apply the circular 115/BTC inadequately and eliminate some indexes due to the lack of information about gathering, processing and disclosing As a result, research on nonfinancial information disclosure are gaining more attention Around the world, there are several research on the level of nonfinancial information disclosure and factors affecting this level, like Mobus (2005), Levine and Smith (2011), Babaloo (2012), Skouloudis and et al (2013), Behbahani and et ah (2013a, 2013b), Karim and et al (2013), Ioannou Sarefeim (2014), Khan and et al (2014), Ghasempour Grewal and et al (2015), Christensen and et al (2015), Kaya (2016), Mihajlov and Spasic (2016), Rezaee Tuo (2017), Manes-Rossi and et al (2018), Gulin and et al (2018), Sierra-Garcia and et al (2018), Szadziewska and et al (2018)… Nonetheless, in Vietnam, the kind of the research topic only has some studies such as the research of Ta Quang Binh (2012, 2014), Pham Duc Hieu and Do Thi Huong Lan (2015) Therefore, it is necessary to choose the topic “Measuring the level of nonfinancial information disclosure and factors affecting the level of nonfinancial information of companies listed on the stock exchange in Vietnam” as the research topic for the dissertation Research objectives and questions 2.1 Research objectives The dissertation is designed to achieve the following specific objectives: + Firstly, measuring the level of non-financial information disclosure of companies listed on the Vietnamese stock exchange in accordance with Vietnamese regulations, and according to GRI4 regulations of the internation + Secondly, identifying the factors and measuring the impact of each factor on the level of non-financial information disclosure of companies listed on the Vietnamese stock exchange 2.2 Research questions Research Methodology The author uses mixture of qualitative and quantitative methods in the dissertation The research process of the dissertation as below: General Research Objectives Measuring the level of non-financial information disclosure of companies listed on the Vietnamese stock exchange in accordance with Vietnamese and international regulations And study on the factors affecting the level of nonfinancial information disclosure The first specific objective: Measuring the level of non-financial information disclosure of The second specific objective: identifying the factors and measuring the impact of each factor on the level of non-financial information disclosure of companies listed on the Vietnamese stock exchange companies listed on the Vietnamese stock exchange in accordance with Vietnamese and GRI4 regulations Qualitative research (Expert method) Identifying factors for the research model Quantitative Method Unweighted index method Descriptive statistics method Results (Answer the second research question) Results The level of non-financial information disclosure in accordance with Vietnamese and GRI4 regulations (Answer the first research question) Using results of the first research objective Regression method Descriptive statistics method Identifying the factors and measuring the impact of each factor on the level of nonfinancial information disclosure (Answer the second research question) Using results of the first research objective Using results of the second research objective Discussion and policy implications to enhance the level of non-financial information disclosure of listed companies in Vietnam Figure 1: Research framework of the dissertation Research subjects and scopes Reseach subjects: Non-financial Information Research Scopes: Companies are listed officially on the stock exchange in Vietnam; Data of non-financial information was collected in annual report 2016 and sustainability report 2016; Studying listed companies had an accounting year from January 1st to December 31th each year Research limitations: Do not study financial companies because they disclosed non-financial information differently from manufacturing companies; The dissertation does not study the quality of non-financial information disclosure; The dissertation does not study companies listed after January 1st, 2016 because they disclosed nonfinancial information inadequately New contributions: The new academic and theoretical contributions: The dissertation has verified and added the scoring method of non-financial information disclosure in Vietnam The dissertation has exposed a new factor which named foreigner loans impacts the level of non-financial information disclosure The dissertation measures the factors affecting the level of non-financial disclosure of the companies listed on the Stock Exchange in Vietnam New implications from the research results: The dissertation has measured the level of non-financial information disclosure of the companies listed in Vietnam according to the regulations in Vietnam and according to G4 guidelines of the Global Reporting Initiative The dissertation has evaluated the level of non-financial information disclosure according to Vietnamese regulations of listed companies what extent against international standards The dissertation proposed policy implications for state management agencies and implies corporate governance from the research results of the dissertation as follow: + For listed companies, the dissertation proposals corporate governance policies ralated to factors affecting to the companies in order to more advantage in the information disclosure more transparent + For state management agencies, implies reviewing non-financial disclosure documents and policies, specifically circular 155/BTC should be adjusted to suit the reality + For professional organizations such as the VAA, VACPA, academic researchers specializing in accounting, the dissertation is one of an elaborate, rigorous studying materials, it is used to compare with the other teaching about non-financial information disclosure and the factors that affect the level of non-financial disclosure Structure of the dissertation: The dissertation is divided into five chapters: Chapter 1: Literature Review Chapter 2: Theoritical Framework Chapter 3: Research Method, Findings and Discussion on measuring the level of non-financial information disclosure Chapter 4: Research Method, Findings and Discussion on identifying and measuring factors impact to the level of non-financial information disclosure Chapter 5: Conclusion and Recommendation CHAPTER LITERATURE REVIEW 1.1 Researches on the mandatory disclosure of non-financial information The characteristics of this research line are the measurement of the level of mandatory non-financial information disclosure The researchers used the unweighted index method to measure the level of mandatory non-financial information disclosure The disclosure indices of a company were prepared base on the national regulations system In this research line, authors used statistical methods to describe the results of the forced publication of non-financial information relative to regulations, thereby assessing the compliance level of non-financial information disclosures of companies in the research sample 1.1.1 Researches on the mandatory disclosure of non-financial information in the world With the research direction of mandatory disclosure of non-financial information, there have been a lot of researches, such as Mobus (2005), Levine and Smith (2011), BaBaLoo (2012), Ioannou and Serafeim (2014), Grewal et al (2015), Christensen et al (2015) and Kaya (2016), Manes-Rossi and et al (2018), Gulin and et al (2018), Sierra-Garcia and et al (2018), Szadziewska and et al (2018) 1.1.2 Researches on the mandatory disclosure of non-financial information in Vietnam In Vietnam, the author has not found a separate study on mandatory disclosure of nonfinancial information yet 1.2 Researches on the voluntary disclosure of non-financial information The characteristics of this research line are non-financial information that has been studied extensively The researchers used the unweighted or weighted index method to measure the level of voluntary disclosure of non-financial information Some researchers used the content analysis method After that, they used the descriptive statistical method to measure the level of voluntary disclosure Each author divided the degree of disclosure by intervals, without template, to evaluate the level of nonfinancial information disclosure of the companies in the research sample 1.2.1 Researches on the voluntary disclosure of non-financial information in the world With the second research line of voluntary disclosure of non-financial information, there are some authors such as Karim et al (2013), Khan et al (2014), Ghasempour and Yusof (2014), Mihajlov and Spasic (2016), Rezaee and Tuo (2017) 1.2.2 Researches on voluntary disclosure of non-financial information in Vietnam In Vietnam, the second line of voluntary disclosure of non-financial information is relatively modest, with some authors such as Ta Quang Binh (2012), Ta Quang Binh (2014), Pham Duc Hieu and Do Thi Huong Lan (2015) 1.3 Researches related to factors affecting the level of non-financial information disclosure With the third research line on factors affecting non-financial information, regardless of mandatory or voluntary disclosure, conducted by Meek et al (1995), Robb et al (2001), Skouloudis et al (2013), Karim et al (2013), Arif and Tuhin (2013), Behbahani et al (2013a, 2013b), Zare et al (2013), Mohammed and Islam (2014), Ghasempour and Yusof (2014), Ta Quang Binh (2014), Pham Duc Hieu and Do Thi Lan Huong (2015), Rezaee and Tuo (2017), Sierra-Garcia and et al (2018), Szadziewska and et al (2018) 1.3.1 Researches related to factors affecting the level of non-financial disclosure in the world Meek et al (1995), Robb et al (2001), Skouloudis et al (2013), Karim et al (2013), Arif and Tuhin (2013), Behbahani et al (2013a, 2013b), Zare et al (2013), Mohammed and Islam (2014), Ghasempour and Yusof (2014), Rezaee and Tuo (2017), Sierra-Garcia and et al (2018), Szadziewska and et al (2018) 1.3.2 Researches related to factors affecting the level of non-financial disclosure in Vietnam Ta Quang Binh (2014), Pham Duc Hieu and Do Thi Lan Huong (2015) 1.4 Evaluation of previous studies and Determination of the research gap 1.4.1 Evaluation of previous studies In the world, this is a full-fledged research series, conducted by three research lines (1) research on the compulsory disclosure level of non-financial information, (2) research on the voluntary disclosure level of non-financial information, and (3) research on factors affecting the level disclosure of non-financial information In Vietnam, the first research line (1) the mandatory disclosure level of non-financial information has not been studyed, the second research line (2) the voluntary disclosure level of non-financial information has been studyed rarely and inadequately And the third research line (3) factors affecting the level disclosure of non-financial information has studyed limitedly and inadequately Most of the previous studies used the non-weighted index method to mark non-financial information disclosure and used statistical methods to measure the level disclosure of non-financial information In addition, the studies used a regression method to test the effect of factors on the level disclosure of non-financial information 1.4.2 Determination of the research gap From the above analysis, the author will detect the research gap for author’s research on non-financial information disclosure as follows: + To measure the level of non-financial disclosure of companies listed on the Vietnamese stock exchange in accordance with Vietnamese regulations, and according to GRI4 regulations of the world From that, to evaluate and compare the level of nonfinancial information disclosure of listed companies in accordance to Vietnam regulation with the world standard + To identify the factors from literature review and to explore new factors that impact on the level of non-financial information disclosure, and measure the impactation of each factor on the level of nonfinancial information disclosure of companies listed in Vietnam CONCLUSION FOR CHAPTER CHAPTER LITERATURE REVIEW 2.1 Overview of Non-financial information 2.1.1 Denifition of non-financial information Non-financial information is a broad concept that is reflected in the various definitions of researchers or professional institutions, such as Meek et al (1995), Robb et al (2001), Dominique (2009), Eccles and Krzus (2010), Fraser (2012), INTOSAI (2013) , European Commission (2013), Forser (2012 ), ICAEW (2008), Admiraal, Nivra, and Turksema Skouloudis et al (2013), Financial Times Lexicon (2015), E&Y (2015) As such, non-financial information is a broad concept, which may be qualitative or quantitative data, not measured in monetary terms, depending on the type of report that non-financial information is presented differently Therefore, in the dissertation, non-financial information is presented in the annual reports that includes the general non-financial information about the company, environment, social, corporate governance, and other non-financial information 2.1.2 The role of non-financial information 2.1.3 Users of non-financial information 2.1.4 Forms of non-financial disclosure According to the Association of Chartered Accountants of England and Wales (ICAEW), non-financial information presented in each report is different, as follows: Table 2.2 Types of Nonfinancial information in each report Types of reports Types of non-financial information Corporate responsibility Policy and performance covering the following issues: reports - Environmental, for example, carbon emissions - Social - Economic - Ethical Annual reports - Development and performance of business - Risks and uncertainties facing the company - Environmental, employment, social and community issues - Contractual relationship - Corporate governance - Internal controls - Reserve reporting - Research and development pipelines Regulatory reporting Report to managers on issues: presenting risks, pricing policies, or demonstrating compliance with legal requirements Detailed data in support of regulatory investigations and consultations Other reports Other operational information, for example, customer satisfaction and quality assurance Source: ICAEW, 2008 10 2.2 Guidelines of non-financial information disclosure 2.2.1 Guidelines for non-financial disclosure in the world 2.2.1.1 Under guidelines G4 of the Global Reporting Initiative (GRI4) 2.2.1.2 Under Singapore framework 2.2.2 Guidelines for non-financial disclosure in Vietnam 2.2.2.1 Under the Vietnames Accounting Standards 2.2.2.2 Under guidelines for disclosure on securities market 2.3 Non-financial Information Disclosure Measurement Method Hassan and Marston (2010) studied the disclosure measurement methods The authors examined 40 previous studies on measuring disclosure The results of the study show that: (1) The study presented measures of disclosure provided in prior studies classified into two approaches The first approach includes proxies for disclosure, which are not directly based on examining the original disclosure vehicle(s) The second approach provides measures of disclosure obtained by inspecting the original disclosure vehicle(s) (2) Frequency of methods used to measure quantity / quality of information disclosure The results of Hassan and Marston (2010) show that some studies can use two or more proxies for disclosure Statistical results suggest that the most used method in disclosure measurement was the disclosure index with rate 32% 2.4 Theoritical Background 2.4.1 Stakeholder theory Content theory Applied theory: Stakeholder theory is used to explain factors such as industry, financial leverage and foreigner liabilities which will affect the level of non-financial information disclosure 2.4 Asymmetric theory Content theory Applied theories The asymmetric theory is used to explain factors such as company's profitability, characteristics of CEO which will affect the level of non-financial information disclosure 2.4.3 Agency theory Content theory Applied theories Agency theory is used to explain factors such as company size, financial leverage, auditing firm, company age, foreign ownership, state ownership, institutional ownership, dual leadership structure which will affect the level of nonfinancial information disclosure 2.4.4 Signaling theory Content theory Applied theories Signaling theory is used to explain factors such as auditing firm, company’s liquidity, financial leverage, company's profitability, company age, company's listing time which will affect the level of non-financial information disclosure 12 29.3%, it belongs to below the average level (< 50%) whereas the lowest value of nonfinancial information disclosure index is 7.8%, which is low The highest value is 72.5% 3.2.2 Discussion 3.2.2.1 Discussing the level of non-financial disclosure according to Vietnamese regulations Survey results show that general non-financial information is considered necessary information, so that listed companies in the research sample disclosed adequatly 18/18 items, reaching 100% However, there are also few companies got the disclosure level very low the lowest is 6/18 items, reaching 33.3%, example of Khang An Real Estate Joint Stock Company (KAC) KAC did not disclose the nonfinancial information such as company introduction, the process of formation and development, business area, governance structure, management structure, executive board list Regarding environmental information, the compliance level of environmental information disclosure is high with 8/8 items, reaching 100%, but there are also non-compliant companies, environmental information is 0/8 items In fact, the survey results show that environmental information disclosure of listed companies is still very sketchy and coping Many companies just listed titles of items without detail disclosure such as Cu Chi Commercial and Industrial Developing Investment JSC (CCT), De Tam Joint Stock Company (DTA), Development Investment Construction Number JSC (DC2), Educational Book JSC In Hanoi City (EBS), Education Cartography And Illustration JSC (ECI), etc or there are cases where companies disclose nonfinancial information in an integrated report but the information items are not comply with regulation of circular 155/BTC and only declare compliance with environmental regulations such as Hydro Power Joint Stock Company – Power No.3 (DRL), Do Thanh Technology Corporation (DTT), FECON Corporation (FCN), International Gas Product Shipping Joint Stock Company (GSP), Nagakawa Group Joint Stock Company (NAG), Vinacomin - Nui Beo Coal JSC (NBC),…With seven social information items under Circular 155/BTC, companies has not reached the maximum level (7/7 items), only 20 listed companies disclose 6/7 items, approximately 4.14% research sample 3.2.2.2 Discussing the non-financial disclosure level in accordance with GRI4 Non-financial disclosures under the guidance G4 of Global Reporting Initiative are not mandatory in Vietnam, and listed companies may voluntarily disclose non-financial information such as environmental, social and corporate governance in accordance with this guideline According to the survey results, the level of non-financial information disclosure of GRI4 was low at 29.3%, reaching below the average level (