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CHAPTER RESEARCH INTRODUCTION 1.1 Reasons for choosing the topic In the world, the family business is the type of business that exists for a long time and accounts for the largest number The proportion of family businesses in many countries accounts for more than 70% of the total number of businesses and plays an important role in promoting economic growth and creating jobs for workers (IFC, 2008) Family businesses include all types of companies from small to medium-sized companies to economic groups operating in different industries and in many different countries On average, in developed countries, there are 40% 60% of companies exist as family businesses In Vietnam, the family business is a part of the private economy, an important driving force of the economy” According to the General Statistics Office (2017), the private economy contributed 42.9% of the country's GDP, an increase of 4% compared to 2016, contributing to 6.81% GDP growth compared to 2016 According to statistics of Forbes Vietnam, the 50 best listed companies in 2018 accounted for 70.8% of the market capitalization with a total profit of VND 106,949 billion, an increase of 34% compared to 2017, including the names of family businesses in the private economic sector such as Vingroup, Hoa Phat, Kinh Do In the Corporate Governance system, the Board of Directors (BOD) is one of the most important internal control factors Research on the BOD in joint stock companies often focuses on the relationship between the BOD’s characteristics and the company's Financial Results which is an important issue in the well-studied Corporate Governance in the world journals such as Family Business Review or issue evaluation reports on family businesses in different countries, regions and countries such as in the US, Europe, Asia However, in Vietnam, the number of research projects on family businesses are still limited, focusing on issues of the relationship between ownership structure including family ownership and operation results or succession process, transfer generation Therefore, the author chose the topic: "Research on characteristics of the Board of Directors affecting the Financial Results of family businesses in Vietnam" not only focused on the study of the BOD’s characteristics that affecting business results in family businesses, but also showing differences in BOD’s characteristics in family businesses and non-family businesses; the study concurrently has provided an empirical evidence on the influence of the Board of Directors on the business results of family businesses, which is a basis for managers, policymakers to give direction to develop the type of family business 1.2 Research purposes The overall objective of the research is to assess the impact of the BOD’s characteristics on the Financial Results of family businesses listed on the stock market The specific objective of the research is to systematize the rationale for family businesses to distinguish them from non-family businesses and evaluate the impact of the BOD's characteristics on the results of family businesses On that basis, some effective Corporate Governance policies are recommended for family businesses 1.3 Objectives and scope of research 1.3.1 Objectives of research However, for the research about family business, the research focuses on researching the definition of family business and comparing the difference between factors affecting the Financial Results or operation results between the two groups: family businesses and non-family businesses Most studies have shown that family businesses have better results and better performance than non-family businesses (McConaughy, 2000; Anderson and Reeb, 2003, Villalonga and Amit, 2006) The objective of the research is family businesses and the characteristics of the Board of Directors affect the company's Financial Results The research studies the basic theories about family businesses, the Board of Directors in family businesses and especially the approaches to defining family businesses in accordance with the practical oriented research in the context of family planning stock market landscape and real conditions in Vietnam Accordingly, family business is defined based on two criteria: (i) Relationship between BOD’s members and related persons; (ii) Ownership ratio of the BOD’s members and related persons In the world, the topic of family business is a topic that academic researchers as well as practical researchers spend great interest to form separate family business Besides, the thesis also delves into the factors that belong to the characteristics of the Board of Directors that affecting the business results of special companies, the thesis adds two specific factors of the family business: the number of family members in the Board of Directors and Family ownership ratio means family members of the Board of Directors and related persons For the company's Financial Results, the thesis uses two groups of indicators reflecting accounting values (ROA, ROE) and indicators reflecting market value (TOBIN’Q) to measure and evaluate the Financial Results 1.3.2 Scope of research - Scope of space: family-owned business have all conditions to list on the stock exchange according to the provisions of Circular No 29/2017/TTBTC At the same time, the disclosed information of these listed companies must ensure transparency and publicity on the financial statements, annual reports and the Corporate Governance reports - Scope of time: the thesis selects to study the characteristics of the Board of Directors and the Financial Results of family businesses in the period of 2012 - 2017 because from 2012 and earlier most companies without Corporate Governance reports On the other hand, after the economic crisis in 2008 to 2011 was a period of economic crisis with inflation issues, family businesses, mainly small and medium-sized companies, were in a very difficult situation From 2012 to the present, the macro economy has only had steady growth and development, the stock market has had positive developments and especially from 2017 - 2018 was the period when Vietnam's stock market reached have considerable development 1.4 New contributions of research 1.4.1 Theoretical contributions Firstly, the thesis provides a system of criteria for family business, in the context that the definition is still controversy Furthermore, it helps to identify the differences between family businesses and non-family businesses Secondly, the thesis asserted that family businesses should pursue agency theory about composition and structure of the BOD to achieve the better financial performance, like listed non-family businesses These are: (i) Ensure the separation between the position of the Chairman of the Board of Directors and the General Manager; (ii) Ensure diversity in the Board of Directors 1.4.2 Practical contributions The research results provide practical evidence on the relationship between the characteristics of the Board of Directors and the Financial Results in family businesses in Vietnam, especially showing the different characteristics of the Board of Directors in family businesses Firstly, financial results expressed through ROA, ROE, TOBIN'S ratios of family companies are higher than those listed on the market, especially profitability ratio for shareholders, return on equity (ROE) of listed family business is much higher than those of listed non-family business in the sample; Secondly, the duality, means chairman is also CEO, is up to 37.42% percentage of for family firms, higher than that of listed businesses in the whole market; Thirdly, the higher the percentage of ownership of family members on the board and related persons is, the better the financial results are This shows the difference compared to non-family companies, in family-owned businesses focusing on business ownership, focus on decision-making, positively affecting the company's financial results The research results are also the basis for the thesis in order to make recommendations and measures to improve the operational efficiency of family businesses in Vietnam 1.5 Research structure In addition to the introduction, conclusion, references and appendix, the structure of the research consists of chapters: Chapter 1: Introduction of research topics Chapter 2: Theoretical basis and overview of BOD’s characteristics that affect the Financial Results of family businesses Chapter 3: Hypotheses and research methods Chapter 4: Research results Chapter 5: Discussion of research results and recommendations CHAPTER 2: THEORETICAL BASIS AND OVERVIEW 2.1 Definition and approaches of family business Based on the overview of the definition of family business in the world and the summary of researchers' approaches, it is necessary to establish a family business definition that appropriate to the practical conditions in Vietnam in practical studies on financial topics A summary of the definition approaches showing the tendency of the third group approach suitable for the purpose of the thesis It is a practical approach, setting family business criteria through family ownership structure and the presence of family members in the Board of Directors or the executive board combined with minimum limits on ownership and control Summarizing the above studies, in order to give a full definition of family businesses from the subjective point of view of the author, it is necessary to understand the family businesses on two sides: - In qualitative terms: It is the relationship between family members that is governed by the family's strategic direction as well as the factors of authority culture - experience (The "soft" element) - In quantitative terms: Including the number of founding family members and participating in Corporate Governance activities and the percentage of ownership control of family members (The "hard" element) In terms of the number of family members, most definitions determine that more than one family member is involved in the business, on the company's BOD, and is usually the founding member of the company (Villalonga and Amit (2006), Rutherford et al (2008) The important question is to determine what ownership percentage of family members is? There is no unified definition to give a general family ownership rate However, there are also many studies on the relationship between family ownership and Financial Results of family businesses such as those of La Porta (1999), Shyu (2011), Anderson Reeb (2003), Gonzalez and et al (2011) Studies often use family ownership ratios ranging from 10% to 20% or 25% In Vietnam, there are similarities with Southeast Asian and Asian countries, according to the study of the companies listed in our country, it is possible to set the family ownership rate of 5% or more An important characteristic of family businesses, however, is the dominant nature expressed in the number of members and the proportion of family ownership When this ratio is low, the presence of family members will hold an important dominant position (as CEO or Chairman of the Board of Directors) or the presence of the majority of family members In contrast, when the family ownership ratio is large, the dominant nature still ensures even when the number of family members is less and does not hold important positions in the Board of Directors Family ownership ratio refers to the ownership ratio of a family member who is on the BOD or the executive board and related persons (parents, spouses, children and siblings) Therefore, summarizing the research results, a listed company is considered a family business when it satisfies one of the following characteristics: - A family member is the CEO or Chairman of the BOD and the family ownership rate accounts for at least 5% (Marleen Dieleman et al., 2013) - At least members participate in the BOD or the executive board (this family is the largest shareholder in the company) and the family ownership rate is at least 5% (Marleen Dieleman et al, 2013) - More than ½ positions in the BOD are held by family members (Shyu, 2011) - At least family member is involved in the BOD and the total ownership of the family (parents, spouses, children, siblings) exceeds 10% (Shyu, 2011) - Family members hold at least 20% of the company's shares or more This number includes shares of family members and subsidiaries / affiliates (La Porta et al., 1999) In order to clarify the characteristics of family businesses furtherly, the author also synthesized research to compare the differences between family businesses and non-family businesses in the following table Table 2.2: Differences between family business and non-family business Criteria Family business - In the long term Orientation - Interested in the long term profit and vision than in the short term Target - Prioritize social and community priority goals with non-financial goals such as family stability, continuation of family ownership, recruitment of family members, etc Value and - Mission statement is regarding mission the reputation, traditions of the Non-family business - Appreciate results in the short term - The main objectives are business and finance such as profit maximization, equity efficiency, asset efficiency Depending on the characteristics of each company Criteria Family business family, having respect for the original mission and values created by the founders Longevity - Long time - Appreciate the succession of Development generations in the family perspective Non-family business and depending on the views of the owner and the executive board - Short time - Interested in raising stock prices, profits for investors, and maximizing profits in the short term Trust - Sustainable and deep trust - Less sustainable than family among family members of the business same bloodline Altruist - Emphasizing altruist, long-term - Clear relationship at work for collective goals can be more the purpose of maximizing profit valuable than profits in the business Business - Most are small, medium-sized - Including small and medium scale and small businesses businesses, large-scale businesses Source: Author synthesis 2.2 The study theories about Corporate Governance and family business 2.2.1 Agency Theory This theory is often applied in companies that have a clear separation between management and owners and are used to explore the relationship between ownership structure and management In family businesses, the management of the company is mainly a family member, so the cost of representation will be minimal when decisions not really affect the performance of company The positive side of agency theory is that it deals with the separation of ownership and control The limitation of agency theory is that agents can have their own interests, opportunistic behaviors When the company is not managed by the owner, it is easy to encounter organizational instabilities and conflicts that can arise from this because these two benefits may not meet According to Fama and Jensen (1983), “A company manager is the representative of the owner and when the agent cares about and appreciate their personal interests, the true benefits of the company will be threatened" However, due to the characteristics of family businesses, shareholders are family members and often members of the BOD or CEOs, who are involved in Corporate Governance activities, the conflict between shareholders and managers is almost eliminated If the family business is managed by the owner, they will work their best to maximize profits and maximize the value of their assets because the success or failure of the company is tied to their personal assets Therefore, studies on the agency theory in family businesses often think that the separation between the position of Chairman and CEO is no longer important However, most studies believe that increasing the number of independent BOD's members can lead to an increase in business results and performance in family businesses In addition, scholars studying family businesses also say that the result of the ineffective business operations of family businesses is due to unprofessional management, inconsistent leadership or complexity relationships in family (Keanon Alderson, 2011) The characteristics of the companies based on agency theory, the Corporate Governance system should ensure that the Chairman of the BOD and the general manager are separate people The ownership structure of these companies is dispersed ownership - meaning that the company is diversified by a diverse group of shareholders including individuals, organizations, and the BOD of these companies is the representative for this diverse ownership structure, as well as a large proportion of external BOD's members or independent ones 2.2.2 Stewarship Theory The stewarship theory of Davis et al (1997) is in contrast to the agency theory According to this theory, executives are not opportunists but persons who want to their jobs well and want to be "stewarship" for the company's assets, so Corporate Governance focuses on creating favorable conditions, empower and integrate the roles of the Chairman of the BOD and the General Manager to increase efficiency and create high profits for shareholders For family businesses, the stewarship theory shows that families take care of their own businesses They are responsible for supervising the company on the basis of respect for the previous generations for the successful development of the next generation Regarding the Financial Results and performance of the company, this theory supports the notion that the general manager or CEO is also the Chairman of the BOD because they are "stewarship" and willing to work to increase results and efficiency for the company family businesses have the capabilities, resources, and relationships that nonfamily businesses not have and cannot grow The stewarship theory also said that the family company can achieve development goals should bring experts with profound knowledge into the BOD The members of the Board of Directors or outside managers are selected to support the missing competencies and skills of family members All studies show that decision-making will be greatly improved if family businesses have a BOD with capacity, experience, qualifications and dynamism and creativity Five sources of capital the family company has helped explain the positive effects from the resource dependence theory: human capital, social capital, stability, viability and governance structures Thus, the family businesses' advantage stems from the interaction of the family and the business in the unique way that they manage, evaluate, acquire, eliminate and utilize the necessary resources The companies based on stewarship theory in which the Chairman of the BOD and the general manager may be the same person - the duality; the ownership structure of these companies is the concentrated ownership - the company is owned by a few large and controlling shareholders, and the BOD of these companies will represent the centralized ownership structure and control as mentioned above, limiting the presence of those who are not has great ownership, or independent BOD members 2.2.3 Stakeholder theory This theory emphasizes the role and interests of all parties involved in the operation of a company; Customers, employees, communities, trade associations, suppliers, governments, investors or institutions must all benefit and have a role for the company For the family business, the stakeholder theory is not supported as much as the agency theory or the stewarship theory Recently, stakeholder theory created the interest of researchers in the family business Like non-family businesses, stakeholders are all people who have roles and interests related to the company's operations or may be affected by the company such as shareholders, employees, customers, suppliers or business partners Differences in family businesses relate to "altruist" among those involved in a "family" relationship However, the stakeholder theory appreciates the role of women members in the BOD These members are the ones who create gender diversity with many new business ideas and the ability to deal with tasks in a flexible, accessible and established way with their partners 2.2.4 Resource Dependence Theory Resource dependence theory also explained the competitive advantage of many family businesses compared to non-family businesses This theory holds that 2.3 Overview of research and research gaps On a theoretical basis, practical studies have been widely used to build access frameworks develop research as well as to develop research hypotheses to predict the relationship between Corporate Governance and performance of the business In the world, there are many researches on BOD characteristics in joint stock companies in general and family businesses in particular The majority of research focused on research subjects is joint stock companies A number of trends and research results can be summarized as: Firstly, researching on the BOD size and the Financial Results In terms of this research, there are always conflicting results and specially focus on comparing the differences between family businesses and non-family businesses Secondly, researching on leadership duality (CEO and Chairman of the BOD) and the relationship with the Financial Results Thirdly, researching on the independence of members of the BOD Fourthly, researching on the diversity of the BOD (gender, age, capacity, experience, qualifications ) and Financial Results of the company For family businesses, in addition to some similar research results of joint stock companies, the directions showing the differences in the research on the BOD's characteristics of the family business are: Fifthly, primarily researching on analyzing the relationship between family ownership and the efficiency of family businesses Sixthly, researching on the relationship between the structure of the B Directors and the performance of family businesses in Vietnam Seventhly, researching on the processes or intergenerational transfers in Vietnamese family businesses 2.3.3 Research Gaps Firstly, there are many theoretical and practical research methods for family business research objects in the world However, the biggest argument in the family business field is how to define a family business to compare with a nonefamily business Each definition has different criterions will affect to research results Therefore, thesis will provide general definition which is suitable with practical Vietnamese situation and experimental research methods for Financial Results in family business If one definition of family research is not clear and lack of essential conditions in variable number research, all hypotheses will not have science meanings Secondly, most research about Corporate Governance and BOD characteristics in Vietnam focus on listed joint stock company BOD characteristics research in family business is the foundation of finding basic specipalities, differences between BOD characteristics in Vietnamese family business and non-family business Thirdly, most family business in Vietnam is SMEs or unlisted company Therefore, listed family company research is essential for effective Corporate Governance and orientation for other company and management agency to support and promote family business development in Vietnam Experimental research results about the effects of BOD characteristics to Financial Resutlts will not be the same because of different time, space and research methods It is still necessary to provide more practical proof to enhance Financial Results and promote effective performances of BOD in family business CHAPTER HYPOTHESES AND RESEARCH METHODS 3.1 Research hypotheses 3.1.1 BOD size There are two research methods that distinguish different opinions about the relationship between BOD and Financial Results The first opinion is BOD size has a reverse relationship with Financial Results A large size of BOD will be a determinant which decrese Financial Results of that company (According to Dalton and Partners, 1992; Lipton and Lorsch, 1992; Yermach, 1996) According to research of Mohammad Badrul Muttakin (2010), A large size of BOD combines with family control will reduce the effective performance of the company A big BOD has to face with arise problems of representative costs (Jensen and Meckling, 1976) On the other hand, a big BOD will create the dependence, subjectivity in effective management control Information communication will be also complex and all decisions will be prolonged They will make Financial Results decline Some research of Mishra and partners (2011), Ibrahim and partners (2011) show the smaller size of BOD will create better management for company which have family controls This opinion is same compare with some research results in Vietnam with general listed company It is a proof for reverse relationship between BOD size and performance results of the company (Vo Hong Duc and Phan Bui Gia Thuy, 2013; Truong and partners, 1998) It might be understood by differences in management style of Vietnam which is effected by “Power distance” When BOD size is bigger, the authority and teamwork of each personal in BOD will be decreased The second opinion shows the same dimensional relationship between BOD size and Financial Results of the company The bigger size of BOD, the better Financial Results (Pfeffer, 1972; Klein, 1998; Coles and partners, 2008) Big size of BOD will create the better support and advisory for the Board of Managers (Klein, 1998) Moreover, an BOD with a big size will collect information easier to make a decision, which will affect positively to Financial results (Dalton and partners, 1999) Some researches about family business show the big size of BOD combines with family control will increase efficiency because they have experiences, expertise knowledge and social relationship will empower for family business (Astranchan, 2002; Setia-Atmajia, 2009) In the first stage of building a company, all decisions mostly are made by the founders and family members so a small size BOD will be more effective However, in other next stages, when the size of the company is bigger and the performance is more complex, a bigger size of BOD will adapt more easily for business fluctuations Therefore, it will be a difference between most of research in Vietnam about BOD size with the object is all listed joint stock company Thesis supports the opinion of the positive effect of BOD size to Financial Results of family company based on the family business features, benefits of directors and dedication abilities to company power The hypothesis is set: H1: BOD size has the same dimensional relationship with Financial Results of family business 3.1.2 Leadership duality Leadership duality and concurrent position of BOD and Directors researches show different results even contradictory results According to Dahya and partners (2009), shareholders and investors think that Chairman of BOD should not concurrently hold the position of General Director or Management Director because this concurrent position will lead to personal assets appropriation affecting shareholders’ benefits Therefore, the separation of BOD Chairman and CEO of company will contribute to the protection for the minority shareholders from the acquisition of BOD whose members is family members In Europe, there is up to 84% of companies in Finland, Germany, Netherlands, Sweden and United Kingdom have the separation between the function of Chairman BOD and CEO (Heidrick and Struggles, 2009) According to Fama and Jenson (1983) opinion, the concurrent position will make BOD lose their management control ability, which lead to the increase of representation costs Researches supported this opinion can be listed: Bolton research (2006), Vo Duc and Phan Thuy (2013), Le Quang Canh and Nguyen Vu Hung (2015) However, there are still some researches proved the same dimensional relationship between the concurrent position and financial results of business such as research of Hermalin and Weibacj (2003), Bhagat and Black (2002) Some researches in Vietnam showed that the separation between Chairman of BOD position and CEO will ensure the control, reduce performance costs and enhance management ability, which affect positively to financial results (Dao Thi Thien Trang and partners, 2014; Vo Hong Duc and Phan Bui Gia Thuy (2013a) The concurrent position help BOD can control the Board of Director independently and become the real representative for all shareholders and the business owner In family business, all family members have rights to control BOD and hold important positions such as Management Director (Porta and partners, 1997) Therefore, the leadership duality is more popular in companies which have the control from family than non-family companies (Lam and Lee, 2008) The leadership duality in family business management will provide more opportunities for managers and taking over the ownership of minority shareholders, which affect negatively to financial results On the other hand, this concurrent position will create a powerful basis and strong control ability, which against the power of outside team and protect minority shareholders from the acquisition of family business Therefore, this research will support for the opinion of the leadership duality is only good for company without family control and has reverse effect to financial results of family business The hypothesis will be: H2: There is a reverse relationship between the concurrent position of BOD Chairman and CEO and Financial Results of family business 3.1.3 The proportion of independent BOD members In family business, members of BOD actually are family members The independent members take an important role when the company develop to a complex size According to a research in US, there are more than 80 companies having up to 3rd generation family ownership, the appearance of one BOD member without family controls will be important element to the existence of these companies (Fred and Alden, 1998) In Corporate Governance point of view, the representative theory and other theories show the role of independent BOD members These members will contain the family control in development orientation of the company These members will not only utilize the knowledge, skills, experiences and professional abilities which family members are lack of but also increase the discipline of BOD meetings, focus on the business strategies without problems of family The independent members also take the medium role when family members have opposite opinion in business matters Some experimental researches about the relationship between the proportion of independent BOD members and financial results have different conclusions According to Anderson and Reeb (2004), Daily and partners (2003), the independent members have positive affect to financial results of family business, their appearance in BOD can reduce arguments of management shareholders and minority shareholders, they can prevent family members from dispossessing assets through excessive compensation, special dividends or unwarranted perks However, other researches show that the independence in BOD will affect negatively to company performance (Setia-Atmaja and partners, 2009; Mohammad Mittakin and partners, 2010) Research of Chen and partners (2005), Ibrahim and partners (2011) have opposite opinion, there isn’t any effect to financial results from the proportion of independent members in BOD They argue that independent members are nominally not really independent, not enough to perform the function of managing, supervising and protecting minority shareholders before family members Therefore, the studies show different results on the relationship between the proportion of independent board members and business results due to differences in space, time and reliability of data used However, from the perspective of representative theory and other management theories implies that independent BOD members will positively impact on the results of joint stock companies and listed companies in general Because of the above foundations, the research hypothesis is set: H3: The proportion of independent BOD members has positive impact on financial results of the family business 3.1.4 The diversity in BOD members There is no unified definition of diversity of the BOD but it is often can be understood from a demographic view More simply, the diversity of BOD is that there are many different people with many different demographic factors within BOD of the company such as age, race, gender, education and profession standards, independent members, foreign members or experience and attitude The diversity of BOD is often approached on theoretical points of view: (i) The theory of representatives; (ii) Resource dependency theory According to the theory of representatives, BOD is set up to minimize the "representative costs" through the structure and composition of BOD Thus, the diversity in the members of the BOD will contribute to reduce representative costs From the perspective of resource dependence theory, “BOD has a role to access the necessary resource for the success of the company, therefore it is essential to utilize the resources of intelligence, creativity as well as the relationship of those who can provide the resources needed for the existence and prosperity of a company.” Therefore, the diversity of BOD will bring some benefits to family companies: (i) Firstly, creativity and different perspectives create a larger number of opinion and solutions for any problems (Watson, Kumar and Michaelse, 1993) This diversity will also limit the ability of the group thinking phenomenon, members can contribute information from a variety of sources (ii) Secondly, accessing to resources and connections By selecting members of BOD with different characteristics, the company can easily access to different resources due to the support from a diverse range of industries, experience, and qualifications (iii) Thirdly, public relations and investor’s relations Some family businesses may benefit more from complying with social expectations than non-family businesses In the world, many countries' legal documents require an BOD of joint stock companies to have a diverse structure, gender, age and ethnic group with the purpose of creating a diverse voice, diverse experience, capable of bringing resources and relationships that can benefit the company However, there are also potential costs surrounding the diversity of the BOD According to some research documents on social psychology, they show that different demographic limits communication between small groups, creates conflicts and reduces attractiveness among individuals Therefore, the diversity in BOD can lead to conflicts and lack of cooperation among members of BOD Some conclusions from the research results about the diversity in the composition of the Administration affect financial results: H4a: The proportion of women in the Board of Directors has a positive impact on business results of family companies H4b: Educational level is positively correlated with business results of family companies H4c: The age of the Board members has the same dimensional relationship with the family business results H4d: There is a negative correlation between the proportion of foreign members in BOD and the business results of family companies 3.1.5 Ownership rate of family members on BOD The research of the relationship between family ownership and company performance is based on the representative theory (Jensen and Meckling, 1976), "There is a conflict of benefits among person who authorized, which leads to the authorizing person has to face the acts of opportunity and moral risks of the representative” Representation and control problems in family companies is reflected in the number of family members and the ownership ratio of board members and related individuals The research results will vary depending on the context and time of the research However, most of the studies focused on the impact of family ownership on the financial results and the endogenous relationship between these two factors One of the characteristics of a family company is the dominance shown by the high concentration of ownership of family members in BOD The concentration of ownership will empower family members to help them achieve their targets better than the minority shareholders Therefore, the control of family can minimize or eliminate representative issues stemming from conflicts of shareholders and managers that help proactively control the company's operations, positively affecting the financial results (Maury, 2006) However, there are also opinions that family ownership reduces the performance of the company due to the family nature has conservative mind, arbitrary control that harms the benefits of minority shareholders and company benefits Research hypothesis of the thesis: H5: Ownership of family members in BOD has a positive relationship with the family business results 3.1.6 The Proportion of family members in BOD The percentage of family members in BOD of family companies is determined by the number of family members in BOD among the total family members According to some studies, when the number of family members in the Board accounts for a half of the seats in BOD, that enterprise has family ownership (Jonchi Shyu, 2011) In addition, even though the family has only one member of BOD, their ownership rate and related people accounting for a large proportion they are also considered to be dominant in making decisions For family companies, due to the “Familiess” feature, the participation rate in terms of the number of family members in BOD has directive feature in reducing management control and especially greatly influencing the making strategic decisions affecting the company's financial results Thus, this relationship is usually linear relations in the positive direction H6: The number of family members in BOD has a positive relationship with Vietnamese family business results 3.2 Research methods 3.2.1 Qualitative research method The author uses the desk research method to find a definition of family company in accordance with the research direction of the thesis, the author has synthesized practical studies in many regions and countries in the world especially in Asian countries, combined with the author's review summarized, the author systematized into approaches and selected the approach followed experimental research to determine the criteria of a family company Besides, the author also uses professional solution method to perform phases before and after having the results of the research to reinforce and support the explanation of research results in accordance with the reality in Vietnam The author interviewed 10 experts including: experts who are managers from the head of the department or above in the State Security Commission; experts are leaders of businesses (Chairman or members of BOD, CEO or members of the Board of Managers); experts who are consultants, supporters and legislators of Corporation Governance; experts are researchers on the same subject in the University Content of general interview in the appendix of the thesis The results of the thesis and expert interview contents are the foundation for the author to make some recommendations and discussion in chapter 3.2.2 Quantitative research method (i) Research model: The research model of the thesis is formed based on the basis of an overview of foreign and domestic documents combined with the identification of operating characteristics of family business to show the relationship between BOD features and financial results of family business In order to orient the factors that belong to the characteristics of BOD which may affect the business results of the listed family business, the thesis inherited the research results from Table 1.3 summarizing the research overview in the chapter with groups of factors affecting business results are: (i) The size of BOD; (ii) The leadership duality; (iii) The proportion of independent BOD members; (iv) The diversity of BOD These results are inherited from previous studies, and applied in Vietnamese conditions Especially, the thesis has pointed out that there are groups of factors that are distinct characteristics expressing the basic characteristics of family business, which help distinguish them from non-family business about characteristics of the ownership ratio of family members in BOD and the percentage of family members in BOD will also affect the company's financial results Regarding to dependent variables, financial results are measured based on two groups: (i) Indicators reflecting accounting book value (ROA, ROE); (ii) The index reflects the market value (Tobin’Q) according to the research of author Pham Nguyen Hoang (2013) To ensure the rigor of the research model, through a preliminary discussion and consultation with a number of experts, the control variables reflect the characteristics of the company, firm size, growth rate, number year of operation, number of years of listing in stock market are added to the model The size of BOD The Leadership duality Financial Results The Proportion of independent members in BOD - ROA ROE - TOBIN’Q The Diversity of BOD The ownership ratio of family members and related person The proportion of family members in BOD - Size of company - Growth Rate - Operating years (Age) - Listed years in stock market Source: Author Figure 3.1: Thesis research model (ii) Data and research sample The thesis uses secondary data, information collected from types of reports: Financial statements, Annual reports and CG reports For listed companies, the requirement to disclose information on the stock market is one of the important contents to comply with the Securities Law and Circular No 155/2015 TT-BTC dated 06 October 10, 2015 by Ministry of Finance The research sample of the thesis is family businesses satisfied the identification criteria and having sufficient information for research in the overall listed companies on both HNX and HOSE The total number of listed companies as announced by the SSC accounted for to December 2017 was 728 companies, of which HNX had 384 companies and HOSE had 344 listed companies Regarding to the enterprise structure, according to the report of the Steering committee for enterprise Innovation and Development under the Ministry of Finance evaluating the situation of restructuring, equitization, divestment, restructuring of state-owned enterprises (SOEs) and enterprise development in the first months of 2018, only 150 out of about 700 SOEs enquitized listing Thus, out of the 728 listed companies, the remaining 578 are privately owned Regarding to the number of family businesses, the thesis has filtered out 57 companies meeting the family identification criteria according to the thesis's research Thus, 57 family companies in the sample show that family companies account for 9.87% in the private business sector This is a relatively small percentage but suitable for studies in China - a country that has many similarities with Vietnam in culture, tradition, financial system and ownership structure In Chinese stock market, the total number of listed companies at the end of 2017 was 3485, of which private ownership accounted for 65% that means 2265 businesses in which family companies accounted for 10% of the total private companies (DRC/ERI-OECD, 2005) On the other hand, in terms of the capitalization ratio of family businesses to the total market capitalization from 2012 - 2017, it ranges from 18-22% Thus, with only 9.87% of the number of family businesses but accounted for 22% of the total market capitalization This is the foundation to ensure the representation in the sample research Regarding to the study period, research was done in the period of 2012 2017 to ensure the latest updates in terms of data, the companies listed before 2012 and the earlier are also removed Thus, with 57 family companies, the data collected over years (2012 - 2017) will create a well-balanced balance sheet with 342 observations This is data that also ensures the representation relatively (iii) Methods of data analysis The thesis uses descriptive statistical methods, correlation analysis methods, regression analysis methods with models: (i) The least square estimation model (Pooled OLS), (ii) Fixed Effects Model (FEM); (iii) Random Effects Model (REM) At the same time, to select the appropriate model, the thesis uses the following tests: (i) Testing the equality of fixed effects - Redundant Fixed Effects; (ii) Hausman test; (iii) Verify the suitability of the regression function; (iv) Durbin Watson test (DW) CHAPTER THE RESEARCH RESULTS 4.1 The overview of stock market and corporate governance of listed companies in Vietnam 4.1.1 The overview of Vietnam's stock market After nearly 20 years of establishment and development (2000 - 2018) Vietnam stock market has changed and developed strongly, increasingly improved in structure, expanded in size, become a capital channel in medium and long term which are important in the economy In terms of number of listed companies, there was a steady growth on both HNX and HOSE About market capitalization scale: In the period of 2011 - 2017, the market capitalization value had been increasing steadily over the years Particularly, 2017 was the year when Vietnam's stock market experienced a great leap forward with the growth and stability of the macro economy In 2018, according to the SSC's report, the market capitalization size reached more than 3.9 million billion VND, increased 12.7% compared to 2017, equivalent to 79% of GDP in 2017 and 71.6% of GDP in 2018, exceeding the target of 70% of GDP set out in the Vietnam stock market development strategy for the period of 2011-2020 4.1.2 Management of Vietnamese listed companies’ evaluation Evaluating the corporate governance of Vietnamese listed companies from 2012 - 2015 According to the report "ASEAN Regional CG Scorecard: Reports and evaluation of each country", the overall evaluation results show that the CG situation in years from 2012 to 2015 show that all areas recorded improvement In recent years, the situation of CG management of listed companies in Vietnam are not as good as other countries in the region Corporate governance of Vietnam listed companies in 2018 evaluation 2018 is the first year Vietnam has launched a set of CG criteria applied to all Vietnamese listed enterprises (VCGS) The CG evaluation sample in 2018 included 485 companies listed in the VNX Allshare index in April 2018 with a total market capitalization of April 23, 2018 is 2,895,009 billion VND, accounting for 91% of the total capitalization of the market These enterprises are categorized into groups: large-scale listed enterprises (including 50 enterprises), mediumsized listed enterprises (including 150 enterprises) and small size listed enterprises (including 285 enterprises) Summary of some results of the CG review in 2018 of Vietnamese listed companies are as follows: Regarding to the distribution of CG scores, it was found that the majority of businesses scored between 50 and 70 points with 335 businesses accounting for 70% of the total enterprises Among them, there are 17 enterprises with scores above 70 (accounting for nearly 4% of the total enterprises); 97 enterprises had a score of 60 - 70 points; 238 companies had scores of 50-60 (accounting for nearly 4% of the total number of enterprises); 133 enterprises had scores lower than the average of 50 points (accounting for 25% of the total number of enterprises were evaluated.) This result shows that the situation of implementing CG followed Vietnam's CG score form (VCSG) is still not really good because the number of enterprises with high scores accounts for very little, the number of enterprises below the average score still accounts for ¼ of the total number of businesses evaluated This is not a challenge but also a requirement for the majority of listed company in Vietnam today Overview of CG scores in Vietnamese listed companies in 2018: The average CG score of all businesses is evaluated at 52.2% of the total score compared to the maximum score of 104 points The assessment of the relationship between corporate governance and performance effectiveness is assessed with 162 companies divided into with the highest, average and lowest CG scores with a statistical significance of 5% The results in Table 3.4 show that the companies with higher CG score will have higher performance effectiveness This shows a positive correlation between CG score and performance effectiveness of listed companies Table 4.4: Corporate Governance and Performance Effectiveness CG scores group Tobin’s Q ROA ROE The Highest 1,44 7,7% 14,9% The Average 1,02 5,3% 11,5% The Lowest 0,96 4,7% 9,8% Source: Evaluation of CG of Vietnamese listed company in 2018 report 4.1.3 Family business management in Vietnam Since “Revolution” in 1986 and especially in recent years, Vietnamese family businesses have affirmed their position with business success and great contribution to social and economic benefits In Vietnam's stock market, when listing the list of 50 - 100 richest people every year, the names of these businesses are also associated with family companies For companies listed on the stock market, family businesses are primarily private companies that participate in Vietnam's stock market in the form of group joint stock companies In the ownership structure of enterprises listed on the stock market in our country, the State ownership accounted for 24%; foreign ownership is 18% and the rest is 58% other ownership, most of which is private ownership The analysis results show three important issues in Corporate Governance of family in Vietnam: Firstly, there is a lack of professionalism in doing business of family businesses Secondly, the composition and structure of BOD in family businesses in Vietnam are not effective Thirdly, the issue of succession or transfer planning between generations in the family businesses 4.2 Descriptive statistics of the research sample From the observed results, the thesis compares to other studies in Vietnam on the characteristics of BOD in the general listed enterprises in the whole market Especially, comparing with the CG score and BOD characteristics in the "CG Report of Vietnamese listed companies 2018" to clarify the characteristics of BOD in family businesses with listed join stock companies on the market Compared to listed companies on the market in 2018 in the “Evaluation report of Vietnamese listed companies 2018 '', family businesses in Vietnam have positive financial results in group of companies which have average CG scores (ROA in this group is 5.38%; ROE is 11.42%, TOBINQ is 1.02) but it is still lower than the group of companies with the highest CG score in 2017 This shows that companies family businesses in Vietnam still need to improve on CG issues in the near future Thus, from the results analyzing descriptive statistics research sample, some characteristics of BOD can be drawn from the family businesses in Vietnam: - Firstly, family businesses' financial results are better than those listed on the market but still belong to the group with CG scores that need to improve operational efficiency - Secondly, the phenomenon of the leadership duality can be considered as a distinctive feature of the family businesses compared to other companies in the market when up to 37.42% of the positions of the Chairman of BOD cum CEO or Director executive director This is suitable with the characteristics of the family businesses - "Familiness" (family characteristics) confirms the dominant factor in decision making for a company to be considered a family company - Thirdly, the percentage of family members in BOD as well as the family ownership ratio of the Board members and related persons is quite high in family companies The research results are similar in some regional countries, especially Asian countries on the Singapore stock market Market Accounting view view TOBINQ ROA ROE Independent Variable The size of BOD The Leadership Duality The proportion of independent member in BOD The proportion of woman in BOD The education level of BOD Average age of BOD The proportion of foreign members in BOD The family ownership ratio in BOD The proportion of family members in BOD Control Variable 10 The size of the company 11 Operating year(s) 12 Listed in the stock market year(s) 13 Growth rate 14 Financial Leverage (+) (-) (+) (+) (-) (+) (+) (+) (+) (-) (+) (+) (-) (-) (-) (+) (+) (+) (+) (-) (+) (-) (-) (-) (+) (+) (+) (+) (-) (+) (-) (+) (+) (+) (+) Source: Data processing results of the author Note: The research results in Table 4.2 were performed with statistical significance at 1% and 5% 4.3 Main research results of the thesis Table 4.2: Research Results of the Thesis Summary Estimated coefficient of Hypothesis Elements financial results (correlation/sign) (+) (-) CHAPTER RESULTS DISCUSSIONS AND SOME RECOMMENDATIONS 5.1 The research results discussion In order to unify the results of the research thesis and explain the relationship between the characteristics of BOD and the financial results of family businesses based on business results with two main criteria: ROA and ROE Firstly, independent variables have the same directional effect as the financial results The results show that there are independent variables that have a positive impact on ROA, ROE results: BOD size (BODSIZE), Independent members in Board of Directors (INDEP), Ownership ratio of BOD members and related individuals in the family (BODOWN), the percentage of women members in the Board of Directors (FEMALE) These variables are all observed in the FEM estimation model when the dependent variable is ROA, the FEM estimation model when the dependent variable is ROE only finds the positive effect of one variable, BODSIZE Among these variables, the size of the Board of Directors has the most influence on the financial results When the number of Board member increases by 1%, the average value of the ROA increases to 25.93%, and if the number of Board member increases by 1%, the average value of the ROE increases to 60.83% (assuming the factors other unchanged) Thus, the research results support the hypothesis that H1 is the size of the Board of Directors having a positive relationship with the results of family businesses The impact level of the next variables, BODOWN, FEMALE, INDEP, respectively, has a positive impact on the outcome of ROA The study results show that if the family ownership ratio increases by 1%, the average value of ROA will increase to 0.608%; The female ratio in the Board of Directors increased by 1%, the average value of ROA increased to 0.27%; The ratio of independent members in the Board of Directors increased by 1%, the average value of the ROA increased to 0.123% The dissertation found evidence when researching the Top 10 companies with the highest ROA shows that the average ownership rate of these companies is 34% higher than the average of all family companies in the sample rescue is 24.83% Secondly, the independent variables have the opposite effect to the financial results There are independent variables that have a negative impact on the business results of family-owned listed companies in Vietnam: The leadership duality (DUALITY), average age of BOD members (AGE), percentage of members foreign Board of Directors (FOREIGN) This result is found in both cases of FEM estimation model when the dependent variable is ROA, ROE Among these three variables, the biggest influence is the AGE variable, if the average age of the board member increases by 1%, the average value of the ROE decreases by 274.63% and if the average age of the board member increases by 1%, the average value of the ROA decreases by 112.13% The next level of influence is DUALITY variable, if the CEO concurrently hold the chairman of the BOD position, the average ROA value will be decreased by 4.76% and the average value of ROE will be decreased by 10.27% Finally, the positive effect of the FOREIGN variable, if the percentage of foreigners in the Board of Directors increased by 1% if the percentage of foreigners in the Board of Directors increased by 1%, the average value of the ROA decreased by 0.39%, then the value The average of ROE decreased by 0.82% For the DUALITY variable, the thesis compares the average ROA of the two groups of companies with a high 6.2% concurrent experience (5.1%) Similarly, the results showed that the group of companies with the leadership duality was lower than the group of companies that did not have this phenomenon Thirdly, the influence of control variables on the financial results For control variables, both FEM estimation models when the results are measured by ROA and ROE indicators have similar results on the influence of factors The two control variables having the same directional impact on the financial results are the number of operating years and the growth rate, the two variables having the opposite effect on the financial results are the number of years of listing in stock market and firm size In addition, there are some variables in the model that have no impact on business results of family businesses These are the education level variables of the Board members (EDU), the percentage of family members in the Board (FAMILY) and financial leverage (LEVER) 5.1.2 Conclusion and discussion of research results Hypothesis H1: The size of the Board of Directors having a positive relationship with the results of family-owned listed companies which is accepted in both models with dependent variables, ROA and ROE Hypothesis H2: There is a negative correlation between the duality of the position of the Chairman of the Board of Directors and the CEO to the results of family businesses which are accepted in both models with dependent variables, ROA and ROE Hypothesis H3: The percentage of independent Board members having a positive impact on the performance of the family businesses which is accepted in the business results model as measured by ROA Hypothesis H4: Regarding to the diversity in the members of the BOD: Hypothesis H4a: The percentage of women members in the Board who have a positive impact on business results of family companies which is accepted in the business results model as measured by ROA Hypothesis H4b: The age of the Board member has the positive influence on the financial results of the hypothetical family companies that are rejected in both cases the financial results are measured by ROA and ROE Hypothesis H4c: There is a negative correlation between the percentage of foreign members in the Board of Directors and the results of family companies that are accepted in both cases the financial results are measured by ROA, ROE However, the percentage of Board members who are foreigners is very small, so this result is almost not statistically significant Hypothesis H5: Ownership of family members in the Board of Directors and related persons positively influences the results of family companies that are accepted in the business results model as measured by ROA 5.2 Recommendations 5.2.1 Recommended for family-owned listed businesses Firstly, it is necessary to professionalize the board of directors in family companies: (i) build an effective and reasonable BOD scale; (ii) the positions of the Chairman of the Board of Directors and the CEO need to be separated; (iii) it is necessary to ensure the proportion of independent Board members in family businesses; (iv) ensure a BOD structure with appropriate female membership in family businesses; (v) Family businesses in Vietnam should rejuvenate the BOD members Secondly, build an effective family businesses governance mechanism The mechanism and regulations of the family business must be institutionalized by specific activities such as: Defining the values, the mission statement and business orientation of the family, separating the issues on the family and business; Develop a list of action rules in the family; clearly define powers, responsibilities and relationships between family members, the Board of Directors and the Board of Managers; Adding independent members outside Board members who are not under family control to neutralize conflicts, family conflicts and enhance discipline in the company; Constantly innovating in thinking, in governance to improve the ability to approach the industrial revolution 4.0 5.2.2 Recommendations to regulatory agencies Firstly, the group of control measures to improve the financial results and performance of family businesses: strict regulations and controls to ensure transparency, especially for the disclosure of information in annual reports and CG reports for family businesses; sanctions should be strictly imposed on businesses that violate the transparency and quality of information disclosure; set up a separate set of corporate governance rules for listed family business Secondly, the group of support measures to support the development of family businesses: Expanding and developing separate training and coaching programs for family businesses according to international standards; forming individual family CGs and guiding information disclosure on the basis of good family CG practices around the world to help family businesses “organize effective CGs to meet the requirements of the law and avoid the objective fluctuations affecting businesses.” CONCLUSION Besides finding axprimental research on the relationship between the characteristics of the Board of Directors and the financial results of listed family businesses in Vietnam, the thesis also summarizes the definitions of family companies to select suitable one for the research subjects of the topic Based on the overview of domestic and foreign research to find the "research gaps", the thesis develops research hypotheses, examines the impact of the Board's characteristics on the financial results of listed companies having family ownership Research method combining qualitative and quantitative methods using estimation model for table data is Pooled OLS model, FEM model and REM model then use tests to select the appropriate model Qualitative research with in-depth interviewing techniques with research-oriented experts on CG, policy makers, business managers, supporting the development of documents to reinforce research results and giving some recommendations The thesis has given some research results as follows: Firstly, developing a family company definition suitable to the subject of experimental research on financial results is that the company has one of the following characteristics: Secondly, a research of the characteristics of the BOD affecting the financial results shows the different impacts in the models when the financial results are measured by ROA and ROE Thirdly, the research results show the different characteristics of the Board of Directors in family companies: (i) The financial results of family companies are better than those listed on the market but still belong to the group having a CG score needs to improve operational efficiency; (ii) The leadership duality of family companies is higher than other listed companies in the whole market; (iii) Ownership of family members in the Board of Directors and related persons is a characteristic that expresses family characteristics and dominance of the family company; (iv) Financial results of family companies are better than other listed companies in the whole market From the results of the thesis research, it is recommended that some effective CG policies for family-owned listed companies with groups for family companies and management agencies However, the thesis also has some limitations that need to be completed, such as the number of research samples due to the transparency of information disclosure in the market Moreover, the thesis has not compared the characteristics of the Board of Directors that are different in how the two groups of family businesses and non-family businesses Therefore, the next research direction of the thesis may refer to the study of the characteristics of the Board of Directors in relation to the financial results based on the comparison of two groups of family and non-family businesses In order to see the impact on which group's business results would be better or consider other aspects of family businesses, especially who is the founder to confirm the existence of that business until the time of the research or adding a number of other characteristics of the Board of Directors affecting the business results such as the capacity, skills, experience, professional qualifications of the Board of Directors  ... Bui Gia Thuy, 2013; Truong and partners, 1998) It might be understood by differences in management style of Vietnam which is effected by “Power distance” When BOD size is bigger, the authority... vision than in the short term Target - Prioritize social and community priority goals with non-financial goals such as family stability, continuation of family ownership, recruitment of family members,... will be greatly improved if family businesses have a BOD with capacity, experience, qualifications and dynamism and creativity Five sources of capital the family company has helped explain the