The impact of ownership structure and capital structure on firm performance of privatized state owned enterprises in vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Le Phuoc Quyen Anh THE IMPACT OF OWNERSHIP STRUCTURE AND CAPITAL STRUCTURE ON FIRM PERFORMANCE OF PRIVATIZED STATE-OWNED ENTERPRISES IN VIETNAM MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2018 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Le Phuoc Quyen Anh THE IMPACT OF OWNERSHIP STRUCTURE AND CAPITAL STRUCTURE ON FIRM PERFORMANCE OF PRIVATIZED STATE-OWNED ENTERPRISES IN VIETNAM MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: CAO HAO THI, Ph.D Ho Chi Minh City – Year 2018 ACKNOWLEDGEMENT First of all, I would like to express my gratitude to all those who gave me the possibility to complete this thesis I am deeply indebted to my supervisor Ph.D Cao Hao Thi, whose helping, guidance, stimulating suggestions and encouragement he gave me in all the time of researching and writing this thesis I also want to express my thankfulness to committee members, Ph.D Tran Ha Minh Quan and Ph.D Nguyen Dinh Tho for their encouragements and comments Besides, I express my appreciation to Ms Phan Dang Bao Anh for your great support and all of my friends in Mbus 4.1 for the time we spent together And last but not least, I send all my gratefulness my family for all their external love and supports Especially, I want to say thank you so much to my boyfriend who always takes care of and supports me all the time I love you i Table of Con LIST OF TABLES LIST OF FIGURES ABBREVIATION ABSTRACT Chapter Introduction 1.1 Research background 1.2 Problem statement 1.3 Research objectives 1.4 Research questions 1.5 Research scope 1.6 Research contribution 1.7 Research structure Chapter Literature Review 2.1 Privatization 2.1.1 Definition of p 2.1.2 Objectives of p 2.2 Privatization in Vietnam 2.3 Effects of ownership structure on f 2.3.1 Effects of State ownership on firm performance 2.3.2 Effects of private ownership on firm performance 2.4 Effects of capital structure on firm 2.5 Effects of firm size as moderating f 2.6 Summary of literature reviews 2.7 Hypotheses 2.8 Research models Chapter Research Methodology 3.1 Research process 3.2 Data collection ii 3.2.1Population 3.2.2Sample 3.2.3Data collect 3.3 Data analysis method 3.3.1Regression a 3.4 Variables 3.4.1Dependent v 3.4.2Independent 3.4.3Control vari 3.5 Summary of methodology Chapter 4Data Analysis 4.1 Descriptive analysis 4.1.1Descriptive 4.1.2Correlation 4.2 Regression analysis 4.2.1Result of rel 4.2.2Result of rel performance 4.2.3Result of the and firm per Chapter 5Conclusion and implication 5.1 Conclusion 5.2 Implication 5.3 Future research REFERENCES APPENDIX A List of privatized SOEs APPENDIX B Data Analysis Result iii LIST OF TABLES Table Number of Vietnam SOEs being privatized from 1992 to 2015 14 Table Vietnamese privatized SOEs with foreign ownership of around 49% 15 Table Sample size 28 Table Description of variables 33 Table Descriptive statistics 35 Table Level of Debt to Equity 35 Table Correlation analysis 36 Table Regression result of relationship between D/E and firm performance .37 Table Regression result of relationship between PDO and firm performance .38 Table 10 Regression result of relationship between SDO and firm performance .39 Table 11 Regression result of relationship between firm performance and D/E independent from PDO 40 Table 12 Regression result of moderating effect of private-dominant ownership on relationship of D/E and firm performance 41 Table 13 Regression result of relationship between firm performance and D/E independent from SDO 42 Table 14 Regression result moderating effect of State-dominant ownership on relationship of D/E and firm performance iv 42 LIST OF FIGURES Figure Vietnamese’s SOEs reform, period 2009-2013 Figure Vietnam Public Debt to GDP ratio (2006- 2015) Figure Predicted public and publicly-guaranteed debt ratio in Vietnam (2015-2021) .3 Figure Choices of ownership privatization 11 Figure Conceptual model 23 Figure Moderated model 24 Figure Research process 26 Figure Data collection procedure 28 v Abbreviation ADB D/E et al etc GDP HNX HSX IPO PDO SCIC SDO SOEs USD WTO vi ABSTRACT Privatization of Vietnamese State-owned enterprises is an interesting case in terms of economic development This study conducts an empirical evidence of privatization and its effects on firm performance It examines the performance of current privatized SOEs in Vietnam listed on Ho Chi Minh Stock Exchange and Ha Noi Stock Exchange The study collects the official published information of sampled privatized firms to analyze the relationship between ownership structure, capital structure and firm performance Based on the result, capital structure is confirmed to have negative effect on performance of privatized firms In addition, the study also found that State-dominant ownership is positively influenced firm performance, but in contrast to expectation, private-dominant ownership is negatively affected performance Regarding to the moderating role of dominant ownership structure on the adverse effect of relationship between capital structure and firm performance, private-dominant ownership results a positive effect while there is no evidence to refute the State-dominant ownership’s impact on this relationship The data collection generally shows an overall picture of current State shares which State shall still control most of large privatized companies Finally, based on the theoretical analysis and empirical results and existing status of Vietnam’s economy, the study provides some beneficial opinions and recommendations for future researches vii Chapter Introduction 1.1 Research background In recent years, privatization in developing countries has been accelerated to meet the requirement of socioeconomic development For a developing country as Vietnam, the privatization is becoming more and more important in reformation process and considered as an essential engine for transformation of State-owned enterprises (SOEs) in the period of the country’s economy on going to integrate with the world economy After Vietnam had been the official member of World Trade Organization (WTO) in 2007, it was necessary to establish a capital mobilization regime suitable with market mechanism and international practices to invest for developing socioeconomic in general As witnessed an economic could not strongly develop in long time if it still depended on the revenue of SOEs, Vietnam Government has to considered privatization of SOEs as a mean of solving this problem and bringing steadily economic development to the country According to Asian Development Bank’s paper (2015), Vietnamese SOEs’ production was lower levels of output than private sector competitors’, influencing on economic growth Figure describes the net turnover as percentage long-term investment of Vietnamese enterprises in period 2009-2013, showing that State-owned remaining low net turnover compared to private-domestic and private-foreign Moreover, in competitive markets, State ownership may be less desirable to private ownership for these reasons: (1) the State’s priorities focus on social and political goals opposed to maximization of firm value; (2) human resource for management/leader position is from political allies rather than experienced staff; and (3) higher transaction cost (Hess, Gunasekarage & Hovey, 2010) Before 1986, Vietnam had a centralized-planning economy, which had only two types of firm ownership in the economy including State and collective enterprises (Tran, Nonneman & Jorissen, 2015) Under central planning system, the government controlled and allocated social properties It led to a weak market mechanism because it distorted the prices of product and services of the economy Since 1992, the “reform” (known as “Doi moi”) program was launched by Vietnam Government with the main purpose of improvement on the firm 98 PSW South – W P 99 PTS Hai Phong P 100 PVB PetroVietna 101 PVC Drilling Mu 102 PVE Petrovietna 103 PVG Petrovietna 104 PVI PVI Holdin 105 PVL Petroleum R 106 PVR PetroVietna 107 PVS Petro Vietna 108 PVX Petro Vietna 58 No Stock 109 code QTC Quang Nam 110 RCL Cho Lon Re 111 S74 Song Da 7.0 112 SAF Safoco Foo 113 SAP Textbook P 114 SCJ Sai Son Cem 115 SD2 Song Da J 116 SD4 Song Da J 117 SD5 Song Da No 118 SD6 Song Da J 119 SD9 Song Da No 120 SDC Song Da Co 121 SDD Song Da In 122 SDG Can Tho Sa 123 SDN Dongnai Pa 124 SDP Petro Song 125 SDT Song Da No 126 SDY Song Da Ya 127 SFN Saigon Fish 128 SGD Educational 129 SGH SaiGon Hot 130 SJE Song Da No 131 SMN South Book 132 SSM Steel Struct 133 STC Book and E 134 TC6 Vinacomin 135 TCS Vinacomin 136 TDN Vinacomin 137 THB Thanh Hoa 138 THT Vinacomin 139 TJC Transportat 140 TMC Thu Duc Tr 141 TMX Vicem Cem 142 TPH Hanoi Textb 143 TPP Tan Phu Pla 144 TSB Tiasang Bat 145 TST Telecommu 59 No Stock 146 code TTC Thanh Than 147 TV2 Power Engi 148 TV3 Power Engi 149 TV4 Power Engi 150 TVD Vinacomin 151 TXM Vicem Gyp 152 V12 Viet Nam C 153 V21 Vinaconex 154 VBC Vinh Plastic 155 VC1 Constructio 156 VC2 Vietnam Co 157 VC7 No Vietna 158 VC9 Constructio 159 VCC Vinaconex 160 VCG Vietnam Co 161 VCM Vinaconex T 162 VE1 VNECO E 163 VE2 VNECO2 E 164 VE3 VNECO E 165 VE4 VNECO4 E 166 VE8 VNECO8 E 167 VE9 VNECO I 168 VFR Transport A 169 VGP The Vegetex 170 VHL Viglacera H 171 VIE VITECO V 172 VIT Viglacera T 173 VMC Vimeco Join 174 VMS Vietnam Ma 175 VNC Vinacontrol 176 VNF Vinafreight 177 VNT The Van Ca 178 VSA Vietnam Oc 179 VTL Thang Long 180 VTS Viglacera T 181 VTV VICEM Ma 182 VXB Ben Tre Co 183 WCS West Coach 60 APPENDIX B Data Analysis Result Table 17 Descriptive analysis (PDO panel) Date: 06/22/17 Sample: 2011 2015 Mean Median Maximum Minimum Std Dev Skewness Kurtosis Jarque-Bera Probability Sum Sum Sq Dev Observations 61 Table 18 Descriptive analysis (SDO panel) Date: 06/19/17 Sample: 765 Mean Median Maximum Minimum Std Dev Skewness Kurtosis Jarque-Bera Probability Sum Sum Sq Dev Observations 62 Table 19 Test result of regression analysis for relationship between capital structure and firm performance (PDO panel) Dependent Variable: FIRM_PERFORMANCE Method: Panel Least Squares Date: 05/30/17 Time: 14:10 Sample: 2011 2015 Periods included: Cross-sections included: 156 Total panel (unbalanced) observations: 774 Variable C D_E SIZE R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 63 Table 20 Test result of regression analysis for relationship between capital structure and firm performance (SDO panel) Dependent Variable: FIRM_PERFORMANCE Method: Least Squares Date: 06/22/17 Time: 14:38 Sample: 765 Included observations: 747 Variable C D_E SIZE R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 64 Table 21 Test result of regression analysis for relationship between private-dominant ownership structure and firm performance (PDO panel) Dependent Variable: FIRM_PERFORMANCE Method: Panel Least Squares Date: 05/30/17 Time: 14:11 Sample: 2011 2015 Periods included: Cross-sections included: 156 Total panel (unbalanced) observations: 774 Variable C PDO SIZE R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 65 Table 22 Test result of regression analysis for relationship between State-dominant ownership structure and firm performance (SDO panel) Dependent Variable: FIRM_PERFORMANCE Method: Least Squares Date: 06/22/17 Time: 14:44 Sample: 765 Included observations: 747 Variable C SDO SIZE R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 66 Table 23 Test result of regression analysis for moderating effect of private-dominant ownership on relationship of capital structure and firm performance (Step 1) Dependent Variable: FIRM_PERFORMANCE Method: Panel Least Squares Date: 06/15/17 Time: 15:21 Sample: 2011 2015 Periods included: Cross-sections included: 156 Total panel (unbalanced) observations: 774 Variable C D_E PDO SIZE R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 67 Table 24 Test result of regression analysis for moderating effect of private-dominant ownership on relationship of capital structure and firm performance (Step 2) Dependent Variable: FIRM_PERFORMANCE Method: Panel Least Squares Date: 05/30/17 Time: 14:11 Sample: 2011 2015 Periods included: Cross-sections included: 156 Total panel (unbalanced) observations: 774 Variable C D_E PDO D_E*PDO SIZE R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 68 Table 25 Test result of regression analysis for moderating effect of State-dominant ownership on relationship of capital structure and firm performance (step 1) Dependent Variable: FIRM_PERFORMANCE Method: Least Squares Date: 06/22/17 Time: 14:44 Sample: 765 Included observations: 747 Variable C D_E SDO SIZE R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 69 Table 26 Test result of regression analysis for moderating effect of State-dominant ownership on relationship of capital structure and firm performance (step 2) Dependent Variable: FIRM_PERFORMANCE Method: Least Squares Date: 06/22/17 Time: 14:45 Sample: 765 Included observations: 747 Variable C D_E SDO D_E*SDO SIZE R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 70 ... hypothesis and hypothesis are conducted to recognize the moderating role of dominant ownership on relationship of firm profit and capital structure The study concerns the relationship of firm performance. .. ratio) on firm performance of privatized SOEs in Vietnam Furthermore, the study also examines the moderating effects of these two dominant ownership structure on the relationship of capital structure. .. structure on firm performance of privatized SOEs in Vietnam - Determine the direct impacts of private-dominant ownership and State- dominant ownership respectively on firm performance of privatized