Disclosure of information & the case study of joint stock commercial bank for investment and development

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS TRAN TRUC QUYNH DISCLOSURE OF INFORMATION & THE CASE STUDY OF JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT Major: Business Administration Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisor: PhD Tran Doan Kim Hanoi - 2012 TABLE OF CONTENT ACKNOWLEDGEMENTS i ABSTRACT ii TÓM TẮT iv TABLE OF CONTENT .vi LIST OF TABLE .ix LIST OF FIGURES x INTRODUCTION .1 Research methodology Significant .5 Delimitation Disseminations 5 Follow-up Thesis structure .7 CHAPTER 1: LITERATURE REVIEW 1.1 Definition Investor Relations 1.1.1 Definition 1.1.2 Function of Investor Relations 1.1.3 The correlation between IR (Investor relations) and PR (Public relations) .12 1.2 Definition of disclosure .13 1.2.1 Definition 13 1.2.2 Roles of disclosure on stock market 15 vi 1.3 Principle of disclosure 19 1.3.1 Accuracy, fidelity and sufficiency 20 1.3.2 Disclosing information promptly and regularly .21 1.3.3 Regulation Fair Disclosure (Reg FD) 22 1.4 An overview of disclosure on Vietnam’s stock market 23 1.4.1 Disclosure reality .23 1.4.2 The causes of violations 26 1.5 The case of disclosure activity at China Construction Bank 28 1.5.1 Overview of China Construction Bank 28 1.5.2 Empirical case of disclosure activities at China Construction Bank .29 CHAPTER 2: AN OVERVIEWOF DISCLOSURE ON BIDV .33 2.1 About BIDV 33 2.1.1 Overview of BIDV 33 2.1.2 The process of formation and development .34 2.1.3 Organization Structure .36 2.2 Position of BIDV in the financial market 39 2.2.1 The leading bank in project and enterprise financing 39 2.2.2 Retail banking - Multichannel and modern distribution network 41 2.2.3 Expansion of international investment and being a reliable counterpartner of international financial institutions .42 2.2.4 The leading bank in transparency and quality management 42 2.2.5 The first bank in implementing the policies of the Party and the Government, and the social security tasks 43 2.3 Disclosure of information at BIDV .44 vii 2.4 Assessment on disclosure activities at BIDV .46 2.4.1 Description of the Research process 46 2.4.2 Research findings .49 2.4.3 Depth interview result 60 CHAPTER3: RECOMMENDATIONS AND ACTION PLANS TO IMPROVE DISCLOSURE ACTIVITY AT BIDV .63 3.1 Recommendations to improve disclosure activity at BIDV .63 3.1.1 Developing Investor Relations Department .63 3.1.2 Setting up Information Policy of BIDV 65 3.1.3 Standardizing the internal disclosure process 65 3.1.4 Building database and processing false information 67 3.1.5 Utilizing the role of spokesperson 69 3.1.6 Building website for investors (IR portal) .69 CONCLUSION 76 REFERENCES 77 APPENDICES 79 viii LIST OF TABLE Table 1.1: Comparison between IR and PR 12 Table 2.1: BIDV process of formation and development 34 Table 2.2: Percentage of respondent survey .49 Table 2.3: Assessment on content of information disclosed 51 Table 2.4: The level of interests in financial reports .52 Table 2.5: The level of interests in non- financial information 55 Table 2.6: Assessment on BIDV website (Investor Relation portal) 59 Table 2.7: Comparing the website for investors .71 Table 2.8: The action plan timetable 74 ix LIST OF FIGURES Figure2.1: The organization chart of BIDV 36 Figure 2.2: BIDV Key Strengths .39 Figure 2.3: Financial capacity of BIDV and other banks 40 Figure 2.4 : The information flow and reporting channels outside 45 Figure 2.5: The research process .47 Figure 2.6: Assessement on time of disclosure at BIDV 50 Figure 2.7 : Assessment on content of information disclosed 51 Figure 2.8: The level of interests in financial reports .53 Figure 2.9: Quality of BIDV’s financial reports .54 Figure 2.10 : The level of interests in non- financial information 56 Figure 2.11: The level of interests in non-financial information 57 Figure 2.12: Means to get BIDV’s information 58 Figure 2.13: Assessment on BIDV website (Investor Relation portal) 59 x INTRODUCTION The disclosure of information is vitally important for evaluation of a company’s progress by its shareholders and potential investors Such disclosure helps companies to attract investment and to remain trustworthy Insufficient or inaccurate information about a company can hinder the successful development of its business Shareholders and investors require regular access to reliable information, in particular to control the management bodies of the company and make informed decisions regarding the evaluation of its activities On the other hand, it is very important to make sure that the information disclosure requirements not act against the company's interests and that no confidential information is disclosed, since it may harm the company However, all restrictions related to disclosure must be subject to strict regulations As a bank which has just completed IPO and become a public firm, BIDV needs to follow the law of corporate disclosure However, for the last few months, disclosure at BIDV has still been random and inconsistent when releasing information to investors and the press Therefore; BIDV needs to have a special department to fully understand the law of disclosure as well as to build a professional and effective disclosure process in order to maximize the benefits for BIDV’s shareholders Motivated by the practical needs mentioned above, the research “Disclosure of Information & The case study of Joint stock commercial bank for investment and development” bears a practical meaning to the joint stock corporates in Vietnam in general and to BIDV in particular Research methodology Both qualitative and quantitative approaches are used to answer the research questions For the quantitative methods, the survey collected and measured data using a logical and critical approach Qualitative approach is more subjective in nature than quantitative approach and involves examining and reflecting on the less tangible aspect of a research subject, e.g values, attitudes, perceptions Qualitative research involves analysis of data such as words (e.g., from interviews), pictures (e.g., video), or objects (e.g., an artefact) Followings are some features of a quantitative research: - The aim is a complete, detailed description - Researcher may only know roughly in advance what he/she is looking for - Recommended during earlier phases of research projects - The design emerges as the study unfolds - Researcher is the data gathering instrument - Data is in the form of words, pictures or objects - Subjective - individual’s interpretation of events is important, e.g., uses participant observation, in-depth interviews etc - Qualitative data is more 'rich', time consuming, and less able to be generalized - Researcher tends to become subjectively immersed in the subject matter Qualitative research method, the common method business study, was based on adequate assumptions, methods and data to draw suggestions and conclusion Quantitative approach is on collecting and analyzing numerical data, it concentrates on measuring the scale, range, frequency etc of phenomena Quantitative approach is one in which the researcher uses positivistic methodology to develop knowledge (e.g cause and effect, test a hypothesis or a theory) Quantitative research involves analysis of numerical data For this research, a quantitative survey will be conducted Followings are some features of a quantitative research: - The aim is to classify features, count them, and construct statistical models in an attempt to explain what is observed - Researcher knows clearly in advance what he/she is looking for - Recommended during latter phases of research projects - All aspects of the study are carefully designed before data is collected - Researcher uses tools, such as questionnaires or equipment to collect numerical data - Data is in the form of numbers and statistics - Objective seeks precise measurement & analysis of target concepts, e.g., uses surveys, questionnaires etc - Quantitative data is more efficient, able to test hypotheses, but may miss contextual detail - Researcher tends to remain objectively separated from the subject matter In this study, the research questions will be used as the guidelines for the research processes 1.1 Research purpose The purpose of this research is to investigate the disclosure activity at BIDV Therefore the main research question is: How is Investor Relations and disclosure of information activities at BIDV To clarify the research question, the research will analyse the following two subresearch questions: How investors assess the disclosure of information at BIDV? Which information would investors like to know? In realizing its aim, the study will specifically focus on: Firstly, the Bank needs to evaluate the activity of IR function, especially the disclosure of information to make sure it follows lawsuit and meets the needs of investors during the very first months of transforming into a public firm Secondly, the Bank needs to research to understand more about the law requirements and the needs of the investors regarding disclosure in order to prepare for the listing process of BIDV on the securities market 1.2 Research approach Inductive and deductive research approaches are considered two general approaches in business research in general However, the research process is a continuous and on-going process which combines the empirical observation, theoretical interpretation and exploration Therefore, this study employs the abductive research method that takes the advantages of both deductive and inductive approach and combines them The author started with empirical observations and searches of academic literature However, the author realized that most research and articles studied were focus on Investor Relations activities There are few academic articles or research studies disclosure of information To the best of my knowledge, there is no literature which covers professional disclosure activities, especial in banking industry Therefore, beside many empirical observations, the author interviewed some experts in other banks and some colleagues in the IR department; and asked them to help to provide information about workflow of IR and disclosure practices in other countries Evaluate the Website for investor relations of BIDV Rank the following criteria as from 01 – Very bad to 05 – Very Good Indicators 01 02 03 04 05 Friendly-user and attractive interface Logical and easy to use Diverse range of information Prompt, accurate and in-time information In order for the website of investor relations to meet the needs for information, would you have any suggestions for improvement in term of interface and content? Please specify Interfacce Content Thank you for your cooperation! 82 APPENDIX 2: INTERVIEW QUESTIONS (English version) This survey is used to interview both individual and enterprise investors First of all, let us say thank you for your time spending to answer these questions The objective of this survey is to investigate your satisfaction of disclosure activity at BIDV Your opinion will be very useful for us It will help us improve the disclosure activity at BIDV Please give your general information: Name: As representative of Business Registration number Questions: Why did you decided to buy stocks issued by BIDV? Please evaluate BIDV’s stocks in comparison with other blue – chip stocks Are you satisfied with the disclosure activity at BIDV from the bank became a public company? Via which channels you often get updated information on BIDV? Why you use those channels? Annual reports Website The other issues Newspaper and magazines Internet Please give comment for those information channels? What kind of information would you like to know more about? 83 What you think about the Website for Investor Relations of BIDV? Would you propose some suggestions for improvement in term of: Interface/design Content/information Giao diện Nội dung , thông tin 84 APPENDIX 3: LIST OF INTERVIEW PEOPLE Corporate Investors No Name Company Address (Representative) 01 Ms Dang Thi Thu BITEXCO GROUP 1st Floor, The Manor Huong Towers, Financial Department My Dinh, Me Tri, Tu Liem, Ha Noi 02 Mr Nguyen Tien Manh Infrastructure G1 Deparment – Thanh Invesment Department Development and Xuan Nam – Thanh Xuan Construction Dist., Hanoi Corporation (LICOGI) Individual Investors No Name Company Address 01 R&D Dept – BIDV 35 Hang Voi, Hoan Nguyen Kim Chi Kiem, Hanoi 02 03 Duong Van Phuong Dam Bich Loc BIDV Insurance 35 Hang Voi, Hoan Company (BIC) Kiem, Hanoi Intelexs Company Số ngách 1/176 ngõ Hoàng Quốc Việt, HN 04 Vien Ngoc Minh Unico Vina Jsc., 199 Dien Bien Phu Street, Ward 15, Binh Thanh (Via telephone) District, TP.HCM 85 APPENDIX 4: CIRCULAR 52 – 2012 – BTC ON DISCLOSURE OF INFORMATION ON THE SECURITIES MARKET (QUOTE) Disclosure of Information by Listing Organizations and LargeScale Public Companies I (Article 4, Chapter I) Means and form of disclosure A disclosure of information shall be made in and on the following information disclosure media: Annual report, electronic information site (website) and other publications of the entity making the disclosure Other mass media in accordance with law Date and reports sent to SSC and the SE must be in the form of written reports or in the form of electronic data using digital signature in accordance with guidelines of the SSC and the SE Public company must set up their electronic information sites within six (06) months from the date on which they become a public company; securities companies or fund management companies must set up their own electronic information sites within six months from the date on the which they are issued with the license and they commence official operations; and organizations carrying out public issued of bond must set up their own electronic information sites before making a public offer of bonds Such sites must have a separate shareholder relationship column (investors) which must disclose company charter, internal administration rules (if any), prospectus (if any) and information to be disclosed on a periodical or extraordinary basis or on request in accordance with Circular 52 The entities disclosing information must notify the SSC an SE and also make a public announcement of the address of their information site and any changes relating to such address within a period of thee (03) working days form the date of 86 completion of setting up their electronic information sites or from the date of change to the address of such electronic information sites II (Section 2) Disclosure of information by Listing Organization and Largescale Public Companies (Articles 10, Section 2, Chapter II)Periodical disclosure of information A listing organization or a large-scale public company shall make a periodical disclosure of information in accordance with article of this Circular and the following provisions: A listing organization or a large-scale public company must make a disclosure of information about its annual financial statements already audited by an approved auditing organization A listing organization or a large-scale public company must prepare and disclose information about its semi-annual [six monthly] financial statements (first six (6) months of a financial year) which have been verified by an approved auditing organization in accordance with the Auditing Standards in respect of the verification of financial statements within a period of five (5) working days from the date on which the approved auditing organization signs the verification report The period for disclosure of information about the verified semi-annual financial statements shall not exceed forty five (45) days from expiry of the first six (6) months of the financial year If the listing organization or the large-scale public company is the parent company of another organization or is the higher level accounting entity with subsidiary accounting entities, the period for disclosure of information about the consolidated semi-annual financial statements or the general semi-annual financial statements which have been verified and the semi-annual financial statements of the parent company or the higher level accounting entity shall be sixty (60) days from expiry of the first six (6) months of the financial year Semi-annual financial statements accompanied by all reports on results of the verification of the semi-annual financial statements must be disclosed on the 87 electronic information site of the listing organization or the large-scale public company and on the information disclosure media of the SSC or the SE (in the case of an organization listed or registered for trading) and must be archived in written form and in electronic data form for at least the next ten (10) years at the head office of the company in order for investors to have the opportunity to refer to such statements The auditing organization which verifies the semi-annual financial statements must be the approved auditing organization which is selected to audit the annual financial statements of the listing organization or the large-scale public company A listing organization or a large-scale public company must, within twenty (20) days from expiry of a quarter, make a disclosure of information about its quarterly financial statements If the listing organization or the large-scale public company is the parent company or the higher level accounting entity with subsidiary accounting entities, it is required to disclose information about the quarterly financial statements of the parent company and the consolidated financial statements or the general financial statements within a period of forty five (45) days from expiry of the quarter, and specifically as follows: 3.1 The quarterly financial statements of the listing organization or the large-scale public company shall comprise the reports stated in clause 1.1 of article of the Circular 52 3.2 If the after-corporate income tax profit stated in the report on results of business operation as between the quarterly report in the disclosing period and the quarterly report in the same disclosing period of the previous year fluctuates by ten per cent (10%) or more or the business results in the quarter show losses, then the listing organization or the large-scale public company must clearly explain the reasons in its quarterly financial statements If the listing organization or the large-scale public company is the parent company, it is required to clearly explain such reasons in both the report on results of business operation of the parent company and the consolidated report on results of business operation If the listing organization or the large-scale public company is a higher level accounting 88 entity with subsidiary accounting entities, it is required to explain the reasons in both the financial statements of the listing organization or the large-scale public company and the general financial statements; 3.3 The listing organization or the large-scale public company must disclose all quarterly financial statements on its electronic information site and on the information disclosure media of the SSC and the SE and must archive same in written form and in electronic data form for at least the next (10) years at the head office of the company in order to enable investors to refer to such statements If the audited annual financial statements and the verified semi-annual financial statements contain a reservation or a note, the company must disclose information about the explanation of such reservation or note (Article 11, Section 2, Chapter II) Extraordinary disclosures of information A listing organization or a large-scale public company must make an extraordinary disclosure of information within twenty four (24) hours in accordance with clause of article of this Circular upon occurrence of one of the following events: 3.1 The company loses assets with a value of ten (10) per cent or more of its equity calculated as at the time of the most recent audited annual financial statements or the most recent verified semi-annual financial statements; 3.2 There is a decision or resolution of the general meeting of shareholders or of the board of management on increase or decrease in charter capital; capital contribution with a value of ten per cent (10%) or more of the total value of assets of the company into another organization; or capital contribution with a value of fifty per cent (50%) or more of the total capital of the company receiving such capital contribution; approval of loan agreements1 and other contracts with a value of fifty per cent (50%) or more of the total value of assets calculated as at the time of the most recent audited annual financial statements or the most recent verified semi-annual financial statements; 3.3 here is a resolution or decision of the general meeting of shareholders or of 89 the board of management on purchase or sale of assets with a value of more than fifteen per cent (15%) of the total value of assets of the company calculated as at the time of the most recent audited annual financial statements or the most recent verified semi-annual financial statements; 3.4 There is a resolution or decision of the general meeting of shareholders or of the board of management or a document of a competent State body (applicable to the case which requires approval of a competent body) on closure or opening of a subsidiary company, branch, plant, or representative office; 3.5 There is a ceiling increase or floor reduction of prices of listed securities of the company (in the case of a listing organization) in ten (10) consecutive sessions or more; 3.6 There is an explanation relating to the financial data to be disclosed by the company in accordance with law which is different from the financial data in the audited financial statements A listing organization or a large-scale public company must make an extraordinary disclosure of information within seventy two (72) hours in accordance with clause of article 28 of this Circular from the date of approval of the listing or de-listing on a foreign SE A listing organization or a large-scale public company must disclose information about the events stipulated in clauses and of this article in the publications [and] on the electronic information site of the company, and on the information disclosure media of the SSC or the SE (in the case of a listing organization) The items to be extraordinarily disclosed must specify the event which occurred and its causes, and a plan and solutions for remedying the problem (if applicable) (Article 9, Section 1, Chapter II) Disclosures of information on request A public company must disclose information within twenty four (24) hours from receipt of a request from the SSC or the SE (in the case of an organization listed or registered for trading) on the occurrence of the following events: 90 1.1 There occurs an event which seriously affects the lawful interests of investors; 1.2 There is information relating to the public company which seriously affects the price of securities and such information requires confirmation A public company must disclose information pursuant to a request, in the publications and on the electronic information site of the company and on the mass media and information disclosure media of the SSC or the SE (in the case of an organization listed or registered for trading) The items disclosed must include the event which the SSC and SE requested be announced and causes of the event, the evaluation of the company about the authenticity of such event, and solutions for remedying the problem (if applicable) 91 APPENDIX 5: LIST OF COMPANY RELATED BIDV Mother company (None) List of companies in control and dominant BIDV The State Bank is the largest shareholder of the Bank, took control and BIDV shares Subsidiaries As of 30/09/2011, BIDVhas6subsidiaries No.1499/VPCP-DMDNdated13/12/2010ofthe According Government to Letter Officeregarding conversion to a one-member limited liability companyand spliting the international investmentcapital upon the equitisation of BIDV,the value of the enterpriseto be equitised shall exclude the fundsprovidedby the Ministry ofFinanceto BIDVfor its investment activities in Cambodia Therefore, BIDV has subsidiariesexcluding 4investment companiesin Cambodiawhich consists of:(i) Cambodia Investment and Development Co., Ltd (IDCC), (ii) Bank for Investment and Development of Cambodia (BIDC), (iii) Cambodia Vietnam Insurance Co (CVI), (iv) Cambodia Vietnam Securities Co.Ltd (CVS) Basic information on the subsidiaries are as follows: No Name of subsidiaries Charter capital Percent age of BIDV Main line of business owners hip (%) BIDV Financial Leasing Company (BLC) VND200 billion 100 Financial leasing BIDV Financial Leasing VND150 billion 100 Financial leasing 92 Company II (BLC II) BIDV Securities Joint Stock Company (BSC) VND865 billion 88.12 Securities brokerage, dealing, depository, underwriting, securities investment consulting and other financial services as prescribed by law BIDV Asset Management Company (BAMC) VND30 billion 100 Receive and recover bad debts BIDV Insurance Corporation (BIC) VND660 billion 82.3 Insurance – Finance BIDV International Holding Ltd (Hong Kong) 100 Mobilization and management of investment funds, provision of financial advisory services to raise funds in international markets to invest in Vietnam USD Joint Ventures and Affiliates Percent age of BIDV Main line of business owners hip (%) No Name of joint ventures / affiliates I Joint ventures VID Public Bank USD62.5 million 50 Finance, Banking Lao-Viet Bank (LVB) USD15 million 50 Finance, Banking Charter capital 93 BIDV Tower Joint Venture Company USD13.1 million 55 Building and office leasing BIDV-Vietnam Partners Investment Management JVC (BVIM) VND25 billion 50 Manage domestic andforeigninvestment fundsin Vietnam, receipt of trustandportfoliomanagement, provision of consulting servicesrelated tofinancialrestructuring, merger and acquisition Vietnam - Russia Joint Venture Bank (VRB) USD62.5 million 50 Finance, Banking Lao-Viet Insurance Joint Venture Company (LVI) USD3 million 51 Insurance, Finance II Affiliates Vietnam Aircraft Leasing Company (VALC) VND1,318 20 Aircraft leasing BIDV Expressway Development Joint Stock Company (BEDC) VND1,500 25 Construction ofroads,infrastructure, industrial parks, export processing zones billion billion Source: Bank for Investment and Development of Vietnam 94 APPENDIX 6: SHAREHOLDERS STRUCTURE – Date: 08/05/2012 Shareholders Number of Number of Share Shareholders Government (State Bank 2.203.607.796 Ratio 95,76% of Vietnam) 01 Domestic, Including 17.482 97.436.531 4,234% Individual 137 26.011.538 1,130% Coporation 17.345 71.424.993 3,104% Oversea, Including 30 126.215 0,006% Corporation 44.420 0,002% Individual 29 81.795 0,004% Total 17.513 2.301.170.542 100% Source: Bank for Investment and Development of Vietnam 95 APPENDIX 7: TITLES AND REWARDS The titles and rewards that the Party, the State and the industry has given: Title of “A Hero of Labour In Renovation Period” given by the State in 2000 The Ho Chi Minh Medal of the State in 2007 The First-Rate (2002) and the Third-Rate (1999) Independence Medals of the State The First-Rate (1997), the Second-Rate (1992) and the Third-Rate (1987) Labour Medals The Friendship Medal in 2007; the Second-Rate Labour Medal in 2002 of the Lao People’s Democratic Republic The Award of “Vietnam Gold Star” for the trade name of BIDV in 2003, 2007; for the trade name of BIDV and the payment product via SWIFT in 2005 The rewards of “Strong Brand Name” granted by the Ministry of Industry and Trade, The Vietnam Economic Times (2005, 2006, 2008, 2009, 2010); And other rewards and noble tiles 96