Financial mangement efficiency of vietnam post and telecommunications groups

FINANCIAL MANAGEMENT EFFICIENCY OF VIETNAM POSTS AND TELECOMMUNICATIONS GROUP _ A DISSERTATION Presented to the Faculty of the Graduate School Southern Luzon State University, Lucban, Quezon, Philippines in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam _ In Partial Fulfillment of the Requirements for the Degree Doctor of Business Administration _ By TO THI NGOC LAN (JENNY) December 2013 i APPROVAL SHEET The Dissertation of NGO THI MAI entitled EMPLOYEE TURNOVER AND RETENTION STRATEGIES OF SMALL AND MEDIUM ENTERPRISE IN SERVICE BUSINESSES IN HANOI Submitted in Partial Fulfilment of the Requirements for the Degree DOCTOR OF BUSINESS ADMINISTRATION A program offered by Southern Luzon State University, Republic of the Philippines in collaboration with Thai Nguyen University, Socialist Republic of Vietnam has been approved by Oral Examination Committee WALBERTO A MACARAAN, EdD Expert JOANNA PAULA A ELLAGA, DBA Expert NELLY I MENDOZA, DBA Expert EDWIN P BERNAL, DBA External Panel CECILIA N GASCON, PhD Chairman Endorsed by: Recommended by: CONRADO L ABRAHAM, PhD Adviser APOLONIA A ESPINOSA, PhD Dean Accepted in Partial Fulfilment of the Requirements for the Degree Doctor of Business Administration _ Date WALBERTO A MACARAAN, EdD Vice President for Academic Affairs ii CERTIFICATE OF ORIGINALITY iii ACKNOWLEDGMENT She would like to express her gratitude to Dr Joanna Paula A Ellaga, for her being outstanding adviser and excellent professor Her constant encouragement, support, and invaluable suggestions made this work successful As an adviser, she has already everything that one could want in an advisor She also would like to thank her for providing her ideas on the research methodology and valuable insights on financial management system Also, she is deeply indebted to Dr Nguyen Thanh Hai and Ms Trinh Thi Hieu -International Training Center, Thai Nguyen University of the Socialist Republic of Vietnam, for their enormous pursuit to provide the Vietnamese people an opportunity to grow through education Also, she would like to thank all the lecturers of DBA1 course which she have been there as a student for three years, for helping her to complete this dissertation She also would like to acknowledge my best friends in the DBA class for reviewing my dissertation and providing valuable feedback She is also grateful to Mr Ngo Anh Cuong and Mr Nguyen Duy Phuong, for their help and valuable advice, and for being great friends throughout her stay in the program She is deeply and forever indebted to her family for their love, support, and encouragement throughout her entire life She would like to thank her husband, Nguyen Trung Kien, who has provided a tremendous amount of iv love and support throughout this study Finally, is for her five-year old son, for being her constant instant inspiration v DEDICATION I am deeply and forever indebted to my family for their love, support, and encouragement throughout the conduct of this study I would like to thank my husband, Nguyen Trung Kien, who has provided a tremendous amount of love and support throughout this study On a final note with love is for my five-year old son! TTNL vi TABLE OF CONTENTS PAGE TITLE PAGE ……………………………………………………………… i APPROVAL SHEET ……………………………………………………… ii CERTIFICATE OF ORIGINALITY ……………………………………… iii ACKNOWLEDGEMENT ………………………………………………… iv DEDICATION ……………………………………………………………… vi TABLE OF CONTENTS ………………………………………………… vii LIST OF TABLES ………………………………………………………… viii LIST OF FIGURES ……………………………………………………… ix LIST OF ABBREVIATIONS ……………………………………………… xii LIST OF APPENDICES ………………………………………………… xiii ABSTRACT ………………………………………………………………… xiv CHAPTER I II III INTRODUCTION …………………………………………… Background of the Study ………………………………… Objectives of the Study …………………………………… Significance of the Study ………………………………… Scope and Limitation of the Study …… ………………… Definition of Terms ………………………………………… REVIEW OF LITERATURE ……………………………… Review of Literature ………………………….………….… Conceptual Framework ………………………………….… 25 METHODOLOGY ………………………………………… 28 Locale of the Study ………………………………………… 28 Research Design ……………………….…………….…… 28 Population, Sample Size, and Sampling Technique…… 28 Research Instrument ……………………………………… 29 Data Gathering Procedure ………………………………… 29 Statistical Treatment ……………………… …….…… 31 vii IV RESULTS AND DISCUSSIONS ………………………… 34 Profile of VNPT ……………………… …………………… 34 Current Status of Financial Management System of VNPT from 2010 to 2012 …………………………… 37 Effects of Financial Management System on Financial Management Efficiency of the VNPT ……………… 76 Problem Encountered by Financial Management System of VNPT …………………………………… V 78 SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ………………………………… 80 Summary of Findings ……………………………………… 80 Conclusions ………………………………………………… 84 Recommendations ………………………………………… 86 REFERENCES …….………… …… ………………………………… 92 APPENDICES …………………………………………………………… 95 CURRICULUM VITAE …………………………………………………… 98 viii LIST OF TABLES TABLE PAGE Distribution of the Respondents …………………………… 29 The Autonomic Level of Capital Mobilization in VNPT …… 41 The Safe Level in Mobilizing Capital of VNPT …… ……… 41 Assets and Equity of VNPT from 2010 to 2012 …………… 42 The autonomic Level in Mobilizing Capital of VNPT’s Subsidiaries …………………………………………………… 43 Clarity and Fulfillment in Harmonizing Capital Mechanism of VNPT ………………………………………………………… 44 Reasonable Level Regulated the Loan Limit at the Rate Payable on Capital in not more than Three Times ………… 44 The Level of Autonomy and Self-Responsibility at VNPT in Using and Managing Capital ………………………………… 52 Level of Capital Preserve in VNPT ………………………… 53 10 The Level of Responsibility in the Management and Use of the Owner’s Capital of VNPT ………………………………… 54 The Effectiveness of Investment Outside the Sector of VNPT …………………………………………………………… 55 The Transparency of Ownership and the Right of Using Assets in VNPT ……………………………………………… 67 13 The Level of Conservation of the Assets in VNPT ………… 68 14 The Level of Efficiency in the Use of Assets in VNPT …… 68 15 The Level of Losses and Wastage in the Use of Assets in VNPT …………………………………………………………… 68 The Clarity and Transparency in Managing Revenues, Expenses and Profits Distribution in VNPT ………………… 73 The Level in Harmonizing between the Interests of the State, Corporations and Employees in Managing Revenues, Expenses and Profit Distribution in VNPT …… 74 11 12 16 17 ix TABLE PAGE 18 Revenue of VNPT from 2010 to 2012 ……………………… 74 19 The Clarity of the Regulations on the Distribution of Profits which Subsidiaries must Contribute to VNPT group ……… 75 20 Profits of VNPT from 2010 to 2012 ………………………… 76 21 The Asset Turnover Ratio of VNPT from 2010 to 2012 …… 76 22 The Debtor Day Ratio of VNPT from 2010 to 2012 ……… 77 23 The Asset Turnover Ratio of VNPT from 2010 to 2012 …… 83 24 The Debtor Day Ratio of VNPT from 2010 to 2012 ……… 83 x 85 VNPT is one member limited liability company of the State owned which has 164 subsidiaries with more than 90,000 employees 2) For the current status of financial management system of VNPT - The assets and equity of VNPT had tended to increase over the years from 2010 to 2012 - The conservation assets and equity of VNPT is high - The rate of total payable liabilities over owner capital was 2.74 fold, 2.33 fold respectively in in 2011, 2012 A recent study showed that this rate of world’s big economic corporations was 1-3 folds - The revenue of VNPT had tended to increase over the years from 2010 to 2012 - But the profit of VNPT had tended to decrease over the years from 2010 to 2012 3) For assessing the financial management efficiency and determining the effects of the financial management system to the financial management efficiency of VNPT Generally, the financial management system of VNPT is fairly good so it has positive effect on financial management efficiency of VNPT 4) For the problem encountered by financial management system of VNPT There are three problems management system of VNPT: encountered by financial 86 - Capital mobilizations of VNPT’s subsidiaries meet many difficulties and limitations - Investment out of the main business operations without efficiency - Revenue of VNPT increased steadily from 2010 – 2012 but profit of VNPT also decreased Recommendations Firstly, complete capital mobilization of VNPT’s subsidiaries Through studying the financial management system of VNPT, capital mobilization of subsidiaries under VNPT remains limited The extension of capital mobilization regulation for subsidiaries of VNPT parallel with responsibilities and effectiveness of mobilized capital’s use is the correct direction facilitating subsidiaries to hold the chances, expand the production and business and comply with legal foundation of subsidiaries with units having independent legal entity The proposed extension of capital mobilization regulation for subsidiaries of VNPT is based on the following grounds: VNPT comprises many business institutions joining each other in terms of finance, technology, product, and market Relations between members of VNPT mainly depend on firmly economic ground instead of mechanical administrative ground On other hand, it should be acknowledged that the final objectives of financial execution and management are to obtain the effectiveness, profit for the whole Group The effectiveness, profit of the whole Group is not integral to the effectiveness, 87 profit of the member companies Strong member units will create the strength of the whole Group The direction and support of the Group play an important role in the strength of member units Furthermore, in the course of socio-economic development in local and international the trend of hierarchy and decentralization develops more and more Above analysis indicates that the extension of capital mobilization regulation for subsidiaries of VNPT is in line with the rule of movement However, in the current condition of VNPT, the extension of capital mobilization regulation for member units of the Group also requires certain conditions including the capacity of financial management system of subsidiaries, the capacity of capital absorption of subsidiaries, the effectiveness of capital usage as well as the supervision of the Group Evidently, the financial management system of VNPT has not yet motivated the subsidiaries exploit totally the capital source Specifically, VNPT only permitted subsidiaries to have the loan, credit guarantee in certain limitations Moreover, it should be noted that the extension of capital mobilization does not only relate to the settlement of internal relations of VNPT but also be attached to relations with banks Generally, because of being familiar with centralization regime, most of State owned banks require VNPT to guarantee in order to increase the reliability, even in the case that guarantee is unnecessary, the bank remains to conduct guarantee regime In addition, the fact that the bank is often familiar with large limit loans, little interest in small limit loans in compliance with requirements of subsidiaries Therefore, the extension of capital mobilization regime requires the combination of both inside and outside of VNPT 88 The extension of capital mobilization regime of subsidiaries VNPT performed not only in relation with banks but also in capital mobilization via the issuance of bonds, stocks of subsidiaries is required to normalize in the direction of strengthening the activeness of subsidiaries joining in capital market To extend the capital mobilization regime of subsidiaries of VNPT, it is required to focus on handling the main problems as follows: - In general, perform the capitalization for VNPT and foster the listing in the security market - For VNPT itself, set the instruction frame including: target, limit, loan and procedure instead of approval for each case in the current time - For the State, consider and adjust the strict regulations on capital mobilization of VNPT, and establish the credit regime in the direction of unblocking the capital source for the central companies, economic group based on the happenings of macroeconomic situation - Parallel with the extension of capital mobilization regime for subsidiaries of VNPT, it is required to cooperate synchronously with the strengthening of supervision, administration regime and the system of final criteria on effectiveness, the extension of capital mobilization regime for member units under the Group can become true and obtain the achievement as expected Secondly, complete investment out of main business operations To set target VNPT is to guarantee the capital and assets (including State capital and assets; for the completion of State capital and assets 89 management of mobilized capital of VNPT) to be safe and increase the effectiveness of usage To reach the target, it is required to continuously fulfill the management and usage of capital by the following solutions: Investment in the outside of main business and production, internally investments in VNPT obviously had warnings So, it is required to have clearer and more specific regulations for the investment in the outside of main business lines (which support in main business and production, which not support in main business and production), internal investments in VNPT to mitigate the risks and raise the effectiveness of State capital use in VNPT In addition, it is required to redefine the strategic objectives, missions of VNPT in the next 5-10 years in which VNPT tends to be a globally competitive corporate in the industry and the distribution of resources will be conducted mainly toward above objectives To correct the limitations of investment in the outside VNPT, it is required to reassess the capital, assets of VNPT accurately and restructure the group toward centralized objectives as increasing the financial management efficiency of VNPT in new situation Publicize the information, transparency of information at least under existing criteria applied to companies listed in security market at present Annually, VNPT shall draw a report on the degree of strategic achievement’s implementation audited under international standard to submit the National Assembly and publicize the information to whom concerning activities of VNPT Raise the role in advising, moderating, supervising related parties to investment decisions, project sponsorship and distribution polices in inner VNPT 90 Thirdly, complete the management of revenue, expenses, and profit distribution The management of revenue, expenses and profit distribution for VNPT can be regarded as the central point, the core of the whole financial management system of the State to increase financial effectiveness To fulfill the management of revenue, expenses and profit distribution, VNPT is required to perform the key solutions as follows: - Reassess the managerial situation of revenue, expenses and profit distribution in VNPT in recent years Also, reassessment of managerial situation shall be conducted from considering the establishment of limits and plans to the deploying of the measurements in reality On that basis, compare to public documents regulating on management of revenue, expenses, profit distribution, especially in Decree 09/2009/NĐ-CP of the Government, and reflect the unsuitability of legal documents to study and adjust - Continue to study and establish the assessment criteria on managerial situation and use of revenue, expenses and profit distribution in VNPT to set a premise for management and use The central establishment of such criteria is to focus on the conservation and increase of capital use effectiveness, and guarantee the increase of financial effectiveness of VNPT - Complete the system of economic and technical regulations in compliance with conditions, operating characteristics of VNPT both assuring the scientific and actual requirements, innovation of plan making on revenue, cost for innovating the ways of profit distribution in 91 direction of focusing on long term benefit of VNPT - Correct the course of statistics, accounting, revenue, expenses, profit and profit distribution of VNPT in the direction of assuring the sufficient recording and timely reflection For the management of revenue, expenses and profit distribution, it is required to focus on expense management because of only good management on expenses and cost reduction results in extending the production and business and increasing revenue and profit 92 REFERENCES Authur J.Keown, Jonh D Martin, J.William Petty and David F.Scott, Jr, (2005) Financial management principles and application, 10 ed, Pearson Education Bo Tai chinh, (1999), Thong tu so 62/1999/TT-BTC huong dan viec quan ly, su dung von va tai san doanh nghiep Nha nuoc Bo Tai chinh, (1999), Thong tu so 63/1999/TT-BTC huong dan viec quan ly doanh thu, chi phi va gia san pham, dich vu tai cac doanh nghiep Nha nuoc Bo Tai chinh, (1999), Thong tu so 66/1999/TT-BTC huong dan che đo phan phoi loi nhuan sau thue va quan ly cac quy doanh nghiep Nha nuoc Chinh Phu, (1999), Nghi dinh số 27/1999/NĐ-CP sua đoi, bo sung quy che quan ly tai chinh va hach toan kinh doanh đoi voi doanh nghiep Nha nuoc Chinh phu, (1999), Nghi đinh so 199/2004/NĐ-CP ve viec ban hanh quy che quan ly tai chinh cua cong ty nha nuoc va quan ly von nha nuoc dau tu vao doanh nghiep khac Chinh phu, (1999), Nghi dinh so 09/NĐ-CP ve viec ban hanh quy che quan ly tai chinh cua cong ty nha nuoc va quan ly von nha nuoc dau tu vao doanh nghiep khac Dang Cong san Viet Nam, (2006), Nghi quyet Dai hoi dai bieu lan thu X cua Dang Dang Cong san Viet Nam, (2011), Van kien Dai hoi dai bieu toan quoc lan thu XI, Nha xuat ban Chinh tri quoc gia, Ha Noi Dang uy khoi Doanh nghiep Trung uong, (2011), Bao cao ve tinh hinh dau tu ngoai nganh nghe kinh doanh chinh cua cac tap doan, tong cong ty, ngan hang thuoc Dang uy khoi doanh nghiep Trung uong, Hà Nội Dang Van Thanh, Le Thi Hoa, (2011), Kiem toan noi bo “Ly luan va huong dan nghiep vu”, Nha xuat ban Tai chinh, Ha Noi Duong Huu Hanh, (2009), Quan ly tai chinh cac doanh nghiep hien dai, Nha xuat ban tai chinh, Ha Noi Erich A Helfert, (2003) Financial analysis: tools and techniques: a guide for managers, Mc-Graw Hill 93 Eugene F Brigham and Joel F Houston, (2 0 ) Fundamentals of Financial Management, 12 ed, the Dryden Press Financial statement of VNPT from 2010 to 2012 Frank J Fabozzi & Pamela P Peterson, (2003) Financial Management and Analysis, e d , Wiley George T Friedlob, (2003) Essentials Of Financial Analysis, Wiley John Wiley & Sons, (2003) Introduction to Financial Reporting & Analysis Kieu Minh Nguyen (2011), Financial management and profitability of small and medium enterprises, Southern Cross university, Australia Kim Langfiel - Smith, H.Thorne and R Hilton (2000) Management Accounting, McGraw-Hill Le Van Tam, (2010), Giao trinh Quan tri doanh nghiep, Truong Đai hoc kinh te quoc dan, Nha xuat ban giao duc, Ha Noi Linh Huong, Vu Duy Hao, (2011), Nhung van đe ban ve tai chinh doanh nghiep, Truong Đai hoc Kinh te Quoc dan, Nha xuat ban thong ke, Ha Noi Martin S Fridson and Fernando Álvarez, (2002) Financial statement analysis: a practitioner's guide, ed, Wiley, Canada M C Ehrhardt & Eugene F Brigham, (2002) Finance Corporate – A Focused Approach, South-Western College Publisher Nguyen Dinh Phan, (1996), Xây dựng quản lý tập đoàn kinh doanh Việt Nam", Nha xuat ban thong ke, Ha Noi Nguyen Hai San, (1996), Giao trinh quan tri tai chinh doanh nghiep, Nha xuat ban thong ke, Ha Noi Peter Jubb, S.Haswell & L.S Nelson ITP, (1999) Company Accounting, ed Pham Quang Trung, (2003), Tap đoan kinh doanh va co che quan ly tai chinh tap đoan kinh doanh, Nha xuat ban Tai chinh, Ha Noi Richard A Brealey, Steward C.Myers and Alan J Marcus, (2001) Fundamentals of corporate finance, ed, Mc Graw Hill Higher Education Tap đoan Buu chinh Vien thong Viet Nam, Tong ket mo hinh tap đoan kinh te, Ha Noi, 2011 Tap doan Buu chinh Vien thong Viet Nam, (2006), Quy che tai chinh 94 Vu Anh Tuan, (2012), Financial Management to contribute to increasing the competitiveness of Vietnamese Economic Groups www.books.google.com www.essay.se www.investopedia.com www.saga.vn www.orcworldwide.com www.vietbao.vn www.en.wikipedia.org 95 APPENDICES 96 Appendix A Survey Questionnaire Part I Respondent’s Profile Please check mark (x) on the box corresponding to your answer: Name: …………………………………………………………… Position in the Organization: CFO of VNPT Director of financial department of VNPT Deputy director of financial department of VNPT CFO of VNPT’s subsidiaries Age: 20- 30 31- 40 41- 50 51- 60 Number of years in service: Less than year From years to years From years to years More than years Part II Questionnaire Survey Please place a check (x) mark on the box corresponding to your answer The following number means: 5- Very high; 4- High; – Average; – Low and 1Very low Please answer every item, not leave any blank Scale Verbal description Very low Low Average High Very high 97 Point Item/code A Capital mobilization The autonomic level of capital mobilization in VNPT is: The autonomic level in mobilizing capital of the VNPT’s subsidiaries is: The safe level in mobilizing capital of VNPT is: Clarity and fulfillment in harmonizing capital mechanism of VNPT is: Reasonable level regulated the loan limit at the rate payable on capital not exceeding times is: B Capital management and use The level of autonomy and self-responsibility at VNPT in using and managing capital is: The level of responsibility in the management and use of the owner's capital of VNPT is: The effectiveness of sector VNPT: investment outside the Level of capital preserve in VNPT is: C Assets management 10 The transparency of ownership and the right of using assets in VNPT is: 11 The level of conservation of the assets in VNPT is: 12 The level of losses and wastage in the use of assets in VNPT is: 13 The level of efficiency in the use of assets in VNPT is: D Management of revenues, expenses and profits distribution 14 The clarity and transparency in managing revenue, expenses, and profit distribution in VNPT are: 15 The Level in harmonizing between the interests of the state, corporations and employees in managing revenue, expenses and profit distribution in VNPT is: 16 The clarity of the regulations on the profit distribution which subsidiaries must contribute to VNPT group is: 98 CURRICULUM VITAE I Personal Data Full name : TO THI NGOC LAN Date of birth : May, 23th 1982 Sex/Marital status : Female/married Nationality : Vietnam II Educational Background: Date from Date to Degree(s) or Diploma(s) obtained: The Southern Luzon State University 2009 - 2013 Degree of Doctor of Business Administration (On - going) The National Economics University 2005 - 2008 Degree of Master of Economics The Academy of Finance 2000 - 2004 Degree of Bachelor of Economics Institution Ha Noi teacher of teaching colleges number 2005 Certificate of teaching Fast Company 2006 Certificate of training accounting software FAST III PROFESSIONAL EXPERIENCES Date from to 2004 Up to now Company/ Project The University of Labor and Social Affairs (ULSA) Position Lecturer in Accounting Description - Teaching in Accounting principles - Teaching in Financial Accounting - Teaching in Management Accounting - Teaching in Tax Accounting - Teaching in Computer Accounting - Science tasks 99 Date from to 2005 - Up to now 2007 - Up to now Company/ Project The National Economics University Long Hung Laws Firm Position - time Lecturer in Accounting Chief Accountant Description - Teaching in Accounting principles - Teaching in Financial Accounting - Teaching in Management Accounting - Teaching in Tax Accounting - Teaching in Computer Accounting - Organizing and controlling the accounting department - Making and checking monthly tax reports, finalization of the fiscal year, annual financial reports - Making reports submitted to the Board of Directors - Classification and information management - Training staff on accounting skills ... the financial performance of the EGs - The status of allocation and use of financial resources of the EGs - The status of distribution and use of operational efficiency of EGs External Factors of. .. practices and financial characteristics of SMEs in Vietnam, (2) to develop and test a model of SME profitability, and (3) to contribute knowledge of the relationships between financial management and. .. Independent and Dependent Variables of Financial Management Efficiency of Vietnam Posts and Telecommunications Group Independent Variables Dependent Variables Company profile VVariable • Type of company