Corporate Governance
Corporate Governance
Corporate Governance
Dung To Thi
Year: 2011
Abstract
Corporate governance (CG) is a popular topic that gets more concerns today, especially in
fast developing countries. Numbers of projects and studies relating to CG and their effects
on financial performance of companies have been done in many countries, but still this kind
of topic is quite new in Vietnam.
This paper tries to find out if there is any relationship between board size & composition,
board activity, and ownership concentration and firm performances. Based on collecting
information of listed companies in Vietnam, I use statistical analysis and quantitative
method to get the paper’s objectives.
Based on CG theory and the role of CG structures such as board of directors, ownership
structure, and this paper also make a review on the compliance of listed companies with CG
rules at Vietnamese market recently.
Our empirical findings show that independent directors enhanced firm performance;
inversely, the dual position of CEO and Chairman has a positive relation with firm value.
Besides, age of director and the number of directors meeting play important roles in firm
value. However, no significant impact of board size, board gender diversity, top ten
shareholders concentration and levels of state ownership on firm performance. Lastly,
regression model of market performance shows that the duality of CEO and Chairman and
the number of independent directors are significant impact on firm value.
Table 3-1: Summary of previous studies on corporate governance structure and firm performance ................ 22
Table 4-2: ANOVA analyses on the impact of board size on firm value ......................................................... 30
Table 4-3: ANOVA analyses on the impact of independent directors on firm value ....................................... 31
Table 4-4: ANOVA analyses on the impact of age of the boards on firm value ............................................... 31
Table 4-5: ANOVA analyses on the impact of dual of CEO-chairman on firm value ...................................... 32
Table 4-6: ANOVA analyses on the impact of F_CEO on firm value ............................................................. 33
Table 4-7: ANOVA analyses on the impact of F_Chair on firm value ............................................................. 33
Table 4-8: ANOVA analyses on the impact of F_Dir on firm value ................................................................. 33
Table 4-11: The impact of ratio of state ownership on the firm value............................................................... 35
Table 4-13: Regression Results for Firm Performance Measures with CG Structures ...................................... 39
Table 4-14: Regression Results for Accounting performance with CG Structures ........................................... 40
List of figures
Regards to the board size & composition variables, the number of directors (Num_Dir) is
the total number of directors on a board. It is clear that large board size is associated with
sufficient capacity to monitor the company and lower efficiency due to the time consumed
in reaching agreements (Ma & Tian, 2009). However, many studies have concluded
inconclusive results from different markets, for example, Yermack (1996) has stated his
main finding of an inverse association between board size and firm value when
evaluating US public corporation (Yermack, 1996); conversely, Cheng (2008) provides
empirical evidence that firms with larger boards have lower variability of corporate
performance. This relationship between board size & composition and firm performance
will be discussed more in the chapter 3.
One more important factor is the number of independent directors (Num_Ind) in the board.
Independent directors are defined as who have no position in the management team and no
direct business or benefit links within the firm (Ma & Tian, 2009). In the board with high
percentage of independent director, the board assures to protect the interests of shareholders
and lead the firms based on the principles of justice, therefore positive affects firm value.
It is argued that the duality of CEO and Chairman may either improve the decision making
speed of the CEO or reduce the monitoring responsibility of the Chairman and affects firm
value (Ma & Tian, 2009). In this study a dummy variable (CEO_Chair) that equals one if
the chairman of the board is also the CEO of a firm and zero otherwise.
Besides, the average age of directors (Age_Dir) is used to measure leading experience of the
board. Thus, an experienced board might affect firm’s performance positively. However,
the board should not too old to accept new technologies or new thinking in this fast
developing environment.
From empirical researches, many corporate managers believe that a positive link exists
between board diversity and shareholder value (Carter, 2003). It means corporate diversity
promotes a better understanding of the marketplace, increases creativity and innovation; and
produces more effective problem-solving (Carter, 2003). According to Ma & Tian (2009),
board diversity represented by percentage of women in the board, women in the board if
they are Chairman and CEO is female or not (Ma & Tian, 2009).
Supporting this view, Dutta & Bose (2006) has told that board diversity or the co-existence
of men and women of different nationalities, races, religions and ages on the board of
directors is a much talked-about topic in today’s corporate world (Dutta & Bose, 2006). In
this study, gender diversity is the presence of women on the board of directors and referred
as three variables. They are the number of female directors (Num_Fdir) in the board;
female chairman dummy (F_Chair) that equals 1 for female chairman and 0 otherwise, and
female CEO dummy (F_CEO) which is 1 for a CEO being a female and 0 otherwise. Based
on previous studies, board diversity is supposed to have a positive link with firm value.
Board activity
Board’s activity, which referred as the number of board’s meeting per year (Dir_Meeting),
reflects how much involvement that the board contributes in monitoring since the board has
right to decide on important issues and supervise board of management. Thus, a proper
frequency of board meetings may enhances the vigilance and oversight of firm management
and adds to firm value and alternatively (Ma & Tian, 2009).
Ownership concentration
3.3.1 Empirical research on the relation between board size and firm
performance
From research on effect of board size in small and medium sized firms, Bennedsen et al
(2008) concluded that effect of board size on performance given by a causal interpretation.
Based on these findings, no performance effects were found when varying the board size at
levels below six directors, the typical range of board size in small and medium-sized firms,
but a negative board size effect in boards of seven or more members was found (Bennedsen
et al., 2008). As an adequate size of board lead to an effective monitoring, finding the right
number of directors is a trade-off between the benefits of having sufficient competencies
represented and the cost arising from increased free riding among directors (Bennedsen et
al., 2008).
Another result on Nigerian stock exchange also shows that the size of the firm has a
positive impact on firm performance. This suggests that firms with larger boards
outperform compared to firms with small boards (Ehikioya, 2009).
On the other hand, the study on the impact of corporate governance mechanisms on the firm
value shows an inverse relationship between board size and firm value and suggests that the
negative relationship between board size and firm value transcends different corporate
governance systems (Mak & Kusnadi, 2005).
However, the results made through for all OECD countries indicate that there is no a
negative relationship between firm value and the size of the board of directors (Andres et
al., 2005).
3.3.2 Empirical research on the relation between board composition and firm
performance
In the research on the relationship between CEO duality, the proportion of independent
directors and firm performance as measured by return on assets (ROA) and return on equity
(ROE), Ponnu (2008) conducted the investigation on samples of large publicly traded
Malaysian companies. He made a conclusion that these two governance parameters, board
structure and CEO duality on firm performance in the context of Malaysia is lacking. Result
indicates that there is no significant relationship between corporate governance structures
and company performance (Ponnu, 2008).
Support to this view, the adverse effect of CEO duality on performance indicates the need
for firms to separate the post of CEO and Chair in order to ensure optimal performance
since the separation of the position of CEO and Chair will encourage efficiency in decision-
making mechanisms (Ehikioya, 2009).
In the context of Hong Kong market, Chen et at (2005) selected 412 publicly listed Hong
Kong firms during 1995–1998 and found a negative relationship between CEO duality and
performance due to managerial entrenchment in companies that combine the positions of
CEO and chairman of the board. This study also show that the composition of the board of
directors (proportion of independent non-executive directors, outsider dominated board) has
little impact on firm performance (Z. Chen, Cheung, Stouraitis, & Wong, 2005).
Contrary to most available studies when analyze the effects of board size and composition
on the valuation and performance, Frick and Bermig are unable to find a consistent effect of
either board size or board composition on firm valuation and performance (Frick & Bermig,
2009).
In another site, study examines the efficacy of monitoring and its impact on firm
performance concluded that in New Zealand firm performance is positively associated with
the proportion of independent outside members on the board (Hossain et al., 2001).
Besides, the empirically findings of Busta (2008) also shows board independence does
matter, at least in the banking industry, but its effect on performance is dependent upon the
governance system (Busta, 2008).
However, in the research on board independent and firm performance for Chile listed
companies, Lefort and Urzua concluded that there is no significant explanatory power of
any of the measures of the proportion of independent directors on firms' Tobin's Q (Lefort
& Urzua, 2008).
Besides some assessments on compliance of CG, a cross-country study of CG in European
banks revealed an inverted U-shaped relation between board size and bank performance, a
positive relation between the presence of non-executive directors and bank performance
(Busta, 2008).
As discussed before, gender diversity in the board is supposed to have a good impaction on
firm performance at a specific value. Refer to the effect of gender diversity or the presence
of women on financial performance of commercial banks in Bangladesh, it shows a
paradoxical relationship between gender diversity in the boardroom and financial
performance of commercial banks in Bangladesh (Dutta & Bose, 2006). This unusual result
is explained by small sample size and unavailability of data for a period longer than 2002-
2005 (Dutta & Bose, 2006).
3.3.3 Empirical research on the relation between board activity and firm
performance
Board activity, which is referred as board meeting frequency, is an important dimension of
board operations. The empirical study for Chinese listed firms during 2003-2004 found that
the frequency of board meetings is negatively associated with firm value, while the
frequency of general shareholder meetings is positively associated with firm value (Ma &
Tian, 2009). They argue that frequent board meetings imply internal problems or inefficient
decision-making while frequent general shareholder meetings display both confidence on
the firm’s management and an acceptance of broad suggestions (Ma & Tian, 2009).
With the same conclusion, the investigation of 307 firms over the 1990-1994 period shows
that the annual number of board meetings is inversely related to firm value because of
increases in board activity following share price declines (Vafeas N., 1999).
Liang (2009) adopted research for 279 Taiwanese public electronic firms to check if firm
performance is affected by ownership structure. The result shows that different levels of
ownership structure have different impacts on firm performance. At low and medium levels,
there is a positive impact of board ownership on firm performance, especially at medium
level, the impact is much stronger, probably because monitoring by other shareholders is
closer and more effective (Liang, 2009).
In line with other studies, Ehikioya (2009) has examined the link between the structure of
corporate governance and firm performance in Nigeria and found a higher level of
ownership concentration leads to a higher market valuation. The investigation shows that
when major shareholdings are acquired in a firm, control cannot easily be disputed and the
resulting concentration of ownership may lower the agency costs (Ehikioya, 2009).
Besides, Busta (2008) stated that there exists a significant relationship between ownership
concentration and performance, which is influenced by the tradition of the legal system
(Busta, 2008). The findings suggest an increase in concentration might be beneficial for
banking firms in Continental Europe, where the degree of legal protection of minority
investors is lower as compared to common law countries (Busta, 2008).
Furthermore, Chen et al (2005) also obtained a result of insignificant positive relationship
between concentrated ownership and firm valuation (Z. Chen et al., 2005).
Table 3-1: Summary of previous studies on corporate governance structure and firm performance
Performance
Authors Country Time horizon Sample size Results
measurement
Ten OECD - No relation between firm value and the
Andrest et al 1990-1996 450 ROA
Countries size of the board of directors
Hossain, Prevost, - Independent members on the board has a
New Zealand 1991-1997 633 Tobin’s Q
& Rao positive impact on firm performance.
- A negative relation between CEO duality
Chen et al Hong Kong 1995-1998 412 ROA, ROE, M/B
and performance.
- No relation between board size and firm
performance was found if the board size at
Industry-adjusted levels below six directors.
Bennedsen Denmark 1999 6850
ROA - A significantly negative effect was found
when the size of boards with six or more
members.
- Ownership concentration has a positive
impact on performance.
- No relation between board composition
ROA, ROE, PE, and firm performance.
Ehikioya Nigeria 1998-2002 107
Tobin’s Q - CEO duality adversely affects firm
performance.
- Firm size impact positively on firm
performance.
- Board independence impacts on
17 Western performance.
Busta European 1993-2005 358 Tobin’s Q, ROA - A positive significant relation between
countries ownership concentration and firm
performance.
- A significant negative effect of board size
Tobin’s Q, ROE,
Frick & Bermig German 1998-2007 294 when using ROIC as dependent variable,
ROIC
not true for Tobin's Q and ROE.
22
Singapore & - Negative relation between board size and
Mak & Kusnadi 2000 550 Tobin’s Q
Malaysia firm value.
- No significant relation between board
Lefort & Urzua Chile 2000-2003 160 Tobin’s Q
independent and firm performance.
- Independent directors enhanced firm
performance.
- Board size and gender diversity do not
affect firm value.
Ma & Tian China 2003-2004 1975 ROA - Frequency of board meetings is
negatively associated with firm value.
- State ownership and total share ownership
concentration results in an asymmetric
U(V) shape of firm performance.
- If board ownership is under 25%, the
convergence-of-interest hypothesis is
supported.
Liang Taiwan 2004 279 ROA
- If board ownership is over 25%, there is a
negative impact of board ownership on
firm performance.
- No significant impact of board structure
Ponnu Malaysia 2005 100 ROA, ROE
and CEO duality on firm performance.
23
3.4 Corporate Governance and Regulation in Vietnam
3.4.1 Adoption of corporate governance
In Vietnam, CG Principles have been applied recently, thus not many researches on this
kind of topic are conducted. Almost there are just few studies on investigating the impacts
of CG structures or CG score to firm performance. This part introduces some initial reports
relating to CG implication have been done in Vietnam.
The assessment of CG in Vietnam conducted in May 2006 by the East Asia and Pacific
Region of the World Bank as part of the Reports on Observance of Standards and Codes
Program showed that Vietnam has recently taken important steps to establish its CG
Framework (IFC and State Securities Commission Vietnam, 2006). This report indicates
some key issues of framework for corporate governance in Vietnam such as a high degree
of informality still exists in the corporate sector, an unofficial securities market that is
significantly larger than the formal market, and there remains a large presence of state
ownership in enterprises (IFC and State Securities Commission Vietnam, 2006). Moreover,
institutions responsible for regulation, enforcement, and development of the capital market
have limited capacity and resources. It lead to some bad consequences, for example investor
protection is inadequate, related-party transactions are pervasive, compliance with
accounting standards is insufficient, and disclosures of quality information are limited (IFC
and State Securities Commission Vietnam, 2006).
In year 2010, an assessment of 100 largest publicly listed companies shows that most
categories of CG has achieved a level of compliance but less than 50% (IFC and The State
Securities Commission, 2010). From this report, mostly companies are still at the first stage
of adoption and development of CG. Besides, different industries demonstrate different CG
performances, but also needed more improves in the future (IFC and The State Securities
Commission, 2010). This report shows that firms with better corporate governance practices
also demonstrate better profitability, as higher return on equity and return on assets ratios,
than those in the bottom CG ranking (IFC and The State Securities Commission, 2010)
The process of compliance CG in Vietnam is rather late compared to other countries in Asia
area and all over the world. As described above, OECD Principles of CG was first
publicized in Vietnam in 2004 and then the International Finance Corporation (IFC)
publicized OECD Guidelines on CG of State-owned Enterprises in 2005 (OECD, 2004b).
Those gave the guidelines for companies to be acquainted to the principles of CG. Next, the
“Corporate Governance Manual in Vietnam” has been official disclosed also by IFC in
2010 not only gave an explanation of CG in an academic way but also a practical toolkit to
help implement good CG in practice (IFC and State Securities Commission of Vietnam,
2010).
In Vietnam, CG principles have been brought into laws in 2007, but the compliance with
CG has been still low and need to be improved gradually. Because of the fact that many
SOEs have been equitized and converted into joint stock companies and state still hold a
majority interests in the companies (IFC and State Securities Commission Vietnam, 2006).
Besides, some characteristics of Vietnam companies such as concentrated ownership and
unclear separation between ownership and control cause the ability of abusiveness minority
shareholder’s rights, weak accountability and poor information disclose. In almost
companies, it is unusual to find joint stock companies in which the general director acts as
the Chairman of the Board of Directors at the same time (IFC and State Securities
Commission Vietnam, 2006).
Other issues in the compliance of CG in Vietnam are the cross-shareholdings and lack of
transparency of information in the ownership structures; make trouble for the process of
getting understand companies of investment of outside investors.
Last but not least, the lack of experience in the field of CG and general good practice of
Supervisory Board, Board of Directors or Management is also a big obstacle for the widely
adoption of CG in Vietnam (IFC and The State Securities Commission, 2010).
Std.
Variable N Minimum Maximum Mean Median Mode
Deviation
Board size
Num_Dir 100 4.00 11.00 5.76 1.28 5 5
Board Composition
Num_InDir 100 .00 9.00 3.04 1.46 3 2
CEO_Chair 92 .00 1.00 .40 .49 0 0
Age_Dir 37 42.10 56.40 49.97 3.77 49.8 54.2
F_Chair 92 .00 1.00 .12 .33 0 0
Num_FDir 92 .00 3.00 .85 .84 1 0
F_CEO 91 .00 1.00 .11 .31 0 0
Board activity
Dir_Meeting 100 1.00 30.00 5.36 5.04 4 1
Ownership concentration
Top10_Total 82 6.05 88.93 46.03 18.68 51.65 51
Ratio_State 85 .00 60.00 20.06 22.42 10.05 0
Firm Performance
ROA 100 -.3292 .5010 .0888 .0981 0.0773 N/A
Tobin’s Q 100 .1131 7.9568 1.0462 .8509 0.97 N/A
The description statistics of all independent and dependent variables are summarized in
Table 4-1. As we can see, the return on asset ROA of 100 largest companies is 0.0888 on
average. The return on asset varies in a wide range from a minimum of -0.3292 to a
maximum of 0.501. While Tobin’s Q of 100 largest companies is 1.0462 on average and
median is 0.97. The value of median 0.97 is quite near the minimum and far from the
maximum value of Tobin’s Q, hence almost companies in the chosen list experienced with
low Tobin’s Q.
The number of director has a mean of 5.76 and median and mode of 5. The range of number
of director is not much with largest board has 11 directors and the smallest one has 4
directors. The range of this variable seems to conform to Law on Enterprises (LOE) 2005..
The median of number of director is 5 means that 50% companies was found to have small
number of board in range of [4-5) and 50% companies have number of board in range (5-
11]. It proves that board of director in Vietnam favors the board with not many people.
However, according to CG Rules and empirical studies, board size of joint stock companies
should be sufficient but not too many members to allow effective operations.
The number of independent directors ranges from 0 to 7 with mean 3.04; median 3 and
mode 2 respectively. The Model Charter for listed joint stock companies requires that one
third of the members of the board be independent directors; however, independent
definition is not clearly regulated by law (IFC and State Securities Commission Vietnam,
2006). Besides, this dataset shows that some companies do not have even one independent
member in the board and the guideline regarding independent directors has not been well
implemented. This is due to limited pool of executive candidates and poor regulatory on
independent directors in Vietnam. Presently, just only non-executive directors are defined
as independent directors and the concept of independent director has not been clarified and
practiced yet.
Also from above table, we can see that the duality of CEO-chairman is quite common in
Vietnam since the mean of 0.4 indicates that 40% of Chairmen also take the position of
CEO. This proves that the separation of roles and responsibilities between CEO and
Chairman is not seriously complimented yet.
The ages of directors has similar mean, median around 50 years. The value of median near
from the largest value of age 56.4 means that more companies experienced high average
age. This average age is comparatively high compared to other countries since in Vietnam,
experienced managers are preferred and they are almost near to the retirement age which is
55 for women and 60 for men.
According to the statistic results, the boards are not widely diversified with the female
directors’ presence. As we can see around 12% Chairmen and 11% CEOs are female in the
board. The average number of female directors in the board is just 0.85, means that just
nearly one female member in each board.
Besides, number of board meeting varies in a wide range from 1 to 30 times per year. Board
meeting hold at least once a year, but for some boards, they hold meetings more frequently
up to 30 times a year. On average, the board of directors holds meetings about 5 times a
year. As indicated from the LOE 2005, board requires meeting at least quarterly and board
meetings attendance should be disclosed (IFC and State Securities Commission Vietnam,
2006). However, this rule is not applied yet. Besides, since almost companies in Vietnam
hold once annual shareholders meetings per year, therefore this kind of variable is not
considered as a factor of board’s activity influencing firm performance in this study.
The ownership of Vietnamese listed firms is very concentrated. The top ten total
shareholders own 52.09% total shares outstanding on average with a maximum of 88.93%.
Thus, in the meeting, the top ten total shareholders are able to control the firms and
dominate other shareholders.
The average ratio of state-owned shares is 20.06% of total shares outstanding. In some
companies state hold a large number of shares up to 60% of total shares outstanding,
conversely, no state ownership exists in some companies. This is one key issue in corporate
governance implication in Vietnam because of the remaining of a large proportion of shares
hold by the State in firms. Since many joint stock companies were transferred from state-
owned enterprises, so the impacts from this big shareholder remain in Vietnam.
A report of March 2006 shows that the State held shares in 2,185 companies, except for the
33 companies that have gone public, the rest are joint stock companies (IFC and State
Securities Commission Vietnam, 2006). During the “equitization” process, process of
transferring from state-owned enterprises (SOE) to joint stock companies, a fixed portion
usually less than 50 percent of the shares are sold to the public, the State keeps a portion,
and the rest is sold at par to management and employees (IFC and State Securities
Commission Vietnam, 2006). Therefore, it is a common practice that a former top executive
of the equitized SOE becomes Chairman of the Board and the former top managers of the
equitized SOE in also a major shareholders in the equitized company (IFC and State
Securities Commission Vietnam, 2006). Due to this issue, the Chairman usually interferes
with the CEO’s operational decisions and affects the interests of minor shareholders.
The result of ANOVA when considering the effect of board size to firm performance is
stated in Table 4-2. As above table, the firms are divided into three groups in terms of size
of the board: 1) the firms with a board comprising less than 9 directors; 2) firms comprising
9 to 10 directors (around the mean, median and mode); and 3) firms comprising more than
10 directors. The results show that ROA varies not following any rule pattern. ROA
decreases when the number of directors increases from <=8 to 9-10, and then it increases
when the number of directors grows more than 10 members. Considering Tobin’s Q as a
measurement of firm performance, Tobin’s Q decreases when the board size becomes
larger. However, the differences on firm performance between three groups are insignificant
in term of statistical mathematics. This is because almost companies in Vietnamese market
just recently listed and they do not really care about the implication of corporate
governance.
Our results also show no significant relation between board size and firm performance. This
is the same conclusion with Andres et al (2005) when investigation conducted in ten OECD
countries. However, it is inconsistent with result of Bennedsen et al (2008), and Mak and
Kusnadi (2000) with their detecting of negative relationship between board size and firm
value when considering Tobin’s Q as a company’s market valuation.
Now this study turn on evaluating the impact of independent directors on firm performance
by dividing the firms into three groups based on the value of the number of independent
directors. Group 1 consist of firms with a board consisting of less than 3 independent
directors; group 2 concludes firms with a board of 3 independent directors (the median and
mode); and group 3 firms consisting of more than 3 independent directors.
From the result, a significant different on ROA with different number of independent
directors at significant level of 5%. This finding are quite match with others study such as
those of Ma & Tian (2009) or Busta (2008) when conclude that independent directors
enhanced firm performance (ROA). It also shows that board with 3 independent directors
has the highest firm profitability ROA. However, number of independent directors does not
affect value of Tobin’s Q as the differences between groups are small and insignificant.
Independent directors impacts on firm value because independent board tend to assure
interests of shareholders more effective and the operation process more apparent. Hence,
the boards with a higher of independent directors make a better judgment on monitoring
issues and generate better firm performance. In this case, Tobin’s Q fluctuates along with
the variation of the stock markets and may not stable enough to represent for the value of
companies.
Table 4-4: ANOVA analyses on the impact of age of the boards on firm value
To examine whether the age of directors represent the administrative experience of boards
and add to firm value, the boards are grouped together if average ages of board members
less than 45 years’ old, 45 to 50 years’ old and more than 50 years’ old respectively.
The result shows that age of director effects significantly to firm performance when using
ROA as a measurement, not Tobin’s Q. The boards with age from 45-50 generates high
ROA with an average return on asset of 0.065 and this was initially expected. The
“youngest board” with an average age under 45 had a negative return on asset of (-0.0477).
However, the board with an average age higher 50 makes a slight lower ROA compared
with board with an average age of 45-50. This is caused by backward lagging behind new
technologies or new concepts. Another reality that average age higher 50 is quite near from
retirement age so people usually get trouble in thinking creative, healthy problems and
tends not to strive for the job prospect in the future.
Besides, a number of Vietnamese companies are still in the first phase of development so
the need of qualified managers are more and more urgent, especially after Vietnam joined
the WTO in January 2007. Because of the fact that most of enterprises, state and private-
owned enterprises have chosen the head of competencies not by merit, but other criteria
such as loyalty or trust so in long – standing companies, the managers may often have a
lack of necessary knowledge in management.
Table 4-5: ANOVA analyses on the impact of dual of CEO-chairman on firm value
Table 4-5 shows the dual of CEO and Chairman impacts significantly on Tobin’s Q of the
companies, but not significant affects ROA. Firms with the duality of CEO-chairman and
separation of CEO and Chairman have higher value of ROA and Tobin’s Q respectively.
This is inconclusive with our initial expectation supposed a Chairman who is also possess
the CEO position effects negatively on firm performance.
However, the differences of ROA between groups are minimal and insignificant. Therefore,
the dual position of CEO and Chairman affects positively Tobin’s Q and does not affect
ROA in Vietnam. As stated before, this reverse result can be caused by the common reality
that former top executive also being a Chairman of the Board and also a major shareholders
in the equitized companies. Due to this fact, the Chairman_CEO usually become more
active in management process, faster in decisions making and hence the firm value.
Table 4-6: ANOVA analyses on the impact of F_CEO on firm value
Next, continue to examine the relation between Female CEO and firm performance. Table
4-6 shows that higher ROA for firms with a female Chairman, but this result is not the same
for Tobin’s Q, however they are all insignificant. This result is consistent with the
hypothesis that board diversity improves firm value.
Table 4-7: ANOVA analyses on the impact of F_Chair on firm value
Move to the considering female directors presence as a variable, table 4-7 give the same
result with those when considering the effect of F_CEO. That is higher ROA and lower
Tobin’s Q when comparing firms with Female Chairman and others. The result indicates
that neither a female Chairman nor female CEO do not affect firm performance and the
differences between groups are small and insignificant.
Table 4-8: ANOVA analyses on the impact of F_Dir on firm value
Table 4-8 indicates that higher ROA and lower Tobin’s Q for firms with female directors
present on their boards but the different are quite small and insignificant. It is found that
female Chairman, female CEO and female directors do not influence firm performance, and
do not support for the assumption that board diversity with female directors adds to firm
value in Vietnamese market. Maybe, the role and interests of female in board of directors
have not been constantly concerned. In modern Vietnam’s society, female managers have
tried to combine their roles outside family with traditional roles of daughter, wife and
mother. However, Vietnam still be influenced by Confucianism which give prominence to
the supremacy of men over women. Hence, the implementation on law of women’s right is
not thoroughly and female entrepreneurs seem to face more issues when doing the business,
raising their opinions or expressing their power in board’s management.
ANOVA analysis give explanation on the impact of board activities on firm value shown in
table 4.9. Firms are clustered based on the frequency of the board meeting into three groups:
group 1 if board’s meeting is less than 4, group 2 from 4 to 6 which includes mean and
median value, and group 3 with more than 6. Table 4-9 shows that the number of directors
meeting influences significantly on ROA of firms, but not for Tobin’s Q value. From the
table 4-9, ROA get the highest value when board meeting is from 4-6 and decrease when
frequency of board meetings is less than 4 or more than 6. This result seems like a good
consequence from argument that proper number of directors meeting will enhance firm
performance and this result also match with other studies in the past.
In this part, the relation between two variables for the proxy of ownership concentration and
firm performance will be considered. The value of Top10_Total of all firms are listed from
low to high and divide the whole sample into 5 quartiles with the same amount of
companies for each group. Table 4-10 shows firm performance in every group.
From figure 4-1, we can see easily that Tobin’s Q values vary as an asymmetric U (or V)
shape in line with the values of Top10_Total. In particular, the Tobin’s Q value initially
increases from 0.3045 to 1.0015, reaches a peak of 1.4147 in the second quartile, and then it
turns down in the third quartile. After that, the firm value increases slightly in the last
quartile. This is like other empirical studies as firm values display an asymmetric U (or V)
shape in line with the total share ownership concentration. However, the variation of ROA
between groups does not follow any rules. In Vietnam market, the top ten shareholders
concentration has no significant impact on firm performance.
Table 4-11: The impact of ratio of state ownership on the firm value
To test whether the percentage of shares directly owned by state to firm performance or not,
firms are divided into 3 groups based on state ownership concentration, group 1 with state
ownership is 0, group 2 from more than 0% to less than 50% and group 3 for state
ownership over 50%. Table 4-11 shows that firm values are not significantly different
between firms with various levels of state ownership. Group 3 have the best ROA value
while group 2 have the best Tobin’s Q. In Vietnam, there remains lot of companies with
high state ownership and supposed to generate good firm performance since they receive a
better support from political and social strategies. However, maybe this study does not
reflect truly the situation in Vietnam since a number of small companies are included to
investigate and limited time scale in this study.
Correlations
37
Pearson Correlation .12 .06 .19 .13 -.21 -.02 .300** .284** 1.00
F_Dir Sig. (2-tailed) .24 .57 .08 .23 .21 .88 .00 .01
N 92.00 92.00 92.00 92.00 37.00 91.00 91.00 91.00 92.00
*
Pearson Correlation -.02 -.09 .213 .09 .03 .00 -.12 -.11 .05 1.00
Dir_
Sig. (2-tailed) .87 .40 .03 .38 .85 .97 .25 .31 .63
Meeting
N 100.00 100.00 100.00 100.00 37.00 91.00 91.00 91.00 92.00 100.00
* *
Pearson Correlation -.240 -.03 -.05 .224 -.06 -.10 -.21 -.14 -.16 .08 1.00
Top10_
Sig. (2-tailed) .03 .76 .66 .04 .73 .35 .05 .23 .15 .45
Total
N 82.00 82.00 82.00 82.00 33.00 82.00 82.00 82.00 82.00 82.00 82.00
* **
Pearson Correlation .09 -.12 .04 -.10 .414 -.06 -.10 -.21 -.280 .14 .274* 1.00
Ratio_
Sig. (2-tailed) .43 .29 .70 .36 .01 .56 .34 .05 .01 .21 .01
State
N 85.00 85.00 85.00 85.00 36.00 85.00 85.00 85.00 85.00 85.00 81.00 85.00
38
The correlation coefficients between two random variables are very small, except that
F_Chair and F_CEO have more relation than others. As we can see the correlation
coefficient between F_Chair and F_CEO is 0.516 and significant at 10%. However,
this coefficient is not too big and cannot be proved the linear relationship among
variables.
In this study, multiple regressions are used and require that every case have a score on
every variable that is used in the analysis. Because of substantial portion of data
missing for variable of Age_Dir, which is not available more than 50%, the variable
of Age_Dir is excluded among the independent variables.
The regression model includes almost variables mentioned before such as the number
of board directors, the number of independent directors, number of female directors,
number of board meeting per year, ratio of shares held by the top ten shareholders to
the total shares outstanding, ratio of state-owned shares to the total shares outstanding.
Besides, all dummy variables as stated before are used to measure the impact of
corporate governance structures in Vietnam Stock Exchange.
This part gives ordinary least squares regression results for the Companies’ market
performance and controlling variables, including 81 companies in the sample. The
column of beta in following table shows the result of regression between Tobin’s Q
and all independent variables.
Table 4-13: Regression Results for Firm Performance Measures with CG Structures
Coefficientsa
Standardized
Un-standardized Coefficients
Control Variables Coefficients t Sig.
B Std. Error Beta
(Constant) 1.271 .615 2.067 .042
Num_Dir .069 .397 .022 .175 .862
Num_InDir .085 .137 .082 .618 .539
CEO_Chair .421 .231 .224 1.819 .073
F_Chair .060 .387 .020 .154 .878
1
F_CEO -.135 .396 -.044 -.342 .733
F_Dir -.271 .242 -.144 -1.121 .266
Dir_Meeting -.195 .147 -.160 -1.326 .189
Top10_Total -.016 .103 -.020 -.158 .875
Ratio_State -.060 .144 -.053 -.415 .680
Adjusted R Square 0.021
F Statistic 0.816
a. Dependent Variable: Tobin’s Q
Regression result for market performance (Tobin’s Q) shows that the duality of CEO
and Chairman is positive related to firm value (Tobin’s Q) and significant at the level
of 10 percent. This result suggests that the duality of CEO and Chairman is important
for market valuation. However, other variables are not related to Tobin’s Q among
Vietnamese companies.
Also according to the above results, we can see that the adjusted R squares is very
small, just only 0.021. It means that the model is not good fit to explain the variation
of firm performance based on those control variables.
Regression results for accounting performance (ROA)
Coefficientsa
Standardized
Unstandardized Coefficients
Control variables Coefficients t Sig.
B Std. Error Beta
(Constant) .158 .068 2.324 .023
Num_Dir .011 .044 .031 .260 .795
Num_InDir -.026 .015 -.225 -1.745 .085
CEO_Chair -.016 .026 -.076 -.629 .531
F_Chair .013 .043 .038 .294 .770
2
F_CEO -.025 .044 -.072 -.575 .567
F_Dir .033 .027 .155 1.238 .220
Dir_Meeting -.005 .016 -.040 -.336 .738
Top10_Total -.019 .011 -.204 -1.656 .102
Ratio_State .017 .016 .135 1.080 .284
Adjusted R Square 0.027
F Statistic 1.247
a. Dependent Variable: ROA
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Code Num_ Num_ Dir_ CEO_ Age_ F_ Num_ F_ Top10 Ratio Tobin’s
No. ROA
Dir Indir Meeting Chair Dir chair Fdir CEO _total _State Q
In the School of Business and Informatics (IDA), we have focused on the students' future
needs. Therefore we have created programs in which employability is a key word. Subject
integration and contextualization are other important concepts. The department has a closeness,
both between students and teachers as well as between industry and education.
Our courses in business administration give students the opportunity to learn more about
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Among our IT courses, there's always something for those who want to design the future of IT-
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The research in the school is well recognized and oriented towards professionalism as well as
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