Transition Economy and Equity Home Bias: The Case of Vietnam

Blenman, Lloyd P.; Le, Ben

doi:10.2139/ssrn.2543010

Cited by 7 publications

(18 citation statements)

References 40 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…However, non-SOEs attract more foreign investment. This finding is consistent with Blenman and Le (2014) showing that foreigners prefer to invest in firms with lower government ownership in Vietnamese markets. Interestingly, the average annual stock return is −4.75 per cent with a high standard deviation of 50.55 per cent for the sample period.…”

Section: Model and Datasupporting

confidence: 91%

The impact of government ownership on the cost of debt and valuation of Vietnamese listed companies

2020

PAR

Self Cite

View full text Add to dashboard Cite

Purpose This paper aims to examine the impact of government ownership on the cost of debt and firm valuation in listed Vietnamese companies for the period 2007 to 2016. Design/methodology/approach The authors use both the generalised methods of the moment (GMM) and the ordinary least squares (OLS) regressions to analyse a panel data spanning over the period 2007 to 2016 in the markets of Vietnam. Further, the instrumental variable is used in the paper. Findings The authors find that firms with relative higher government stockholdings or state-owned companies where the government owns 50 per cent or more of shares outstanding enjoy a lower cost of debt compared to the other firms. Consequently, these firms have higher firm valuation and profitability. The results are robust for both the GMM and the OLS regressions. Further, firms that no longer retain government ownership have a higher cost of debt than the other firms. The results of the paper imply the importance of political connections in businesses in the market of Vietnam. Originality/value This paper connects the relationship between government ownership and the cost of debt with the relationship between government ownership and firm valuation. The paper tests the relationship between the cost of debt and government ownership using both OLS and GMM specifications and the results are robust for both approaches. The manuscript uses an instrumental variable to show that government ownership has a positive impact on higher firm performance through reducing cost of debt. Further, this paper addresses the possible issue of endogeneity.

show abstract

Section: Model and Datasupporting

confidence: 91%

The impact of government ownership on the cost of debt and valuation of Vietnamese listed companies

2020

PAR

Self Cite

View full text Add to dashboard Cite

show abstract

“…Sun and Tong (2003) find for China and Le et al (2018) find for Vietnam that the cost of borrowing is lower for state-owned enterprises (SOEs) (either implicit or explicit cost) than for other firms because SOEs carry government guarantees. Blenman and Le (2014) find that foreigners that invest in Vietnam target a long-term horizon, thereby helping provide financing to the firms they invest in. However, Teach notes the negative effect of easy capital access; he coins the term barely working: “The availability of cheap debt has reduced companies’ incentive to improve working-capital management” (2015).…”

Section: Model and Hypothesesmentioning

confidence: 99%

Working capital management and firm’s valuation, profitability and risk

2019

IJMF

Self Cite

124

View full text Add to dashboard Cite

Purpose The purpose of this paper is to examine the effects of working capital management on firm valuation, profitability and risk. Design/methodology/approach The paper uses a panel data set of 497 firms covering the period 2007 to 2016. The authors test the effects of working capital management on firm valuation, profitability and risk using the panel data methodology that includes firm and year fixed effects regressions. Findings The authors find a significantly negative relationship between net working capital (NWC) and firm valuation, profitability and risk. The results suggest that, in managing working capital, firm managers must make a trade-off between their objectives for profitability and risk control. Working-capital management is of particular importance in firms with less access to capital; it is also important when firms are expanding their investments during periods of economic recovery. Originality/value This paper contributes to the literature in several ways. First, to my knowledge, it provides the most comprehensive investigation, to date, on the relationship between working capital management and firm valuation, profitability and risk in an emerging market. Second, this study documents the existence of an optimal level of NWC in an emerging market. Third, firm performance, as measured in both market and accounting value, can be improved with efficient working capital management. Finally, the study includes the impact of the business cycle in an analysis of the effects of working capital management on firm performance.

show abstract

“…Firstly, in an SOE, the agent’s oversight may be less effective because of the lack of a clear principle (state ownership is common ownership which is less evidence regarding who is the owner). Secondly, the appointment of a manager in an SOE is based more on political connections than on the manager’s talent (Sun et al , 2002; Blenman and Le, 2014). These managers may seek higher politically appointed positions and may point to high tax payments of their firms as an indicator of performance success.…”

Section: Introductionmentioning

confidence: 99%

“…However, Vietnam is a relatively small market. The market capitalisation of stock markets was equal to 44.21% of Vietnamese GDP in 2007 (Blenman and Le, 2014). The market-capitalisation-weighted average of equity held by foreigners in Vietnamese listed firms was 22.08% in 2007 (Blenman and Le, 2014) and 29.40% during the period 2013–2016 after the government relaxed the restriction of foreign holding, allowing foreigners to own up to 100% of the equity in non-SOEs (Le, 2020b).…”

Section: Introductionmentioning

confidence: 99%

“…The market capitalisation of stock markets was equal to 44.21% of Vietnamese GDP in 2007 (Blenman and Le, 2014). The market-capitalisation-weighted average of equity held by foreigners in Vietnamese listed firms was 22.08% in 2007 (Blenman and Le, 2014) and 29.40% during the period 2013–2016 after the government relaxed the restriction of foreign holding, allowing foreigners to own up to 100% of the equity in non-SOEs (Le, 2020b). While foreigners own relatively high liquid (liquid is measured by a turnover rate that is the ratio of shares traded during a year by total shares outstanding) stocks in other countries, they hold low liquid stocks in Vietnam, implying their long-term horizon targets in Vietnam.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The effects of state ownership and tax rate cuts on accounting conservatism: evidence from Vietnam

Moore

2021

PAR

Self Cite

View full text Add to dashboard Cite

Purpose The purpose of this paper is to examine the joint effects of state ownership and tax rate cuts on accounting conservatism, considering the different levels of foreign ownership in the context of Vietnam. Design/methodology/approach The paper uses ordinary least squares regressions and a data set of 405 firms covering the period 2007 to 2019. The manuscript uses three measures of accounting conservatism: Basu’s 1997 timeliness of earnings, Basu’s 1997 earnings persistence and the book-to-market ratio. Findings State-owned enterprises (SOEs) adopt less accounting conservatism than non-SOEs; however, the result is only robust in firms with foreign ownership being lower than the foreign ownership median. Firms increase accounting conservatism in the year immediately prior to the year that the tax rate cuts become effective. An SOE possesses an unusual conflict both as a taxpayer and in having its controlling interest held by the government, which is both a tax creator and a tax collector. Interestingly, the increase in accounting conservatism prior to the year of the tax rate cuts is more pronounced for non-SOEs than SOEs. Practical implications This research is beneficial to investors and policymakers where the government is both the taxpayer and tax collector and in emerging markets where foreign investment is local firms’ important financing. Originality/value To the best knowledge, this study is the first in examining the joint effects of state control and tax rate cuts on accounting conservatism.

show abstract

Transition Economy and Equity Home Bias: The Case of Vietnam

Cited by 7 publications

References 40 publications

The impact of government ownership on the cost of debt and valuation of Vietnamese listed companies

The impact of government ownership on the cost of debt and valuation of Vietnamese listed companies

Working capital management and firm’s valuation, profitability and risk

The effects of state ownership and tax rate cuts on accounting conservatism: evidence from Vietnam

Contact Info

Product

Resources

About