Luận văn thạc sĩ UEH factors in corporate governance affect to default risk of companies listed on

Factors in Corporate Governance Affect to Default

Risk of Companies Listed on Vietnam Stock Market

Mai KyQuoc

Mbus 2.4 – 2011

[email protected]

University of Economics HCM City

International School of Business

Master Thesis

Supervisor Dinh Cong Khai

January 2014

LUAN VAN CHAT LUONG download : add [email protected]

i

ACKNOWLEDGEMENT

First of all, I would like to thank Dr. Khai who has supervised with strength,

knowledge and vitality that has supported me to finish this research.

Secondly, I would like to appreciate to my family for moral and financial support,

encouragement and motivation.

Thirdly, I own particular thanks to professors, ISB community and all my

classmates who have gone with me so far and helped me to achieve the knowledge.

Finally, I would like to thank my friends who have helped me in several ways to

accomplish this research and authors of previous researches which provided me theoretical

framework to support for my findings in researching.

LUAN VAN CHAT LUONG download : add [email protected]

ii

ABSTRACT

Corporate governance plays important role in developing of company. Good

corporate governance ensures strong management performance, efficient capital structure,

and constant investment strategy. Besides that, default risk is the uncertainty surrounding a

firm's ability to service its debts and obligations. Corporate governance is regarded as the

most important key, affect to defaults risk. Using secondary data from 70 companies which

represent for all industries, listed on Vietnam Stock market, this research empirically

identify the relationship of factors in corporate governance such as the power of CEO,

proportion of government ownership, and salaries & remuneration of board of directors to

default risk.

Key words: corporate governance, default risk, EDF score, KMV model.

LUAN VAN CHAT LUONG download : add [email protected]

iii

TABLE OF CONTENT

ACKNOWLEDGEMENT................................................................................................................. i

ABSTRACT.......................................................................................................................................ii

TABLE OF CONTENT...................................................................................................................iii

LIST OF FIGURES .......................................................................................................................... v

LIST OF TABLES........................................................................................................................... vi

LIST OF ABBREVIATIONS ........................................................................................................vii

CHAPTER 1 INTRODUCTION..................................................................................................... 1

1.1 Research Background....................................................................................................... 1

1.2 Statement of Problem ....................................................................................................... 3

1.3 Research Objective and Research Question................................................................... 4

1.4 Scope of the Research ....................................................................................................... 4

1.5 Research Structure ........................................................................................................... 5

CHAPTER 2 LITERATURE REVIEW......................................................................................... 6

2.1 Corporate Governance ..................................................................................................... 6

2.1.1 Overview Corporate Governance............................................................................ 6

2.1.2 Corporate Governance in Vietnam ......................................................................... 9

2.2 Default Risk ..................................................................................................................... 11

2.3 Factors Affect to Default Risk and Hypothesis Development..................................... 12

2.3.1 Government Ownership ............................................................................................. 12

2.3.2 Scale Board.................................................................................................................. 13

2.3.3 CEO power .................................................................................................................. 14

2.3.4 Payment of Board........................................................................................................ 15

2.3.5 Other Factors Affect to Default Risk ........................................................................ 15

2.3.6 Conceptual Framework.............................................................................................. 18

CHAPTER 3 RESEARCH METHODOLOGY........................................................................... 20

3.1 Research Process............................................................................................................. 20

3.2 Model Testing.................................................................................................................. 20

3.2.1 Model Selection ....................................................................................................... 20

3.2.2 KMV Model............................................................................................................. 23

3.3 Target Population and Sample ...................................................................................... 24

LUAN VAN CHAT LUONG download : add [email protected]

iv

3.3.1 Target Population ................................................................................................... 24

3.3.2 Sample...................................................................................................................... 25

3.4 Data collection ................................................................................................................. 25

3.5 Method Analysis.............................................................................................................. 28

3.5.1 Descriptive Analysis.................................................................................................... 28

3.5.2 Multiple Regression Strategy..................................................................................... 28

CHAPTER 4 RESULTS................................................................................................................. 30

4.1 Descriptive Statistic ........................................................................................................ 30

4.2 Estimation of Regression Models and Hypothesis Testing.......................................... 33

4.2.1 Estimating the Model.................................................................................................. 33

4.2.2 Inspection of Multicollinearity................................................................................... 36

4.2.3 Check the Autocorrelation ......................................................................................... 39

4.2.4 Test of the Heteroscedasticity .................................................................................... 42

4.2.5 Testing the Assumption of Normal Distribution of the Error Term...................... 42

4.2.6 Ramsey Test for Omitted Variables......................................................................... 43

4.3 Summurize the Result..................................................................................................... 45

CHATER 5 CONCLUSION AND IMPLICATIONS.................................................................. 47

5.1 Research Finding ............................................................................................................ 47

5.2 Managerial Implications................................................................................................. 48

5.3 Limitations and Future Research.................................................................................. 51

REFERENCES................................................................................................................................ 53

APPENDIX...................................................................................................................................... 58

LUAN VAN CHAT LUONG download : add [email protected]

v

LIST OF FIGURES

Figure 2.1 The conceptual framework ......................................................................... 19

Figure 3.1 Research process........................................................................................ 20

LUAN VAN CHAT LUONG download : add [email protected]

vi

LIST OF TABLES

Table 3.1 Describing variables.................................................................................... 22

Table 3.2 The relationship between dependent variable and independent variables.. 23

Table 3.3 The source of independent variables............................................................ 27

Table 3.4 Descriptive statistic variables...................................................................... 28

Table 4.1 The result from the first regression.............................................................. 34

Table 4.2 Wald test redundant variables...................................................................... 35

Table 4.3 The result from the second regression ......................................................... 36

Table 4.4 Coefficients between pairs of variables ....................................................... 38

Table 4.5 Value of the Variance- Inflation factor........................................................ 39

Table 4.6 The result after adjusting endpoints............................................................. 41

Table 4.7 The result from Ramsey Reset Test .............................................................. 45

LUAN VAN CHAT LUONG download : add [email protected]