The impact of ownership structure on the value of non - financial enterprises listed on Ho Chi Minh city stock exchange, 2022

MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM

HO CHI MINH CITY UNIVERSITY OF BANKING

TRAN THI PHUONG UYEN

THE IMPACT OF OWNERSHIP STRUCTURE ON THE

VALUE OF NON – FINANCIAL ENTERPRISES LISTED

ON HO CHI MINH STOCK EXCHANGE

GRADUATION THESIS

MAJOR: FINANCE – BANKING

NUMBER CODE: 7340201

HO CHI MINH CITY – JUNE 2022

MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIETNAM

HO CHI MINH CITY UNIVERSITY OF BANKING

TRAN THI PHUONG UYEN

THE IMPACT OF OWNERSHIP STRUCTURE ON THE

VALUE OF NON – FINANCIAL ENTERPRISES LISTED

ON HO CHI MINH STOCK EXCHANGE

GRADUATION THESIS

MAJOR: FINANCE – BANKING

NUMBER CODE: 7340201

ACADEMIC ADVISOR

NGUYEN TRAN PHUC, PHD.

HO CHI MINH CITY – JUNE 2022

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ABSTRACT

Title: The impact of ownership structure on the value of non – financial

enterprises listed on Ho Chi Minh stock exchange.

Abstract:

Maximizing enterprise value is the ultimate goal of every company because it will

contribute towards creating sustainable profits promoting business development, stabilizing

macroeconomic and increasing competitiveness in integration environment. This issue that is

most concerned by administrators, investors and the Vietnamese government. For that

reason, the author conducted the study "The impacts of the ownership structure on value of

non-financial companies listed in Ho Chi Minh Stock Exchange". The research model

includes the dependent variable which is firm‟s value, the independent variables which are

the rate of state ownership, the rate of foreign ownership, the existence of major

shareholders and control variables. After testing for FEM model selection and overcoming

model defects by FGLS method, the results of the state ownership rate, foreign ownership

rate and the existence of major shareholders are statistically significant for the value of

businesses.

Objective: To identify and determine the impact of ownership structure on the value

of non-financial enterprises listed on the Ho Chi Minh Stock Exchange and propose

management implications to improve operational efficiency and position in the market.

Method: Quantitative research includes: descriptive statistics, correlation matrix, the

test of model and hypothesis, the selection of suitable model and model regression.

Results: This thesis shows the positive impact of state ownership, foreign ownership

and the existence of major shareholder on firm value as measured by Tobin's Q, ROA and

ROE

Conclusion and recommendation: Through the econometric model built with the

dependent variable being the value of enterprise, the research results show that the

ownership structure is a factor that helps to improve corporate governance that increase

efficiency and have opportunity form outside investors.

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Keywords: Ownership structure, corporate value, state ownership, foreign ownership,

large shareholder existence.

DECLARATION

I honestly declare that this graduation thesis entitled “The impact of ownership

structure on the value of non – financial enterprises listed on Ho Chi Minh Stock

Exchange” is the final result of my original research work under the guidance of PhD.

Nguyen Tran Phuc, my academic advisor.

This thesis has never been submitted for a graduation's degree at anywhere else

before. This thesis is the author's own research and the results of the research are

trustworthy. The thesis does not consist of any previously published content or content made

by others except for citations which are fully cited in the thesis.

Ho Chi Minh City, June 2022

Tran Thi Phuong Uyen

iii

ACKNOWLEDGEMENT

First of all, I would like to express my sincere thanks and gratitude to my academic

advisor, PhD. Nguyen Tran Phuc. Thanks for always supporting me whenever I need your

help and all the knowledge you have taught me during my university journey.

Besides, the author would also like to express gratitude to teachers of Banking

University of Ho Chi Minh City, who have equipped the author about necessary knowledge

with their enthusiastic and dedicated teaching during the past years. At the same time,

hereby the author would like to special thanks teachers, leadership board as well as staff of

the functional departments of university who wholeheartedly worked, organized, managed

and created conditions for the author. Secondly, I would like to sincerely thank to my

parents, who always take care and encourage me during the time doing this thesis. I will

never forget the love you gave me!

Last but not least, I want to say thanks to my friend, Tuong Vy, who has appeared at

the hardest time to help me.

Due to the limitation of time, knowledge and research experience, this thesis is hard

to avoid shortcomings and limitations. Therefore, the writer would like to receive valuable

comments and suggestions from the defense committee to make the thesis more complete

and professional.

Best regard.

Ho Chi Minh City, June 2022

TABLE OF CONTENTS

ABSTRACT...............................................................................................................................i

DECLARATION ......................................................................................................................ii

ACKNOWLEDGEMENT...................................................................................................... iii

LIST OF ABBREVIATIONS..................................................................................................iv

LIST OF TABLES....................................................................................................................v

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

1.1. MOTIVATION OF RESEARCH:...............................................................................1

1.2. GAP OF RESEARCH: ................................................................................................2

1.3. OBJECTIVES OF RESEARCH:.................................................................................3

1.3.1. General objective:....................................................................................................3

1.3.2. Particular objectives: ...............................................................................................3

1.4. QUESTION OF RESEARCH: ....................................................................................3

1.5. SUBJECT AND SCOPE OF RESEARCH: ................................................................4

1.5.1. Subject of research: .................................................................................................4

1.5.2. Scope of research:....................................................................................................4

1.6. METHODOLOGY OF RESEARCH: .........................................................................4

1.7. CONTRIBUTIONS OF RESEARCH:........................................................................4

1.8. STRUCTURE OF RESEARCH:.................................................................................5

CONCLUSIONS OF CHAPTER 1 ..........................................................................................6

CHAPTER 2. LITERATURE REVIEW ..............................................................................7

2.1. OWNERSHIP STRUCTURE AND ENTERPRISE VALUE.....................................7

2.1.1. The concept of ownership structure ........................................................................7

2.1.1.1. The definition of ownership structure...............................................................7

2.1.1.2. Classification of ownership structure:...............................................................8

2.1.2. The concept of enterprise value.............................................................................12

2.1.2.1. The definition of enterprise value ...................................................................12

2.1.2.2. Methods of measuring firm value ...................................................................12

2.2. THE THEORETICAL FRAMEWORK:...................................................................16

2.2.1. Agency cost theory................................................................................................16

2.2.2. Transaction cost theory .........................................................................................17

2.3. EMPIRICAL STUDIES ............................................................................................18

2.3.1. International previous studies................................................................................18

2.3.2. Previous studies in Vietnam:.................................................................................19

CONCLUSIONS OF CHAPTER 2 ........................................................................................26

CHAPTER 3. METHODOLOGY OF THESIS..................................................................27

3.1. RESEARCH PROCESS ............................................................................................27

3.2. RESEARCH HYPOTHESIS.....................................................................................27

3.2.1. Impact of state ownership to the value of non-financial enterprises.....................27

3.2.2. Impact of foreign ownership to the value of non-financial enterprises ................28

3.2.3. Impact of the existence of major shareholders to the value of non-financial

enterprises...............................................................................................................................28

3.3. RESEARCH MODEL ...............................................................................................29

3.3.1. The estimated model .............................................................................................29

3.3.2. Variable description...............................................................................................30

3.4. DATA OF THESIS....................................................................................................37

3.5. METHOD OF DATA ANALYSIS ...........................................................................37

3.5.1. Descriptive Statistics.............................................................................................37

3.5.2. Correlation analysis...............................................................................................37

3.5.3. Methods of regression analysis .............................................................................38

3.5.3.1. The pooled ordinary least squares model (Pooled – OLS): ............................38

3.5.3.2. The fixed effect model (FEM) and random effect model (REM):..................39

3.5.4. Testing of the estimate model ...............................................................................39

3.5.5. Testing of defect in the model...............................................................................40

3.5.6. Surmounting of defect in the model......................................................................41

CONCLUSIONS OF CHAPTER 3 ........................................................................................41

CHAPTER 4. THE RESEARCH RESULTS .....................................................................43

4.1. DESCRIPTIVE STATISTIC ANALYSIS................................................................43

4.2. CORRELATION ANALYSIS ..................................................................................44

4.3. THE RESULT OF MULTICOLLINEARITY TEST THOUGH THE VIF

COEFFICIENT.......................................................................................................................45

4.4. THE RESULT OF ESTIMATE MODEL .................................................................47

4.4.1. Result of Hausman test..........................................................................................47

4.4.2. Result of F-test ......................................................................................................48

4.4.3. Result of heteroscedasticity test ............................................................................51

4.4.4. Result of Wooldridge test......................................................................................51

4.4.5. Result of FGLS method.........................................................................................52

4.5. Discussing the research results..................................................................................54

CONCLUSIONS OF CHAPTER 4 ........................................................................................55

CHAPTER 5. CONLUSIONS AND RECOMMENDATIONS.........................................57

5.1. OVERVIEW OF RESEARCH..................................................................................57

5.2. RECOMMENDATIONS FROM RESEARCH RESULTS......................................58

5.3. LIMITATIONS OF THE RESEARCH.....................................................................59

REFERENCES

APPENDICES

iv

LIST OF ABBREVIATIONS

Abbreviations Definition

BLOCK Big shareholder existence

FEM Fixed effects model

FIRMAGE The age of the business

FIRMSIZE Company size

FORG Foreign ownership ratio

FGLS Generalized Least Square

GOV State ownership ratio

GROWTH Revenue growth

HCM Ho Chi Minh

HNX Ha Noi Stock Exchange

HOSE Ho Chi Minh Stock Exchange

LEV The leverage ratio of the business

LM Breuschand-Pagan Lagrangian multiplier

M&A Mergers and acquisitions

REM Random effects model

ROA Return on asset

ROE Return on equity

TOBIN’S Q Enterprise value

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LIST OF TABLES

Table 2.1 The summary of previous researches. ....................................................................22

Table 3.1. Measurement of variable in thesis.........................................................................34

Table 4.1. Descriptive statistics of the variables ....................................................................43

Table 4.2. Results of correlation analysis of variables...........................................................44

Table 4.3. Results of have no correlation between the independent variables.......................46

Table 4.4. Results of the Hausman test...................................................................................48

Table 4.5. Result of F-test.......................................................................................................48

Table 4.6. Results of FEM model regression..........................................................................50

Table 4.7. Results of the Modified Wald test .........................................................................51

Table 4.8. Results of the Modified Wald test .........................................................................52

Table 4.10. Result of FGLS test to correct autocorrelation and variance change phenomenon.

.................................................................................................................................................53

Table 4.11. Summary of research results................................................................................55

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CHAPTER 1. INTRODUCTION

This chapter will demonstrate the main contents of which relate to the necessity of

thesis; presenting the objectives and question; identifying the subject and scope; building

research method of thesis based on previous research.

1.1. MOTIVATION OF RESEARCH:

In 2021, there had strong growth in the Vietnamese stock market as a clue for the

market's attraction, stated by the Deputy General Director of Hanoi Stock Exchange (The

Ministry of Finance, 2022), the number of companies listed on the market is increasing,

leading to more diverse and complex ownership structure. Vietnam has become a member of

World Trade Organization (WTO) since 2007 so the economy in our country has been an

open and integrated economy, the form of organizational ownership and foreign ownership

is being recognized as having an important role besides domestic forms of ownership such

as state ownership or private ownership. Many studies by Vo X.V. (2020), Nguyen D.T.

(2020) consider the effect of ownership structure on firm value, but these studies show

inconsistent results; due to that point, the connection between ownership structure and

corporate value is the highest consideration for managers, investors, and the Government. In

any terms of ownership, the main purpose is to maximize business value; however, different

forms of ownership such as different strengths and weaknesses, leading to different ways

that affect the firm's value as the size of firm, reputation, management capacity, etc. Factors

affecting the value of enterprises such as the size of enterprises, business position,

management capacity, tax policies of the government, and so on.

In the world and Vietnam, many articles are studying the relationship between

ownership structure and corporate value, but the results of the studies are not consistent due

to differences in management policies from government and corporate regulations.

Therefore, the author conducted the thesis: "The impact of ownership structure on the

value of non-financial enterprises listed on Ho Chi Minh City Stock Exchange", thereby

proposing appropriate management measures to help businesses maximize the value and

profitability of enterprises, as well as developing business activities more stable and

sustainable.

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1.2. GAP OF RESEARCH:

From the above motivation, it can be seen that the impact of ownership structure has

received much attention due to the importance of the internal governance mechanism

affecting the value of enterprise. Accordingly, enterprise‟s value is affected by internal

governance mechanism (in which, ownership structure is a way for enterprises to control

operations and increase value for shareholders). This topic is being researched a lot, but

there are inconsistent results in the context of non-financial enterprises listed on HOSE

nowadays and more empirical studies are needed to review and unify results of ownership

structures in different market contexts, not only in developed markets but also in frontier

markets that are in marked transition to developing markets.

Each country has different economic environment as well as political institutions, so

business system also has its own characteristics in each country. Therefore, it is

inappropriate to inherit studies on the relationship between ownership structure and firm

value in other countries to apply the model in Vietnam. Therefore, in-depth studies are

required on different angles of ownership structure (state ownership characteristics, foreign

ownership characteristics, the concentrated of major shareholders) and its impact on the

control variables with different measures of business value.

The number of research about the impact of ownership structure on firm value is

relatively small and especially less in the context of enterprises in developing countries.

Vietnamese enterprises in recent years have made great progress, value development to

make the right decisions for listed companies is more focused, however, endogenous factors

as ownership structure has not been taken into account. In particular, there are few

researches that examine the characteristics of state ownership, foreign ownership and

existence of major shareholders in the same study to see the difference in the degree of

influence. of these characteristics to the value of non-financial enterprises listed on HOSE.

In addition, most of the studies on non-financial enterprise activities in Vietnam were

conducted in a narrow research period, so they are no longer applicable to current practice.

This study is urgent and meaningful in order to supplement empirical evidence and

synthesize a relatively theoretical basis as evidence to argue about the impact of ownership

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structure on non-financial firm value. The financial statements are listed on HOSE from

2013 to 2020, a period that shows many changes in the Vietnamese economy, as well as

contributes to evaluating the effectiveness of government policies issued such as Decision

No. 242 / QD-TTg restructuring the stock market and insurance market.

1.3. OBJECTIVES OF RESEARCH:

1.3.1. General objective:

To identify and determine the impact of ownership structure on the value of non￾financial enterprises listed on the Ho Chi Minh Stock Exchange and propose management

implications to improve operational efficiency and position in the market.

1.3.2. Particular objectives:

 Evaluate the impact of state ownership on the value of non-financial enterprises

listed on the stock exchange of Ho Chi Minh City.

 Evaluate the impact of foreign ownership on the value of non-financial enterprises

listed on the stock exchange of Ho Chi Minh City.

 Evaluate the existence of major shareholder affects on the value of non-financial

enterprises listed on the stock exchange of Ho Chi Minh City.

1.4. QUESTION OF RESEARCH:

To achieve specific goals, this thesis needs to answer the main question: To what

extent the ownership structure affects the value of non-financial enterprises listed on the

Stock Exchange of Ho Chi Minh City?

For more specific this thesis „s question, there are have some small questions that

have been answered:

 Is there a correlation between the state ownership and enterprise‟s value? If yes, to

what extent the state ownership affects the value of non-financial enterprises listed on the

Stock Exchange of HCM City?

 Is there a correlation between the foreign ownership and enterprise‟s value? If yes,

to what extent the foreign ownership affects the value of non-financial enterprises listed on

the Stock Exchange of HCM City?

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 Is there a correlation between the existence of major shareholders and enterprise‟s

value? If yes, to what extent the existence of major shareholders affects the value of non￾financial enterprises listed on the Stock Exchange of HCM City?

1.5. SUBJECT AND SCOPE OF RESEARCH:

1.5.1. Subject of research:

The subject of thesis is the impact of the ownership structure on the value of non￾financial enterprises listed on the Stock Exchange of Ho Chi Minh City.

1.5.2. Scope of research:

- Scope of space: The study used data of 200 non-financial enterprises listed on the

Stock Exchange of Ho Chi Minh City. This thesis removes financial, insurance and real

estate companies due to differences in financial statements, risks in governance decisions

and other factors.

- Scope of time: Study period within 8 years from 2013 to 2020

1.6. METHODOLOGY OF RESEARCH:

- Quantitative method: Used to measure the impact of ownership structure on the

enterprise‟s value. Quantitative research samples are carried out the scale of 200 non￾financial enterprises and receive 1600 valid template.

- Sample collection method: The data collected is secondary data from audited annual

financial statements, management reports, and annual corporate reports. Data is selected

after the elimination of enterprises that do not publish information or incomplete information

and M&A.

- Data processing method: Input data is processed using Microsoft Excel 2016

software and STATA 14 to indicate the impact of ownership structure on the enterprise‟s

value of non-financial companies listed on the stock exchange of Ho Chi Minh City.

1.7. CONTRIBUTIONS OF RESEARCH:

- Scientific significance: Thesis is systematizing the theoretical basis and results of

experimental research in the world as well as in Vietnam about ownership structure and

corporate value. Thereby, the topic provides more theory about the impact of ownership

structure on business value.

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- Practical meaning: Provide research results on the impact of ownership structure on

the value of non-financial enterprises listed on HOSE from 2013 to 2020. Then, based on the

research, measures and recommendations are proposed to help business executives manage

their ownership allocation more efficiency, also be careful in their decisions for profit

maximization and avoiding from possibly negative impact.

1.8. STRUCTURE OF RESEARCH:

CHAPTER 1: INTRODUCTION.

This chapter will demonstrate the main contents of which relate to the necessity of

thesis; presenting the objectives and question; identifying the subject and scope; building

research method of thesis based on previous research and the expected contribute of this

thesis.

CHAPTER 2: LITERATURE REVIEW.

The author shows the theoretical framework of the ownership structure and firm

value, the empirical thesis around the world and in Vietnam about the impact of ownership

structure on the value of enterprises. Therefore, proposing the expected hypothesis to

determine the factor of thesis in chapter 3.

CHAPTER 3: METHODOLOGY OF THESIS.

In this chapter, the author presents in detail about the model is built, the variables are

selected, the research hypothesis are expected, the research method and research documents,

the descriptive list of data used in the study, correlation matrix between variables.

CHAPTER 4: THE RESEARCH RESULTS.

This chapter show that statistics summarize the number of observations, the mean of

variables, the correlation coefficient between the independent variables. Besides, this thesis

reports results obtained from the regression results on the impact of ownership structure on

the value of enterprises.

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS.

In this final chapter, the author concludes an overview of the research results, making

some counter-recommendations. At the same time, some limitations of the study and future

research directions are presented.