Academic journal article Academy of Accounting and Financial Studies Journal

Ownership Structure and Information Disclosure: An Approach at Firm Level in Vietnam

Academic journal article Academy of Accounting and Financial Studies Journal

Ownership Structure and Information Disclosure: An Approach at Firm Level in Vietnam

Article excerpt

JEL Classification: G14, G32, G34

INTRODUCTION

The Hochiminh stock exchange (HOSE), which occupies 85% of the Vietnamese stock market capitalization, has developed to have 302 listed stocks, 2 funds and 28 bonds until 2013 since the first trading day at 28/07/2000 with only two listed stocks. This fresh market accounts 27% of the GDP with the capitalizing value about USD40 billion for the year 2013. After a period of fast development, the VN Index as denoted the HOSE market index has confronted a decreasing trend from the range 950-1000 in the years 2007-2008 to be sustainably above 500 in recent years, vis-a-vis the world crisis. This fact possibly reflects a stagnancy in the Vietnamese economy since the stock market is always considered as one of the best ways to forecast the economic performance as it shows much economic information through its stock pricing system according to Roll (1988). A research question is posed that how to improve the informativeness environment focusing on corporate information disclosure practices in order to promote the investment climate attractive enough to both foreign and domestic investors.

Corporate disclosure is considered as the communication between the firm managers, controlling owners and the outside investors about firms' performance, financial situation, potential development or even risks such as cost of capital, stock performance and bid-ask spreads via regulated financial, annual reports, press release or firm online news (Healy and of those kinds of information into the stock price variation is not always good because of the corporate disclosure problem. A bad disclosure can block the information to be captured in the stock price and create the asymmetric information between the insiders and uninformed investors. Due to this market failure, the cost for acquiring information becomes higher for the outside investors (Jiang, et al. 2011). The more severe the situation, the less attractive an investment environment. Thus, a fund attraction progress for the capital market in order to lower the domestic cost of capital could be in vain if the corporate disclosure problem is not resolved (Jiang, et al. 2011; Lawrence, 2013).

In this study, the impact of the ownership structure on disclosure activities is the main research objective. The first argument behind this suggestion is based on the agency problem mentioned by Jensen and Meckling (1976) that controlling shareholders would hide corporate information from outside investors for their private benefits, such as covering their corruption, private contracts or inside trading. Perhaps, ownership concentration especially that associated with state ownership in Vietnam doesn't favor the information disclosure system. Hence, the ownership level would have a negative relationship with the corporate disclosure level. However, there could be another argument developed by Healy and Palepu (2001) that a high holding rate of a firm stock is a strong commitment for the owner's honesty. Investors could easily punish his bad behavior by discounting his asset easily and directly on the stock market. Thus, the effect of ownership concentration on the corporate disclosure is important but with mixed results.

To the best of our knowledge, this paper is the first one to shed a light on the transparency of Vietnam stock market by analyzing the firm-specific return variation and its relationship with ownership concentration. By using the OLS, fixed effects, and random effects estimations together with robustness checks for a panel data including 195 listed firms on the Hochiminh Stock Exchange from 2006 to 2011, we find a robustly positive impact of ownership concentration on information disclosure in the context that firms try their effort to send transparent signals to investors. Interestingly, this affect is only significant for wholly private firms, but not for the state-related firms. There could be the fact that state-related firms want to protect information as state ownership plays a major role in transition economies, from former central planned economy, for the case of Vietnam. …

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