Ownership Structure and Firm Performance Improvement: Does it Matter in the Vietnamese Stock Market?

Abstract

This study examines the effects of ownership structure on firm performance of manufacturing companies listed on the Ho Chi Minh Stock Exchange using the system‐GMM estimator. The empirical results show a cubic relationship between managerial ownership and Tobin's Q, that is, positive, negative and positive, meanwhile block ownership has no impact on firm performance. This implies that internal managerial incentives play a more important role than shareholders' external monitoring in improving corporate governance quality. We also found an inverted U‐shaped relationship between state ownership and Tobin's Q, indicating that partial privatisation possibly is an efficient way to improve firm performance.

The Dynamic Relationship between Ownership Structure and Corporate Performance: Evidence from the Vietnamese Food Industry

“…This relationship has also been considered in emerging markets such as Thailand (Kim et al, 2004), Malaysia (Haniffa and Hudaib, 2006). In Vietnam, Hoang et al (2017), Phung and Mishra (2016), Vu et al (2018), and Tran and Le (2020) are closest in spirit to our study. However, Phung and Mishra (2016) and Vu et al (2018) do not examine the effect of both block ownership and managerial ownership on corporate performance.…”

“…Haniffa and Hudaib (2006) find no linkage between changes in managerial shareholdings and subsequent market performance in the Malaysian market. In Vietnam, Hoang et al (2017), Tran and Le (2020) find no statistical significance of a linear relationship between block ownership and corporate performance. Kim et al (2004) tend to newly listed Thai firms to emphasize the importance of managerial shareholdings in emerging markets and indicate the positive effect of managerial shareholdings on corporate performance.…”

“…Moreover, in China, Liu et al (2012) indicate the positive impact of managerial shareholdings on firm performance for the entire market. Hoang et al (2017) tend to Vietnamese manufacturing listed firms to conclude the positive impact of managerial shareholdings on firm performance. Although the empirical evidence on the negative relationship between managerial shareholdings and subsequent corporate performance exists, the negative relationship is not rich compared to the positive relationship.…”

“…However, Phung and Mishra (2016) and Vu et al (2018) do not examine the effect of both block ownership and managerial ownership on corporate performance. Whereas, Hoang et al (2017) provide empirical evidence on the linear relationship between managerial ownership and firm performance in the non-linear specification rather than the merely linear specification. Additionally, this analysis only tends to Vietnamese manufacturing listed firms.…”

Ownership Structure and Firm Performance

“…Galego et al, (2019) found a positive relationship between managerial ownership and firm performance where managers are the part of higher management and the corporate board. Another method of finding the relationship between ownership structure and firm performance was introduced by Hoang et al, (2017) using the simultaneous equation model and considering both firm performance and ownership structure as endogenous. They found that managerial ownership was a positive predictor of Q and that Q is a significant negative predictor of managerial ownership.…”