Advanced Search
MyIDEAS: Login

The Impacts of Corporate Governance On the Performance of Privatized Firms In Vietnam

Contents:

Author Info

  • Tran Thi, Que Giang
Registered author(s):

    Abstract

    This paper examines the impact of corporate governance on the performance of 450 privatized firms in Vietnam. To study the effect of changes in management and the role of state ownership on the performance of privatized firms, we utilize a panel of 450 Vietnamese firms privatized over the 2000-2004 period. As the state ownership of these firms was determined exogenously, we avoid the simultaneity problem often present in studies on transition economies where existing managers become owners or are replaced. In addition, due to the limited number of managers with market-economy skills in Vietnam, we avoid the selection problem often present in studies for market economies where new managers may be better suited than existing managers to manage the firm. Controlling for initial conditions and sector-specific effects and using several measures of enterprise performance, we find that the privatized firms’ performance are positively related with the entry of new managers and negatively related to the retaining share of the state. In this study we use the methodologies first introduced by Megginson, Nash and Van Randenborgh (MNR 1994) by using the Wilcoxon and proportion tests to compare the pre- and post-privatization financial and operating performance of the firms in our sample. Although the pre–post comparison method has been applied in many studies, it has its shortcomings. Indeed, this method is unable to isolate the impact of privatization on firm performance from concurrent effects of other economic factors. To deal with this issue, the DID (difference in difference) method is employed in this paper. Both approaches confirm that privatization in Vietnam brings about significant improvement in most performance measures of the firm, namely profitability, productivity, and employee’s welfare. This paper reveals some important impact of governance on corporate performance. Privatization leads to important changes in the nature and the structure of ownership of firms as well as in management personnel, which in turn significantly influence the performance of privatized firms. Our study also finds that the competition resulted from the opening to foreign markets has significant and positive impact on the performance of privatized firms. Finally, we find that privatized firms in Vietnam still rely on commercial banks as the main source of providing credits for their activities.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/3860/1/CGinVN_TRANQG.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/3860.

    as in new window
    Length:
    Date of creation: Jun 2008
    Date of revision:
    Handle: RePEc:dau:papers:123456789/3860

    Contact details of provider:
    Web page: http://www.dauphine.fr/en/welcome.html
    More information through EDIRC

    Related research

    Keywords: Corporate performance; Ownership Structure; Privatization; Transition Economies; Vietnam;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Anderson, James H & Lee, Young & Murrell, Peter, 2000. "Competition and Privatization Amidst Weak Institutions: Evidence from Mongolia," Economic Inquiry, Western Economic Association International, vol. 38(4), pages 527-49, October.
    2. Stijn Claessens & Simeon Djankov, 1999. "Ownership Concentration and Corporate Performance in the Czech Republic," William Davidson Institute Working Papers Series 227, William Davidson Institute at the University of Michigan.
    3. Djankov, Simeon, 1999. "Restructuring of insider-dominated firms," Policy Research Working Paper Series 2046, The World Bank.
    4. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
    5. Simeon Djankov, 1999. "Ownership Structure and Enterprise Restructuring in Six Newly Independent States," Comparative Economic Studies, Palgrave Macmillan, vol. 41(1), pages 75-95, April.
    6. Alexander Muravyev, 2003. "Turnover of Senior Managers in Russian Privatised Firms," Comparative Economic Studies, Palgrave Macmillan, vol. 45(2), pages 148-172, June.
    7. Alon Brav & Christopher Geczy & Paul A. Gompers, . "Is the Abnormal Return Following Equity Issuances Anomalous?," Rodney L. White Center for Financial Research Working Papers 02-99, Wharton School Rodney L. White Center for Financial Research.
    8. Nellis, John & Kikeri, Sunita, 1989. "Public enterprise reform: Privatization and the World Bank," World Development, Elsevier, vol. 17(5), pages 659-672, May.
    9. Catherine D. Wolfram, 1998. "Increases in Executive Pay Following Privatization," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(3), pages 327-361, 09.
    10. Andrei Shleifer, 1998. "State Versus Private Ownership," NBER Working Papers 6665, National Bureau of Economic Research, Inc.
    11. Fama, Eugene F., 1998. "Market efficiency, long-term returns, and behavioral finance," Journal of Financial Economics, Elsevier, vol. 49(3), pages 283-306, September.
    12. Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
    13. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    14. Narjess Boubakri & Jean-Claude Cosset, 1998. "The Financial and Operating Performance of Newly Privatized Firms: Evidence from Developing Countries," Journal of Finance, American Finance Association, vol. 53(3), pages 1081-1110, 06.
    15. Rafael La Porta & Florencio Lopezde-Silanes & Andrei Shleifer, 2000. "Government Ownership of Banks," NBER Working Papers 7620, National Bureau of Economic Research, Inc.
    16. Gérard Roland, 2004. "Transition and Economics: Politics, Markets, and Firms," MIT Press Books, The MIT Press, edition 1, volume 1, number 026268148x, December.
    17. Li, Wei, 1997. "The Impact of Economic Reform on the Performance of Chinese State Enterprises, 1980-1989," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1080-1106, October.
    18. Simeon Djankov, 1999. "The restructuring of insider-dominated firms: A comparative analysis," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 467-479, July.
    19. Roland, Gerard & Szafarz, Ariane, 1990. "The ratchet effect and the planner's expectations," European Economic Review, Elsevier, vol. 34(5), pages 1079-1098, July.
    20. Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer & Robert W. Vishny, 1999. "Investor Protection and Corporate Valuation," NBER Working Papers 7403, National Bureau of Economic Research, Inc.
    21. Berglof, Erik & Roland, Gerard, 1998. "Soft Budget Constraints and Banking in Transition Economies," Journal of Comparative Economics, Elsevier, vol. 26(1), pages 18-40, March.
    22. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766.
    23. John D. Lyon & Brad M. Barber & Chih-Ling Tsai, 1999. "Improved Methods for Tests of Long-Run Abnormal Stock Returns," Journal of Finance, American Finance Association, vol. 54(1), pages 165-201, 02.
    24. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    25. Michael Firth & Peter M. Y. Fung & Oliver M. Rui, 2006. "Firm Performance, Governance Structure, and Top Management Turnover in a Transitional Economy," Journal of Management Studies, Wiley Blackwell, vol. 43(6), pages 1289-1330, 09.
    26. Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. " The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, vol. 49(2), pages 403-52, June.
    27. Barber, Brad M. & Lyon, John D., 1996. "Detecting abnormal operating performance: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 41(3), pages 359-399, July.
    28. Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact Of Private Ownership On Corporate Performance In The Transition Economies," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1153-1191, November.
    29. Dyck, I J Alexander, 1997. "Privatization in Eastern Germany: Management Selection and Economic Transition," American Economic Review, American Economic Association, vol. 87(4), pages 565-97, September.
    30. Martin L. Weitzman, 1980. "The "Ratchet Principle" and Performance Incentives," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 302-308, Spring.
    31. Vining, Aidan R & Boardman, Anthony E, 1992. " Ownership versus Competition: Efficiency in Public Enterprise," Public Choice, Springer, vol. 73(2), pages 205-39, March.
    32. Boardman, Anthony E & Vining, Aidan R, 1989. "Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises," Journal of Law and Economics, University of Chicago Press, vol. 32(1), pages 1-33, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:dau:papers:123456789/3860. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandre Faure).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.