Next Article in Journal
An Attempt to Understand Stock Market Investors’ Behaviour: The Case of Environmental, Social, and Governance (ESG) Forces in the Pakistani Stock Market
Previous Article in Journal
Farmers’ Willingness to Purchase Weather Index Crop Insurance: Evidence from Battambang, Cambodia
Previous Article in Special Issue
Global Financial Market Integration: A Literature Survey
 
 
Font Type:
Arial Georgia Verdana
Font Size:
Aa Aa Aa
Line Spacing:
Column Width:
Background:
Article

The Nexus between Corporate Performance and State Ownership in Vietnam: Evidence of State Ownership’s Inverted U-Shape and Provincial Business Environment Influences

by
Tran Thai Ha Nguyen
1,*,
Susilo Nur Aji Cokro Darsono
2,
Gia Quyen Phan
3,
Thi Hong Van Pham
1,
Huyen Bach Thi
4 and
Sobar M. Johari
5
1
Faculty of Finance and Banking, Van Lang University, Ho Chi Minh City 70000, Vietnam
2
Department of Economics, Faculty of Economics and Business, Universitas Muhammadiyah Yogyakarta, Yogyakarta 55183, Indonesia
3
Department of Economics and Law, Vietnam National University, Ho Chi Minh City 70000, Vietnam
4
Department of Accounting, Thai Nguyen University of Economics and Business Administration, Thainguyen 25000, Vietnam
5
Department of Sharia Economics, Universitas Muhammadiyah Yogyakarta, Yogyakarta 55183, Indonesia
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2023, 16(12), 499; https://doi.org/10.3390/jrfm16120499
Submission received: 26 October 2023 / Revised: 22 November 2023 / Accepted: 27 November 2023 / Published: 2 December 2023
(This article belongs to the Special Issue Emerging Markets II)

Abstract

:
The level of state ownership in corporations is still a controversial topic because of its duality: on the one hand, it brings resource advantages, and on the other hand, it causes agency problems. Thus, our study aims to investigate the relationship between state ownership and corporate performance within the Vietnamese context, unraveling the impacts of state ownership’s non-linear and provincial business environment. Analyzing financial data spanning over a decade from 359 listed corporations on the Vietnamese stock markets (2010–2021), our empirical findings derived through the General Method of Moments (GMM) reveal that state ownership emerges as a potent “strategic asset” with a positive influence on corporate performance. However, a critical point is identified when state ownership surpasses the threshold of 32 percent and a decline in corporate performance ensues—a confirmation of an inverted U-shaped impact. These results substantiate the necessity of the equitization process and underscore the imperative of judiciously managing state ownership in Vietnam. Notably, our study unveils a more critical dimension: the enhanced provincial business environment bolsters corporate performance and amplifies the positive impact of state ownership. Thus, a strategic dual approach is suggested to improve corporate performance: improving the business environment and recalibrating the percentage of state shareholders. Our study serves as empirical evidence, referencing Vietnam and other transitional economies, toward mannerly policy decision-making related to state ownership and the business environment to boost corporate performance.

1. Introduction

Once again, the attention of researchers has turned towards corporate performance, a matter of great significance, especially within transitional economies that grapple with challenges like uncertainty in institutions, the repercussions of financial crises, and the persistent threat posed by the coronavirus pandemic (Alsamhi et al. 2022; Quyen et al. 2021; Tseng et al. 2019). Consequently, the emphasis on ensuring strong corporate performance has intensified, not just for the sake of bolstering overall organizational efficiency but also for safeguarding the interests of investors and fostering economic progress (Gao et al. 2023; Tseng et al. 2020). The primary focus revolves around comprehending the intricate roles assumed by corporate activities, the business environment, and state ownership due to their pivotal functions (Nguyen and Wong 2021). Given the context of emerging markets, these linkages hold particular significance, where governments often wield strategic resources such as information, regulatory frameworks, subsidies, tax policies, concessional loans, and financial support for market orientation (Nguyen et al. 2020; Vo 2018).
Vietnam’s economic history is marked by a system where the government centrally planned the economy, with significant roles for state-owned enterprises. The unique historical backdrop positions Vietnam as an ideal case study for examining the role of state ownership. Despite a notable decline in state ownership following the 1986 reform’s equitization, the enduring impact of state ownership has remained pronounced in recent times (Nguyen and Wong 2021; Nguyen and Vo 2022). Furthermore, Vietnam’s market could be classified as developing, characterized by partial opacity and insufficient corporate governance, as Vo (2018) and Nguyen et al. (2021) highlighted. The context in Vietnam serves as an excellent setting to delve into the interplay between state affiliations, governance attributes, and corporate performance. Acknowledging the institutional landscape’s complexity is imperative, which influences how affiliated enterprises establish connections and manage their performance.
Recent research has emphasized the growing importance of connections between businesses and governmental entities, as highlighted in the studies conducted by Nguyen and Wong (2021), Nguyen et al. (2020), and Ahmad et al. (2022). Debates surrounding the state’s involvement in corporations have consistently revolved around the themes of efficiency and opportunities for investment, aiming to enhance competitiveness and refine business strategies (Nguyen et al. 2020; Ben Rejeb Attia et al. 2018) and its agency problems (Huang et al. 2017; Khatib et al. 2022). The existence of state ownership serves as a clear indication of the bond between businesses and the government, often leading to enhanced prospects for receiving governmental support, akin to a gesture of assistance (Chen et al. 2021; Song et al. 2016). Companies that maintain affiliations with the government enjoy facilitated access to valuable information, financial resources, government subsidies, concessional loans, investment agreements, and tax benefits. These factors invariably influence corporate valuation and overall performance. However, specific studies have shed light on the negative consequences associated with this relationship, suggesting that such connections do not always contribute positively to firm value and performance. Corporations under state ownership often grapple with significant challenges related to agency issues when pursuing objectives beyond mere profitability (Peng et al. 2016). Thus, the inconclusive findings across previous findings necessitate a fresh research perspective on the concentration of state ownership and its impact on performance.
On one side, it has been observed that small-holder representatives encounter limitations in exerting authority over corporate operations and strategic decisions in joint-stock companies, as highlighted by Nguyen et al. (2020) and Cao et al. (2022). Consequently, the consolidation of shares under state ownership expands their presence on corporate boards of directors and supervisory committees, granting them the power to shape operational strategies. Moreover, the concentration of state ownership bestows significant advantages upon enterprises, facilitating streamlined access to both internal and external resources and easing contract negotiations with government entities (Chase and Murtha 2019; Kumar and Zattoni 2015). Within this intricate interplay, the setbacks faced by the enterprise become intertwined with those of the state, creating a heightened motivation for the state to actively contribute to enhancing corporate performance. However, the concentration of ownership also carries inherent risks, notably exacerbating challenges related to agency problems as the state’s ownership stake grows disproportionately large. Complexities such as the diversion of profits for alternative purposes, the potential lack of managerial expertise among appointed officials, and the possibility of a decline in the motivation to improve corporate performance among private shareholders arise as formidable obstacles to business expansion, particularly in environments characterized by weak institutional frameworks (Wehrheim et al. 2020; Gan et al. 2017; Song et al. 2016). Given contentious issues, the primary objective of our study is to thoroughly scrutinize the extent of state ownership concentration and its impact on corporate performance. Thus, the study aims to offer valuable insights and enhance our comprehension of the dynamics at play between the state and firms through empirical investigation.
On the other side, Tee (2018), in conjunction with Song et al. (2016) and Ben-Nasr et al. (2015), have put forth the proposition that the intricacies of the business environment significantly shape the correlation between ownership structure and corporate performance. According to this perspective, a favorable business environment fosters transparency, competition, protection of minority interests, and institutional accountability, irrespective of the ownership arrangement (North 1990; Pfeffer and Salancik 1978). However, when government affiliations are considered business assets, their influence can be misused, particularly within an inadequate institutional framework. Put simply, companies may extract these affiliations for non-transparent and non-competitive purposes, essentially treating these connections as a privileged pathway (Vo 2018; Pan et al. 2014; Yu 2013). As a result, it inevitably leads to imbalances in competition and distorts business operations as enterprises prioritize cultivating relationships with governmental bodies to avail themselves of preferential treatment. As highlighted by Wei (2007), the government assumes the dual roles of both a “player” and a “judge,” contributing to ineffective and biased corporate governance and performance under these circumstances. Notably, Song et al. (2016) and prior research emphasize the disparities in treatment between state-owned enterprises and other companies concerning the protection of property rights, allocation of resources and information, and financial support. Consequently, reform endeavors should aim to foster an environment of equitable competition for both state-owned and non-state-owned enterprises, treating them with impartiality (Wei 2007). In this context, understanding the intricate relationship between the business environment and state ownership within the Vietnamese context stands as a crucial and relevant topic of inquiry.
Nonetheless, our current understanding of this intricate phenomenon, particularly in Vietnam, remains somewhat limited. Consequently, further research is crucial to deepen our scholarly comprehension and develop theories regarding the impact of state affiliations and governance attributes on corporate performance within Vietnam’s distinct market. In spite of advancements made in refining this line of research, several noteworthy gaps still require filling as main contributions in our study. Firstly, despite concerted scholarly endeavors, the previous findings concerning the impact of state connections on corporate performance and value have yielded mixed results. Secondly, a distinct facet emerges where businesses form a formal, institutionalized connection with the government, facilitated through legal agencies and contractual agreements that provide secure access to resources (Song et al. 2016). This particular dimension has the potential to reshape our prior understanding of the implications of state ownership and its effects at the corporate level. Thirdly, the scope of previous studies has often been confined to the Chinese context, leaving unaddressed gaps in terms of empirical contributions within other countries. Fourth, the influence exerted by the local business environment has the potential to significantly impact enterprise performance, subsequently altering the dynamics between state ownership and businesses. In support of our empirical analysis, financial data covering over a decade from 359 listed corporations on the Vietnamese stock markets (2010–2021) and the General Method of Moments (GMM) are applied to achieve optimal results.
Beyond the introductory section, the subsequent structure of our study unfolds as follows: Section 2 delves into the literature review and the hypotheses underpinning the research, while Section 3 outlines the data, models, and methodologies employed. Empirical findings and discussions will be showcased in Section 4, and finally, Section 5 encapsulates the study’s conclusions and implications and outlines the limitations inherent to this endeavor in Section 6.

2. Literature Review

On the one hand, Friedman (1962) advocates for the government’s intervention to restrain monopolistic inclinations and prevent misconduct; it is crucial to acknowledge that the government actively participates in the economy through various means. In the early stages of market development, the government may establish wholly state-owned corporations, subsequently subject to partial or complete privatization (Uddin 2016). This strategic engagement of the government, whether as a major or minor stakeholder, empowers it to exert influence over the overall operations of the corporation. It is important to note that, as expressed by Uddin (2016), regardless of its level of ownership, the government remains the most politically influential shareholder, driven by an intense motivation to rigorously supervise managers primarily evaluated on socioeconomic objectives rather than purely focusing on maximizing shareholder wealth. This situation can lead to a dilemma where appointed managers prioritize socio-political objectives over the pursuit of maximizing shareholder wealth, creating a significant quandary. Moreover, in the absence of internal checks and competitive dynamics, managers might be inclined to prioritize their personal interests, as highlighted in the research by Liljeblom et al. (2019). This underscores the idea that privatization has the potential to offer illuminating perspectives. Indeed, investigations across diverse contexts, encompassing various nations, industries, and multiple countries, consistently reveal a trend where corporate performance witnesses improvement following the privatization process, implicating that state ownership in the past did not strongly promote enterprise performance (Khan et al. 2019; Chen et al. 2017).
On the other hand, the traditional resource-based theory has predominantly concentrated on market-derived resources and capabilities; an emerging body of literature has extended this perspective to encompass nonmarket-based political resources and capacities (Ahmad et al. 2022; Tu et al. 2021; Sharma et al. 2020). Lux et al. (2010) have proposed that political resources and capabilities increasingly influence corporate performance, especially within Western contexts. Hence, it is reasonable to contend that political resources and capacities exert an expanding and significant sway over corporate operations (Li et al. 2013). Indeed, in contrast to private and foreign enterprises, companies with affiliations with the state often forge robust connections with officials through their appointed executives (Tihanyi et al. 2019; Peng et al. 2016). These associations can bolster a firm’s reputation, enhance its legitimacy, and amplify its bargaining prowess with the state and other stakeholders (Sun et al. 2021; Peng et al. 2016). In fiercely competitive markets, the possession of state ownership acquires distinct value and rarity, and it becomes notably intricate to replicate, particularly in influential sectors such as telecommunications, electricity, water, transportation, and construction (Liljeblom et al. 2019). These corporate entities can strategically leverage these relationships as invaluable resources to secure competitive advantages and cultivate superior strategies (Nguyen et al. 2020; Ben Rejeb Attia et al. 2018). Furthermore, as a shareholder, the government wields various mechanisms to support these interconnections between state and enterprise, a phenomenon commonly observed in specific countries like China (Goodell et al. 2021; Jin et al. 2022). They provide financial and political support by facilitating access to banking networks for loans. Enterprises with substantial state ownership levels often enjoy easier access to concessional loans and benefit from resource extraction facilitated by the state’s influence as a major shareholder (Borisova et al. 2015; Yu 2013).
In the case of Vietnam, most research has attested to the main context of privatization by comparing firm performance before and after the privatization process (Nguyen and Vo 2022). However, investigations examining the impact of residual state ownership in partially privatized enterprises within the Vietnamese setting are scarce and yield varying outcomes (Nguyen et al. 2021; Vu and Pratoomsuwan 2019; Suu et al. 2021). Given the constrained and diverse findings, it is imperative to conduct additional research on the effects of residual state ownership on privatized enterprises, particularly within the specific context of Vietnam. We believe that the presence of state ownership within enterprises yields distinct advantages, yet it also introduces potential disadvantages, ultimately influencing revenue growth, cost efficiencies, and overall corporate effectiveness while concurrently introducing potential drawbacks. Hence, the first hypothesis is stated as follows:
H1. 
State ownership has a positive impact on corporate performance.
Looking at it from a different perspective, empirical studies conducted in China and various other countries worldwide have unveiled a non-linear correlation between high state ownership and metrics like firm value, risk-taking proclivity, and cash holdings (Nguyen and Wong 2021; Nguyen et al. 2020; Le et al. 2019; Kubo and Phan 2019). This is explained based on two opposite assumptions, as follows:
First, it is highly unlikely for owners to monitor the management teams and enforce their property rights within enterprises possessing modest levels of state ownership. As a result, this kind of corporate activity mirrors the diverse range of benefits catered to various shareholders (Tran et al. 2023; Uddin 2016). However, it is increasingly evident that the interplay between private and state entities is considerably more intricate than previously assumed. Due to the government’s role as the most influential political stakeholder and the perceived value of state affiliations, representatives from the state wield considerable influence, effectively compelling regulators and private owners to make impactful decisions geared towards augmenting corporate value (Uddin 2016; Aljifri and Moustafa 2007). In this case, the state holds a potent arsenal of monitoring tools and political connections, including audits and inspectorates, that facilitate rigorous oversight and safeguard its investments (Ng et al. 2009). Evidence of a positive link between the percentage of state ownership and firm performance (Boubakri et al. 2018; Liao and Young 2012) supports that state ownership can correlate with improved corporate performance (Sharma et al. 2020).
Second, however, the agency theory offers insight into situations where the state assumes a major shareholder position. Under this setup, appointed representatives often dictate strategies and corporate proceedings, engendering what is referred to as the principal-principal agency problem. This interference is commonly perceived as detrimental to both corporate performance and minority shareholders (Khatib et al. 2022). It is due to the deliberate diversion of company resources for socioeconomic purposes through the exertion of control and voting rights by appointed managers (Shleifer and Vishny 1998; Boycko et al. 1996). Furthermore, these appointed managers may also succumb to opportunistic tendencies, focusing on their private gains from managing the corporation rather than maximizing profits. Such opportunistic behavior is fueled by the existence of an imperfect state surveillance system and officials’ inadequate grasp of proficient management skills within a fiercely competitive market (Huang et al. 2017; Gan et al. 2017).
The above findings further bolster our hypothesis concerning the existence of an inverse U-shaped relationship between state ownership and corporate performance, as formulated in the subsequent hypothesis:
H2. 
State ownership has an inverted U-shaped impact on corporate performance.
In more recent times, the concept of institutional theory has risen to prominence as a framework to elucidate the disparities observed in research outcomes concerning firm performance across various markets. Fundamentally, this theory gives a mechanism for comprehending how firm behavior is influenced by specific social contexts (North 1990). In essence, individuals and organizations react to shifts within their environment, which encompass alterations to governmental laws and regulations, to navigate external pressures (Aguilera and Jackson 2010). Scholars such as Ho and Michaely (1988) and Cohen et al. (1983) have underscored the potency of a robust institutional framework in mitigating challenges stemming from information asymmetry, transactional expenses, and risks while concurrently elevating market efficiency, optimizing resource allocation, and safeguarding property rights. In addition, Kusnadi et al. (2015) and Kang and Kim (2012) posit that the absence of effective institutions and regulatory frameworks can pose significant hindrances to output, potentially fostering internal asset appropriation and nurturing corruptive behavior driven by the interests of corrupted officials.
Provincial business competition, implying institutional quality, reflects the enforcement of laws and regulations at the localized level, commonly recognized as the provincial business environment (Malesky et al. 2020; Thanh et al. 2020). Specifically, after the reforms in 1986, a noteworthy devolution of power transpired, transferring significant authority from the central government to local governments, empowering them to devise business strategies and attract investments tailored to the nuances of their respective regions. Esteemed researchers such as Tran et al. (2018) and Thanh et al. (2020) have cast a spotlight on the substantial divergence in governance quality evident across diverse Vietnamese regions. This divergence inherently reverberates in business operations, especially for enterprises operating within localized markets.
Within the dynamic interplay between corporations and local governance, state ownership assumes the role of a protective mechanism, safeguarding businesses from the detrimental consequences of corruption and local bureaucratic impediments (Darsono et al. 2022b). Noteworthy research conducted by Zhou (2017) and Nguyen and Van Dijk (2012) has illuminated how corporations boasting robust political affiliations gain heightened asset protection, exhibit reduced susceptibility to corruption, and remain shielded from undue interference by local government agencies, particularly within weak institutional landscapes. However, the insights proposed by Peng et al. (2016) posit that the significance of government ties may wane in a deregulated or liberalized environment. Thus, a plausible argument can be made that in regions characterized by lower-quality local governance, the influence of state ownership on corporate performance assumes a heightened role. Conversely, within regions characterized by higher-quality local governance, which inherently translates to heightened efficiency, the impact of state ownership becomes relatively less pivotal for firms.
H3. 
The interaction of the provincial business environment with state ownership has a positive impact on corporate performance.
Before showing the data, models, and empirical estimations, our paper illustrates the proposed hypotheses in Figure 1.

3. Data, Model, and Method

3.1. Data

Our study analyzes financial and ownership data from 365 listed corporations in Vietnam from 2010 to 2021, using 4308 observations. The data is gathered from financial statements and reports on the Ho Chi Minh Stock Exchange (HOSE) and Ha Noi Stock Exchange (HNX). In addition to the financial indicators described in Section 3.2, the Provincial Competitiveness Index (PCI) measures residents’ and businesses’ perceptions of the provincial institutional environment, assessing the quality of the provincial business environment (Malesky et al. 2020). It was developed, calculated, and annually published by the Vietnam Competitiveness Initiative and the Chamber of Commerce and Industry of Vietnam, scaling from 0 to 100. In our study, we use the final published results of the PCI index to measure the quality of the business environment, as the higher the index, the higher the quality of the business environment.

3.2. Model

To initiate the analysis, (i) the study analyzes firm performance and state ownership; (ii) it builds a model that investigates the non-linear influences of state ownership; and (iii) it develops a moderative model for the interaction of the business environment on corporate performance and state ownership. According to the extant literature, the following dynamic models are built to evaluate our hypothesis:
C F P i t = α 0 + α 1 C F P i t 1 + α 2 S O E i t + k = 1 5 γ 1 k C o n t r o l   v a r i a b l e s i t + ε i t
C F P i t = β 0 + β 1 C F P i t 1 + β 2 S O E i t + β 3 S O E 2 + k = 1 5 γ 2 k C o n t r o l   v a r i a b l e s i t + ε i t
C F P i t = λ 0 + λ 1 C F P i t 1 + λ 2 P C I i t + λ 3 S O E P C I i t + k = 1 5 γ 3 k C o n t r o l   v a r i a b l e s i t + ε i t
Corporate financial performance (CFP) in a given year is typically measured using two major indicators: (a) Return on Assets (ROA) reflects the ratio of net income to the average of total assets, and (b) Return on Equity (ROE) shows the net income divided by the average of total equity. State ownership (SOE) is the percentage of shares owned by the national or local government, including those held by state organizations. Meanwhile, multiple state ownership percentages calculate the square of state ownership (SOE2). The Provincial Competitiveness Index (PCI) in Vietnam has been used to assess public and corporate perceptions of the provincial business environment. An interaction variable (SOE∗PCI) is constructed using the original variables to capture the interactive effects of state ownership and the local business environment.
The natural logarithm of total assets determines corporate size (SIZE); corporate age (AGE) is confirmed by the natural logarithm of the number of years since the initial public offering (IPO); tangibility asset (PPE) is the ratio of property, plant, and equipment to total assets at year-end; corporate leverage (LEV) is the ratio of total debt to total assets at year-end; and operating net cash flow (NCFOTA) is added into these models as control variables. The term ε i t shows the error term, ensuring that E ( ε i t ) equals 0 for all i firms and t times, signifying the random variation in the corporate performance model.

3.3. Estimating Method

Building upon the empirical discoveries of Ben Rejeb Attia et al. (2018), our study strategically employs the Generalized Methods of Moments (GMM) methodology to effectively contend with endogeneity, heteroscedasticity, and serial correlation that can potentially confound the analysis of corporate performance and state ownership. The GMM approach, surpassing the Ordinary Least Squares (OLS) estimation, stands out among lagged instruments and avoids biased results due to endogenous problems. The validity of the application of a two-step system in GMM estimation is confirmed through a Hansen test and the Arellano-Bond test. Hansen’s test is to determine whether there are over-identifying restrictions in our statistical models. Concurrently, the Arellano-Bond test probes whether the prospect of autocorrelation in idiosyncratic error terms exists. These methodological steps draw upon the recommendation of Blundell et al. (2001).

4. Findings and Discussions

4.1. Empirical Findings

Table 1 provides a comprehensive summary of variable statistics from 2010 to 2020. The statistics encompass the mean, standard deviation, minimum, median, and maximum values. The mean values for ROA and ROE are 0.060 and 0.111, respectively, expressed as percentages. The standard deviations are 0.074 for ROA and 0.158 for ROE. The maximum value of ROA is 0.784 (Kinh Do Joint Stock Company in 2015), and its minimum value is −0.646 (Long A Food Processing Export Joint Stock Company in 2012). Similarly, ROE’s minimum and maximum values are −3.674 (Camimex Group Joint Stock Company in 2013) and 0.982 (Kinh Do Joint Stock Company in 2015), respectively. The average value of SOE is 0.235, and the standard deviation is 0.241, showing that state ownership percentage fluctuated significantly during the research period. The average index of PCI is 0.623, and its standard deviation is 0.040, illustrating less volatility. Other statistics are shown in Table 1.
In Table 2, Table 3 and Table 4, the AR(1) and AR(2) tests satisfy the requirements of the GMM-two steps; meanwhile, the Hansen test also shows that they are robust estimations with suitable instrumental variables. Table 2 displays that the outcomes related to the impact of SOE are clearly positive for both ROA and ROE, maintaining significance at the 1% level. They imply that state ownership exerts a favorable influence on corporate performance. To be specific, the regression coefficients for SOE are calculated as 0.010 (ROA) and 0.047 (ROE). Our results support Hypothesis H1, according to which state ownership participation positively affects corporate performance. It shows that state ownership is a strategic asset and that firms can benefit from this relationship. Our findings indicate that government-related shareholders can improve corporate performance by effectively monitoring and managing risk-taking in listed companies (Nguyen et al. 2020; Ben Rejeb Attia et al. 2018; Vo 2018).
Next, model (2) is estimated with the participation of SOE and SOE2. The results in Table 3 show that the regression coefficients of SOE are 0.072 (for ROA) and 0.408 (for ROE), while the regression coefficients of SOE2 are −0.110 (for ROA) and −0.632 (for ROE), at the 1% significance level for both estimates, respectively. Our interesting result suggests that there exists a maximum value of SOE where over-owning will have a negative effect on CFP, supporting Hypothesis H2. By derivative concerning SOE, it is S O E = β 2 + 2 β 3 S O E . Our study sets 0 = β 2 + 2 β 3 S O E , and the equation is solved to find the SOE. As a result, the SOE receives 32.72 (for ROA) and 32.27 (for ROE), respectively. These findings approximate the SOE values found in the previous study by Nguyen and Wong (2021) for corporations’ cash holdings.
Table 4 outlines the empirical outcomes of the nexus among the business environment, state ownership, and corporate performance. The computed coefficients for the Provincial Competitiveness Index (PCI), acting as a gauge of institutional environment robustness, stand at 0.021 (ROA) and 0.245 (ROE), respectively. Remarkably, these coefficients attain statistical significance at the 1% level. Hence, the implications derived from Table 4 propose that a favorable institutional milieu serves to curtail disparities in risks and informal expenditures. Additionally, it accentuates the role of the institutional framework in augmenting market efficiency and resource allocation. In essence, the provincial institutional setting significantly shapes corporate performance.
Previous investigations have often treated state ownership, political engagement, and market forces as distinct entities (Green and Liu 2005). Nevertheless, the empirical findings showcased in Table 4 corroborate a tight interconnection among the institutional landscape, state ownership, and corporate performance. The interactive coefficients (SOE∗PCI) emerge as statistically substantial at the 1% level, conveying affirmative impacts on both ROA (0.020) and ROE (0.071). Our outcomes support Hypothesis H3, positing that with an enhancement in the institutional framework, the influence of state ownership on corporate performance gains potency. To conclude, our findings illuminate the pivotal role of the institutional backdrop in mediating the correlation between state ownership and corporate performance. While state ownership contributes to corporate performance, sustained enhancements in the institutional framework hold the potential to amplify these effects further.
Furthermore, the control variables across all estimation models yield consistent outcomes at the 1% significance threshold. The above findings indicate a level of robustness in the estimates and validate the notion that alterations in the financial attributes of a firm elicit responses in its performance. Notably, SIZE demonstrates a positive impact on both ROA and ROE. Evidently, larger company sizes foster more advantageous conditions for enhancing efficiency by employing their total assets in investment and production endeavors. Similarly, the presence of tangible assets (PPE) and the influx of cash from operating activities (NCFOTA) manifest statistically significant and positive influences on corporate performance. Should these attributes be enhanced, they could significantly bolster operational efficiency, making them focal points in operational management. However, variables such as IPO duration (AGE) and debt ratio (LEV) exert adverse effects on a company’s performance. This observation lends support to the prevailing argument that profitable firms often opt for lower debt levels, likely owing to the expenses linked with securing external capital. Likewise, aging companies are prone to diminished profits due to the effects of age-related effects such as obsolescence, adaptability, and resistance. These outcomes align with prior investigations conducted by Minh Ha et al. (2021) and Merendino and Melville (2019).

4.2. Discussions

Our research broadens comprehension by investigating how state ownership, institutional environment, and board characteristics influence corporate performance. This exploration is crucial due to the ambiguity surrounding the necessity and benefits of state ownership for corporations and the extent to which the business environment can enhance their performance. Vietnam has been proposed as a fitting case study for examining the effects of state ownership, given its status as an emerging transitional nation and its historical background of a centrally planned economy dominated by state-owned enterprises.
Empirical evidence highlights the positive influence of state ownership on firm performance, resonating with analogous findings in China and Vietnam (Suu et al. 2021; Lazzarini and Musacchio 2018). Government engagement as a stakeholder has significantly transformed corporate performance by furnishing non-market political resources and competencies. Enterprises with state involvement enjoy heightened property rights protection and resource allocation, distinguishing them from their counterparts. In Vietnam’s economic landscape, state ownership assumes the character of a valuable asset, contributing to enhanced corporate performance, in line with precedent studies by Suu et al. (2021) and Nguyen et al. (2020).
However, our study shows that high state ownership is not always a powerful tool. Empirical findings show the optimal state threshold at approximately 32.00 percent, which suggests that over-ownership can cause problems for firm performance. Our findings support agency theory, which presents a conflict between state shareholders and other minority shareholders (Khatib et al. 2022). Furthermore, since short-term social and political goals are also the top priorities of state-owned enterprises, these goals may conflict with maximizing the profits of minority shareholders (Abramov et al. 2017). The previous evidence supports the inverted U-shaped results of studies by Nguyen and Wong (2021), Le et al. (2019), and Kubo and Phan (2019).
In addition, our study further accentuates the influence of the institutional milieu on local governance quality, specifically exemplified through the Provincial Competitiveness Index. Historical antecedents from the southern and northern regions have imprinted divergent characteristics on local governance and extensive decentralization from central to local levels. Broad factors strongly impact business operations through legal enforcement and customary local governance. Elevating local governance quality correlates with improved corporate performance, consistent with institutional theory.
Nevertheless, in comparison to previous studies such as those by Iwasaki et al. (2022), Chan et al. (2016), Kim et al. (2013), and Gill et al. (2011), which indicate an inefficient link between state ownership and firm activities in developed economies like Korea, New Zealand, the United States, and Europe, our study robustly supports the positive connection between state ownership and the business environment. Here, state-owned enterprises can serve as strategic liaisons, fostering ties with local governments and receiving essential support for business operations.
Thus, the research demonstrates state ownership’s significant and positive role in business performance. Nonetheless, pinpointing the threshold of state ownership in its relationship with enterprise performance remains crucial. Our research’s findings suggest that state ownership plays a pivotal role in the performance of listed companies, aligning perfectly with Vietnam’s characteristics, where state ownership is deemed a “strategic asset.” State ownership presence fosters robust support for constructing a legal framework, safeguarding rights, and preventing misconduct through its own role. However, the repercussions of ownership concentration result in adverse effects associated with an excessively high state ownership percentage, leading to conflicts with other shareholders regarding the company’s strategic direction, whether geared towards profit or socio-political goals. Major state shareholders can wield control, compelling corporations to engage in activities that benefit them at the expense of minority shareholders. In our sample, the average state ownership is about 23.5%; meanwhile, the found threshold ratio is 32%. In this case, the higher 32.00 percent state ownership ratio can significantly influence corporate decisions. Consequently, resources may be extracted by individuals or other affiliated parties, particularly within contexts characterized by weak institutions (Gan et al. 2017; Wehrheim et al. 2020). This is substantiated by the subsequent revelation that enterprise performance witnessed an upswing alongside the enhancement of the institutional environment. Our investigation underscores the linkage between advancements in local governance quality and the simultaneous improvement in corporate performance. Our findings are entirely consistent with institutional theory, emphasizing that the amelioration of the business environment contributes to better asset protection, diminished information asymmetry, and reduced risks, corruption, and costs for businesses (Nguyen and Vo 2022; Nguyen and Wong 2021; Nguyen et al. 2020, 2021).

5. Conclusions

In recent times, corporations have encountered escalating risks and dropping performance due to crises and uncertainties (Darsono et al. 2022a). Over the years, the Vietnamese government has been actively propelling corporate structure and institutional reforms since the 1980s, aiming to enhance effectiveness and efficiency. Nevertheless, challenges persist as local governance and corporate practices continue to evolve, profoundly affecting corporate performance.
Our study delves into the ramifications of state ownership and the institutional framework on corporate performance in Vietnam, an emerging nation transitioning from a centrally planned economy. The investigation underscores the pivotal role of state ownership as a “strategy asset” tool for government intervention. Our quantitative analysis reveals that state ownership, institutional environment, and corporate characteristics share intricate relationships with corporate performance, albeit with distinct effects. Our findings unveil their roles within a country characterized by the state’s central role.
The research also scrutinizes the interplay between state ownership and the local business environment concerning the performance of listed companies in Vietnam from 2010 to 2020. Employing a two-step systematic GMM approach, our study elucidates the positive role of state ownership in corporate performance. However, state ownership is not a powerful tool because our findings show that the optimal state threshold of approximately 32.00 percent suggests that over-ownership can cause problems for firm performance. Additionally, it uncovers that an augmented local business environment correlates with enhanced corporate performance. An upgraded institutional context accentuates state ownership’s positive impacts while mitigating corporate attributes’ negative influences. Our study illuminates the pivotal function of state ownership within listed company operations, encompassing financial performance and governance mechanisms. The study’s findings contribute to a deeper comprehension of state ownership’s manifestations in corporate governance and financial performance within Vietnam’s distinctive landscape. Furthermore, our study accentuates the significance of the business environment in the context of state ownership and corporate performance, thus supplying valuable insights into financial theories.
Consequently, our research has a number of practical implications. Policymakers and regulators could contemplate elevating local institutions’ caliber, gradually lessening state shareholders’ predominant role, and carving out well-defined roles for corporate characteristics to invigorate corporate performance. The study also underscores the active involvement of corporate state representatives in supervising and endorsing board decisions.

6. Limitations

However, the study exhibits limitations, such as the omission of factors like risk, ownership structure, and gender diversity that can influence firm performance. Moreover, it relies on a confined sample size and a singular business environment indicator. Subsequent studies should delve into these factors, broaden the sample size for more representative findings, and strengthen the evidence regarding the business environment’s impact on corporate operations. In addition, social responsibility, state ownership, and sustainable performance should also be considered, referring to Hou (2019) and Hai Yen et al. (2023).

Author Contributions

Conceptualization, T.T.H.N.; methodology, T.T.H.N. and G.Q.P.; software, T.T.H.N. and G.Q.P.; validation, S.N.A.C.D. and G.Q.P.; data curation, S.N.A.C.D. and T.H.V.P.; writing—original draft preparation, T.T.H.N.; writing—review and editing, S.N.A.C.D., S.M.J. and H.B.T.; visualization, T.H.V.P. and H.B.T.; supervision, T.T.H.N.; project administration, T.T.H.N. and S.M.J. All authors have read and agreed to the published version of the manuscript.

Funding

Our research received no external funding.

Data Availability Statement

The data are available from the corresponding author upon request.

Acknowledgments

The authors especially thank the Guest Editor Rakesh Gupta, Department of Accounting Finance and Economics, Griffith Business School, Griffith University, Australia, anonymous referees, and co-authors for their helpful comments and support, which helped to improve our manuscript significantly. The first, second, and sixth authors would like to thank Wing-Keung Wong for his continuous guidance and encouragement.

Conflicts of Interest

The authors declare no conflict of interest.

References

  1. Abramov, Alexander, Alexander Radygin, Revold Entov, and Maria Chernova. 2017. State Ownership and Efficiency Characteristics. Russian Journal of Economics 3: 129–57. [Google Scholar] [CrossRef]
  2. Aguilera, Ruth V., and Gregory Jackson. 2010. Comparative and International Corporate Governance. Academy of Management Annals 4: 485–556. [Google Scholar] [CrossRef]
  3. Ahmad, Yahya Yeshua, Bambang Subroto, and Sari Atmini. 2022. The Role of Political Connections in the Relationship between Managerial Ability and Fraudulent Financial Statements. Journal of Accounting and Investment 23: 431–45. [Google Scholar] [CrossRef]
  4. Aljifri, Khaled, and Mohamed Moustafa. 2007. The Impact of Corporate Governance Mechanisms on the Performance of UAE Firms: An Empirical Analysis. Journal of Economic and Administrative Sciences 23: 71–93. [Google Scholar] [CrossRef]
  5. Alsamhi, Mohammed H., Fuad A. Al-Ofairi, Najib H. S. Farhan, Waleed M. Al-Ahdal, and Ayesha Siddiqui. 2022. Impact of Covid-19 on Firms’ Performance: Empirical Evidence from India. Cogent Business & Management 9: 2044593. [Google Scholar] [CrossRef]
  6. Ben-Nasr, Hamdi, Narjess Boubakri, and Jean Claude Cosset. 2015. Earnings Quality in Privatized Firms: The Role of State and Foreign Owners. Journal of Accounting and Public Policy 34: 392–416. [Google Scholar] [CrossRef]
  7. Ben Rejeb Attia, Mouna, Naima Lassoued, and Mohamed Chouikha. 2018. State Ownership and Firm Profitability in Emerging Markets. International Journal of Public Sector Management 31: 167–83. [Google Scholar] [CrossRef]
  8. Blundell, Richard, Stephen Bond, and Frank Windmeijer. 2001. Estimation in Dynamic Panel Data Models: Improving on the Performance of the Standard Gmm Estimator. In Nonstationary Panels, Panel Cointegration, and Dynamic Panels. Edited by Badi H. Baltagi, Thomas B. Fomby and R. Carter Hill. Bradford: Emerald Group Publishing Limited, England, vol. 15, pp. 53–91. [Google Scholar]
  9. Borisova, Ginka, Veljko Fotak, Kateryna Holland, and William L. Megginson. 2015. Government Ownership and the Cost of Debt: Evidence from Government Investments in Publicly Traded Firms. Journal of Financial Economics 118: 168–91. [Google Scholar] [CrossRef]
  10. Boubakri, Narjess, Sadok El Ghoul, Omrane Guedhami, and William L. Megginson. 2018. The market value of government ownership. Journal of Corporate Finance 50: 44–65. [Google Scholar] [CrossRef]
  11. Boycko, Maxim, Andrei Shleifer, and Robert W. Vishny. 1996. A Theory of Privatization. The Economic Journal 106: 309–19. [Google Scholar] [CrossRef]
  12. Cao, Qingzi, Ming Fang, and Yuying Pan. 2022. Minority shareholders protection and corporate financial leverage: Evidence from a natural experiment in China. Pacific-Basin Finance Journal 73: 101742. [Google Scholar] [CrossRef]
  13. Chan, Kenny Ka Yin, Li Chen, and Norman Wong. 2016. New Zealand State-Owned Enterprises: Is State-Ownership Detrimental to Firm Performance? New Zealand Economic Papers 50: 1–15. [Google Scholar] [CrossRef]
  14. Chase, Kevin S., and Brian Murtha. 2019. Selling to Barricaded Buyers. Journal of Marketing 83: 2–20. [Google Scholar] [CrossRef]
  15. Chen, Ruiyuan, Sadok El Ghoul, Omrane Guedhami, and He Wang. 2017. Do State and Foreign Ownership Affect Investment Efficiency? Evidence from Privatizations. Journal of Corporate Finance 42: 408–21. [Google Scholar] [CrossRef]
  16. Chen, Ruiyuan, Sadok El Ghoul, Omrane Guedhami, Chuck C. Y. Kwok, and Robert Nash. 2021. International evidence on state ownership and trade credit: Opportunities and motivations. Journal of International Business Studies 52: 1121–58. [Google Scholar] [CrossRef] [PubMed]
  17. Cohen, Kalman J., Gabriel A. Hawawini, Steven F. Maier, Robert A. Schwartz, and David K. Whitcomb. 1983. Friction in the Trading Process and the Estimation of Systematic Risk. Journal of Financial Economics 12: 263–78. [Google Scholar] [CrossRef]
  18. Darsono, Susilo Nur Aji Cokro, Wing-Keung Wong, Nguyen Tran Thai Ha, Hafsah Fajar Jati, and Diah Setyawati Dewanti. 2022a. Good Governance and Sustainable Investment: The Effects of Governance Indicators on Stock Market Returns. Advances in Decision Sciences 26: 69–101. [Google Scholar] [CrossRef]
  19. Darsono, Susilo Nur Aji Cokro, Wing-Keung Wong, Tran Thai Ha Nguyen, and Dyah Titis Kusuma Wardani. 2022b. The Economic Policy Uncertainty and Its Effect on Sustainable Investment: A Panel Ardl Approach. Journal of Risk and Financial Management 15: 254. [Google Scholar] [CrossRef]
  20. Friedman, Milton. 1962. Capitalism and Freedom. Chicago: University of Chicago Press. [Google Scholar]
  21. Gan, Jie, Yan Guo, and Chenggang Xu. 2017. Decentralized Privatization and Change of Control Rights in China. The Review of Financial Studies 31: 3854–94. [Google Scholar] [CrossRef]
  22. Gao, Shang, Fanchen Meng, Wenshuai Wang, and Wenxin Chen. 2023. Does ESG always improve corporate performance? Evidence from firm life cycle perspective. Frontiers in Environmental Science 11: 1105077. [Google Scholar] [CrossRef]
  23. Gill, Amarjit, Nahum Biger, and Neil Mathur. 2011. The Effects of Capital Structure on Profitability: Evidence from United States. International Journal of Management 28: 3–15. [Google Scholar]
  24. Goodell, John W., Mingsheng Li, and Desheng Liu. 2021. Price informativeness and state-owned enterprises: Considering their heterogeneity. International Review of Financial Analysis 76: 101783. [Google Scholar] [CrossRef]
  25. Green, Stephen, and Guy S. Liu. 2005. Exit the Dragon? Privatization and State Control in China. London: Chatham House, Blackwell Publishing. [Google Scholar]
  26. Hai Yen, Tran Thi, Wing-Keung Wong, Mohammed Hasan Ali Al-Abyadh, Iskandar Muda, Felix Julca-Guerrero, Sanil S. Hishan, and Md Monirul Islam. 2023. The impact of ecological innovation and corporate social responsibilities on the sustainable development: Moderating role of environmental ethics. Economic Research-Ekonomska Istraživanja 36: 2153260. [Google Scholar] [CrossRef]
  27. Ho, Thomas S. Y., and Roni Michaely. 1988. Information Quality and Market Efficiency. The Journal of Financial and Quantitative Analysis 23: 53. [Google Scholar] [CrossRef]
  28. Hou, Tony Chieh-Tse. 2019. The relationship between corporate social responsibility and sustainable financial performance: Firm-level evidence from Taiwan. Corporate Social Responsibility and Environmental Management 26: 19–28. [Google Scholar] [CrossRef]
  29. Huang, Zhangkai, Lixing Li, Guangrong Ma, and Lixin Colin Xu. 2017. Hayek, Local Information, and Commanding Heights: Decentralizing State-Owned Enterprises in China. American Economic Review 107: 2455–78. [Google Scholar] [CrossRef]
  30. Iwasaki, Ichiro, Xinxin Ma, and Satoshi Mizobata. 2022. Ownership Structure and Firm Performance in Emerging Markets: A Comparative Meta-Analysis of East European Eu Member States, Russia and China. Economic Systems 46: 100945. [Google Scholar] [CrossRef]
  31. Jin, Xiankun, Liping Xu, Yu Xin, and Ajay Adhikari. 2022. Political governance in China’s state-owned enterprises. China Journal of Accounting Research 15: 100236. [Google Scholar] [CrossRef]
  32. Kang, Young-Sam, and Byung-Yeon Kim. 2012. Ownership Structure and Firm Performance: Evidence from the Chinese Corporate Reform. China Economic Review 23: 471–81. [Google Scholar] [CrossRef]
  33. Khan, Farman, Junrui Zhang, Muhammad Usman, Alina Badulescu, and Muhammad Sial. 2019. Ownership Reduction in State-Owned Enterprises and Corporate Social Responsibility: Perspective from Secondary Privatization in China. Sustainability 11: 1008. [Google Scholar] [CrossRef]
  34. Khatib, Saleh F. A., Dewi Fariha Abdullah, Ahmed Elamer, and Saddam A. Hazaea. 2022. The development of corporate governance literature in Malaysia: A systematic literature review and research agenda. Corporate Governance: The International Journal of Business in Society 22: 1026–53. [Google Scholar] [CrossRef]
  35. Kim, Younghwan, Jungwoo Lee, and Taeyong Yang. 2013. Corporate Transparency and Firm Performance: Evidence from Venture Firms Listed on the Korean Stock Market. Asia-Pacific Journal of Financial Studies 42: 653–88. [Google Scholar] [CrossRef]
  36. Kubo, Katsuyuki, and Huu Viet Phan. 2019. State ownership, sovereign wealth fund and their effects on firm performance: Empirical evidence from Vietnam. Pacific-Basin Finance Journal 58: 101220. [Google Scholar] [CrossRef]
  37. Kumar, Praveen, and Alessandro Zattoni. 2015. Ownership Structure, Corporate Governance and Firm Performance. Corporate Governance: An International Review 23: 469–71. [Google Scholar] [CrossRef]
  38. Kusnadi, Yuanto, Zhifeng Yang, and Yuxiao Zhou. 2015. Institutional Development, State Ownership, and Corporate Cash Holdings: Evidence from China. Journal of Business Research 68: 351–59. [Google Scholar] [CrossRef]
  39. Lazzarini, Sergio G., and Aldo Musacchio. 2018. State Ownership Reinvented? Explaining Performance Differences between State-Owned and Private Firms. Corporate Governance: An International Review 26: 255–72. [Google Scholar] [CrossRef]
  40. Le, Manh-Duc, Fabio Pieri, and Enrico Zaninotto. 2019. From Central Planning Towards a Market Economy: The Role of Ownership and Competition in Vietnamese Firms’ Productivity. Journal of Comparative Economics 47: 693–716. [Google Scholar] [CrossRef]
  41. Li, Yuan, Mike W. Peng, and Craig D. Macaulay. 2013. Market–Political Ambidexterity During Institutional Transitions. Strategic Organization 11: 205–13. [Google Scholar] [CrossRef]
  42. Liao, Jing, and Martin Young. 2012. The Impact of Residual Government Ownership in Privatized Firms: New Evidence from China. Emerging Markets Review 13: 338–51. [Google Scholar] [CrossRef]
  43. Liljeblom, Eva, Benjamin Maury, and Alexander Hörhammer. 2019. Complex State Ownership, Competition, and Firm Performance—Russian Evidence. International Journal of Emerging Markets 15: 189–221. [Google Scholar] [CrossRef]
  44. Lux, Sean, T. Russell Crook, and David J. Woehr. 2010. Mixing Business with Politics: A Meta-Analysis of the Antecedents and Outcomes of Corporate Political Activity. Journal of Management 37: 223–47. [Google Scholar] [CrossRef]
  45. Malesky, Edmund, Dau Anh Tuan, Ngoc Thach Pham, Le Thanh Ha, Tran Minh Thu, Phan Tuan Ngoc, Truong Duc Trong, Nguyen Thi Le Nghia, and Nguyen Le Ha. 2020. The Vietnam Provincial Competitiveness Index: Measuring Economic Governance for Private Sector Development. Hanoi: Vietnam Chamber of Commerce and Industry and United States Agency for International Development’s Vietnam Competitiveness Initiative. [Google Scholar]
  46. Merendino, Alessandro, and Rob Melville. 2019. The board of directors and firm performance: Empirical evidence from listed companies. Corporate Governance: The International Journal of Business in Society 19: 508–51. [Google Scholar] [CrossRef]
  47. Minh Ha, Nguyen, Pham Tuan Anh, Xiao-Guang Yue, and Nguyen Hoang Phi Nam. 2021. The impact of tax avoidance on the value of listed firms in Vietnam. Cogent Business & Management 8: 1930870. [Google Scholar] [CrossRef]
  48. Ng, Alex, Ayse Yuce, and Eason Chen. 2009. Determinants of State Equity Ownership, and Its Effect on Value/Performance: China’s Privatized Firms. Pacific Basin Finance Journal 17: 413–43. [Google Scholar] [CrossRef]
  49. Nguyen, Bach, Hoa Do, and Chau Le. 2021. How Much State Ownership Do Hybrid Firms Need for Better Performance? Small Business Economics, 1–27. [Google Scholar] [CrossRef]
  50. Nguyen, Manh Hoang, and Thi Quy Vo. 2022. Residual State Ownership and Firm Performance: A Case of Vietnam. Journal of Risk and Financial Management 15: 259. [Google Scholar] [CrossRef]
  51. Nguyen, Thuy Thu, and Mathijs A. Van Dijk. 2012. Corruption, Growth, and Governance: Private Vs. State-Owned Firms in Vietnam. Journal of Banking & Finance 36: 2935–48. [Google Scholar] [CrossRef]
  52. Nguyen, Tran Thai Ha, and Wing-Keung Wong. 2021. Do State Ownership and Business Environment Explain Corporate Cash Holdings? Empirical Evidence from an Emerging Country. Asian Academy of Management Journal of Accounting and Finance 17: 1–33. [Google Scholar] [CrossRef]
  53. Nguyen, Tran Thai Ha, Massoud Moslehpour, Thi Thuy Van Vo, and Wing-Keung Wong. 2020. State Ownership and Risk-Taking Behavior: An Empirical Approach to Get Better Profitability, Investment, and Trading Strategies for Listed Corporates in Vietnam. Economies 8: 46. [Google Scholar] [CrossRef]
  54. North, Douglass Cecil. 1990. Institutions, Institutional Change and Economic Performance. New York: Cambridge University Press. [Google Scholar]
  55. Pan, Yigang, Lefa Teng, Atipol Bhanich Supapol, Xiongwen Lu, Dan Huang, and Zhennan Wang. 2014. Firms’ FDI ownership: The influence of government ownership and legislative connections. Journal of International Business Studies 45: 1029–43. [Google Scholar] [CrossRef]
  56. Peng, Mike W., Garry D. Bruton, Ciprian V. Stan, and Yuanyuan Huang. 2016. Theories of the (State-Owned) Firm. Asia Pacific Journal of Management 33: 293–317. [Google Scholar] [CrossRef]
  57. Pfeffer, Jeffrey, and Gerald R. Salancik. 1978. The External Control of Organizations: A Resource Dependence Perspective. Academy of Management Review 4: 521–32. [Google Scholar]
  58. Quyen, Phan Gia, Nguyen Tran Thai Ha, Susilo Nur Aji Cokro Darsono, and Tran Dang Thanh Minh. 2021. Income Diversification and Financial Performance: The Mediating Effect of Banks’ Size, Ownership Structure and the Financial Crisis in Vietnam. Journal of Accounting and Investment 22: 296–309. [Google Scholar] [CrossRef]
  59. Sharma, Piyush, Louis T. W. Cheng, and Tak Yan Leung. 2020. Impact of Political Connections on Chinese Export Firms’ Performance—Lessons for Other Emerging Markets. Journal of Business Research 106: 24–34. [Google Scholar] [CrossRef]
  60. Shleifer, Andrei, and Robert W. Vishny. 1998. The Grabbing Hand: Government Pathologies and Their Cures. Cambridge: Harvard University Press. [Google Scholar]
  61. Song, Zengji, Abraham Nahm, and Jun Yang. 2016. Institutional Environment, Political Connections of Partial State Ownership, and Performance. International Journal of Social Economics 43: 856–70. [Google Scholar] [CrossRef]
  62. Sun, Jide, Zhe Ji, Chen Wang, and Xincheng Wang. 2021. State ownership, institutional development, and corporate philanthropic giving: An integrated view of legitimacy–efficiency trade-offs. Economic Research-Ekonomska Istraživanja 34: 608–27. [Google Scholar] [CrossRef]
  63. Suu, Nguyen Duy, Ho Thuy Tien, and Wing-Keung Wong. 2021. The Impact of Capital Structure and Ownership on the Performance of State Enterprises after Equitization: Evidence from Vietnam. Annals of Financial Economics 16: 2150007. [Google Scholar] [CrossRef]
  64. Tee, Chwee Ming. 2018. Political Connections, Institutional Monitoring and the Cost of Debt: Evidence from Malaysian Firms. International Journal of Managerial Finance 14: 210–29. [Google Scholar] [CrossRef]
  65. Thanh, Su Dinh, Neil Hart, and Nguyen Phuc Canh. 2020. Public Spending, Public Governance and Economic Growth at the Vietnamese Provincial Level: A Disaggregate Analysis. Economic Systems 44: 100780. [Google Scholar] [CrossRef]
  66. Tihanyi, Laszlo, Ruth V. Aguilera, Pursey Heugens, Marc van Essen, Steve Sauerwald, Patricio Duran, and Roxana Turturea. 2019. State Ownership and Political Connections. Journal of Management 45: 2293–321. [Google Scholar] [CrossRef]
  67. Tran, Trung K., Minh T. Truong, Kim T. Bui, Phung D. Duong, Minh V. Huynh, and Tran T. Nguyen. 2023. Firm Risk and Tax Avoidance in Vietnam: Do Good Board Characteristics Interfere Effectively? Risks 11: 39. [Google Scholar] [CrossRef]
  68. Tran, Tuyen Quang, Anh Lan Tran, Thai Minh Pham, and Huong Van Vu. 2018. Local Governance and Occupational Choice among Young People: First Evidence from Vietnam. Children and Youth Services Review 86: 21–31. [Google Scholar] [CrossRef]
  69. Tseng, Ming-Lang, Chia-Hao Chang, Chun-Wei Lin, Tran Thai Ha Nguyen, and Ming K. Lim. 2020. Environmental responsibility drives board structure and financial and governance performance: A cause and effect model with qualitative information. Journal of Cleaner Production 258: 120668. [Google Scholar] [CrossRef]
  70. Tseng, Ming-Lang, Phan Tan, Shiou-Yun Jeng, Chun-Wei Lin, Yeneneh Negash, and Susilo Darsono. 2019. Sustainable Investment: Interrelated among Corporate Governance, Economic Performance and Market Risks Using Investor Preference Approach. Sustainability 11: 2108. [Google Scholar] [CrossRef]
  71. Tu, Wenjun, Xiaolan Zheng, Lei Li, and Zhiang Lin. 2021. Do Chinese firms benefit from government ownership following cross-border acquisitions? International Business Review 30: 101812. [Google Scholar] [CrossRef]
  72. Uddin, Md Hamid. 2016. Effect of Government Share Ownership on Corporate Risk Taking: Case of the United Arab Emirates. Research in International Business and Finance 36: 322–39. [Google Scholar] [CrossRef]
  73. Vo, Xuan Vinh. 2018. Do Firms with State Ownership in Transitional Economies Take More Risk? Evidence from Vietnam. Research in International Business and Finance 46: 251–56. [Google Scholar] [CrossRef]
  74. Vu, Kelly Anh, and Thanyawee Pratoomsuwan. 2019. Board Characteristics, State Ownership and Firm Performance: Evidence from Vietnam. International Journal of Managerial and Financial Accounting 11: 167–86. [Google Scholar] [CrossRef]
  75. Wehrheim, David, Hakkı Doğan Dalay, Andrea Fosfuri, and Christian Helmers. 2020. How Mixed Ownership Affects Decision Making in Turbulent Times: Evidence from the Digital Revolution in Telecommunications. Journal of Corporate Finance 64: 101626. [Google Scholar] [CrossRef]
  76. Wei, Gang. 2007. Ownership Structure, Corporate Governance and Company Performance in China. Asia Pacific Business Review 13: 519–45. [Google Scholar] [CrossRef]
  77. Yu, Mei. 2013. State Ownership and Firm Performance: Empirical Evidence from Chinese Listed Companies. China Journal of Accounting Research 6: 75–87. [Google Scholar] [CrossRef]
  78. Zhou, Wubiao. 2017. Institutional Environment, Public-Private Hybrid Forms, and Entrepreneurial Reinvestment in a Transition Economy. Journal of Business Venturing 32: 197–214. [Google Scholar] [CrossRef]
Figure 1. Analytical framework among state ownership, corporate performance, and the local business environment.
Figure 1. Analytical framework among state ownership, corporate performance, and the local business environment.
Jrfm 16 00499 g001
Table 1. Descriptive statistics.
Table 1. Descriptive statistics.
VariableObservationsMeanStd. Dev.MinMax
ROA43080.0600.074−0.6460.784
ROE43080.1110.158−3.6740.982
SOE43080.2350.2410.0000.844
PCI43080.6230.0410.4930.751
SIZE430827.2941.58423.33033.691
AGE43088.7593.8381.00017.000
PPE43080.1890.1910.0000.962
LEV43080.2450.2080.0001.476
NCFOTA43080.0560.134−0.6961.903
Source: HOSE and HNX.
Table 2. State ownership and corporate financial performance.
Table 2. State ownership and corporate financial performance.
CFPCFP (ROA)CFP (ROE)
Lag of CFP0.337 ***0.085 ***
(70.70)(52.51)
SOE0.010 ***0.047 ***
(3.03)(8.18)
SIZE0.008 ***0.030 ***
(10.72)(24.41)
AGE−0.001 ***−0.002 ***
(−5.59)(−11.66)
PPE0.015 **0.079 ***
(2.00)(9.47)
LEV−0.025 ***−0.086 ***
(−8.21)(−18.47)
NCFOTA0.038 ***0.147 ***
(17.94)(25.47)
Const.−0.181 ***−0.713 ***
(−8.73)(−21.43)
Group359359
Obs39493949
Number of IVs252281
Hansen test (p-value)0.2500.179
AR (1) (p-value)0.0000.019
AR (2) (p-value)0.1950.856
Two-step GMM, ( ) is z-statistic. ** and *** are significances at 5%, respectively and 1%.
Table 3. Non-linear effects between state ownership and corporate financial performance.
Table 3. Non-linear effects between state ownership and corporate financial performance.
CFPCFP (ROA)CFP (ROE)
Lag of CFP0.335 ***0.077 ***
(70.86)(44.97)
SOE0.072 ***0.408 ***
(4.72)(13.63)
SOE2−0.110 ***−0.632 ***
(−4.00)(−12.50)
SIZE0.009 ***0.034 ***
(12.21)(25.86)
AGE−0.001 ***−0.002 ***
(−4.02)(−7.60)
PPE0.138 *0.075 ***
(1.83)(8.36)
LEV−0.028 ***−0.099 ***
(−9.01)(−19.58)
NCFOTA0.037 ***0.111 ***
(16.79)(18.90)
Const.−0.206 ***−0.846 ***
(−10.24)(−22.87)
Group359359
Obs39493949
Number of IVs252281
Hansen test (p-value)0.2770.163
AR (1) (p-value)0.0000.021
AR (2) (p-value)0.2000.895
Threshold32.7232.27
Two-step GMM, ( ) is z-statistic. * and *** are significances at 10% and 1%, respectively.
Table 4. State ownership and corporate financial performance.
Table 4. State ownership and corporate financial performance.
CFPCFP (ROA)CFP (ROE)
Lag of CFP0.349 ***0.083 ***
(221.80)(78.79)
PCI0.021 ***0.245 ***
(4.54)(16.66)
SOE∗PCI0.020 ***0.071 ***
(10.35)(13.45)
SIZE0.001 ***0.031 ***
(28.81)(40.73)
AGE−0.001 ***−0.004
(−10.09)(−25.97)
PPE0.004 *0.072
(1.83)(14.27)
LEV−0.029 ***−0.098 ***
(−27.65)(−35.85)
NCFOTA0.045 ***0.158 ***
(44.05)(41.58)
Const.−0.186 ***−0.870 ***
(−23.93)(−40.19)
Group359359
Obs39493949
Number of IVs336326
Hansen test0.3850.241
AR (1)0.0000.020
AR (2)0.1830.858
Two-step GMM, ( ) is z-statistic. * and *** are significances at 10% and 1%, respectively.
Disclaimer/Publisher’s Note: The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of MDPI and/or the editor(s). MDPI and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.

Share and Cite

MDPI and ACS Style

Nguyen, T.T.H.; Darsono, S.N.A.C.; Phan, G.Q.; Pham, T.H.V.; Bach Thi, H.; Johari, S.M. The Nexus between Corporate Performance and State Ownership in Vietnam: Evidence of State Ownership’s Inverted U-Shape and Provincial Business Environment Influences. J. Risk Financial Manag. 2023, 16, 499. https://doi.org/10.3390/jrfm16120499

AMA Style

Nguyen TTH, Darsono SNAC, Phan GQ, Pham THV, Bach Thi H, Johari SM. The Nexus between Corporate Performance and State Ownership in Vietnam: Evidence of State Ownership’s Inverted U-Shape and Provincial Business Environment Influences. Journal of Risk and Financial Management. 2023; 16(12):499. https://doi.org/10.3390/jrfm16120499

Chicago/Turabian Style

Nguyen, Tran Thai Ha, Susilo Nur Aji Cokro Darsono, Gia Quyen Phan, Thi Hong Van Pham, Huyen Bach Thi, and Sobar M. Johari. 2023. "The Nexus between Corporate Performance and State Ownership in Vietnam: Evidence of State Ownership’s Inverted U-Shape and Provincial Business Environment Influences" Journal of Risk and Financial Management 16, no. 12: 499. https://doi.org/10.3390/jrfm16120499

APA Style

Nguyen, T. T. H., Darsono, S. N. A. C., Phan, G. Q., Pham, T. H. V., Bach Thi, H., & Johari, S. M. (2023). The Nexus between Corporate Performance and State Ownership in Vietnam: Evidence of State Ownership’s Inverted U-Shape and Provincial Business Environment Influences. Journal of Risk and Financial Management, 16(12), 499. https://doi.org/10.3390/jrfm16120499

Article Metrics

Back to TopTop