State Ownership and Risk-Taking Behavior: An Empirical Approach to Get Better Profitability, Investment, and Trading Strategies for Listed Corporates in Vietnam
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Department of Business Administration, Asia University, Taichung 41354, Taiwan
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Faculty of Finance and Accounting, Saigon University, Ho Chi Minh City 700000, Vietnam
3
Department of Management, California State University, San Bernardino, CA 92407, USA
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Department of Finance, Fintech Center, and Big Data Research Center, Asia University, Taichung 41354, Taiwan
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Department of Medical Research, China Medical University Hospital, Taichung City 404, Taiwan
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Department of Economics and Finance, The Hang Seng University of Hong Kong, Hong Kong
*
Author to whom correspondence should be addressed.
Economies 2020, 8(2), 46; https://doi.org/10.3390/economies8020046
Received: 29 April 2020 / Revised: 17 May 2020 / Accepted: 28 May 2020 / Published: 3 June 2020
(This article belongs to the Special Issue Asset Pricing, Investment, and Trading Strategies)
Corporate risk-taking behavior and investment is a crucial factor in order to seek higher profits and a better trading strategy. Competitive advantage and innovation, while maintaining profitability and state ownership, are considered as crucial resources. Furthermore, it is essential to connect the short-term and long-term business and investment objectives plus stakeholder’s expectations to corporate sustainability and development. This connection is especially important in the context of transforming economies and getting better trading strategies. This study estimates the relationship between state ownership, profitability, corporate risk-taking behavior, and investment in Vietnam by using Generalized Method of Moments (GMM) methods. Using the data of 501 listed non-financial corporates during the period 2007–2015 from Ho Chi Minh City and Hanoi Stock Exchanges, we find that profitability is determined as a factor to reduce corporate risk-taking acceptance caused by the chances of entrenchment. Meanwhile, the impact of state ownership on the risk appetite of corporate has a non-linear effect. In particular, state ownership reduces corporate risk-taking behavior and investment but yet increases the risk-taking behavior and investment when the state ownership rate exceeds a threshold. One the one hand, this implies that the low level of state ownership not only prevents risk-taking behavior and investment but also results in more severe agency problems, causing unsustainability due to the imbalance of interests among various stakeholders. On the other hand, a dominant role of state ownership concentration causes a boost in corporate risk-taking decision-making in investment and trading strategy, leveraging the connection of significant external resources to deal with uncertain problems. The study contributes to existing theories of corporate governance in the context of a socialist-oriented market.
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Keywords:
market efficiency; state ownership; risk-taking behavior; investment; Vietnam; GMM; nonlinearity; trading strategy
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited
MDPI and ACS Style
Nguyen, T.T.H.; Moslehpour, M.; Vo, T.T.V.; Wong, W.-K. State Ownership and Risk-Taking Behavior: An Empirical Approach to Get Better Profitability, Investment, and Trading Strategies for Listed Corporates in Vietnam. Economies 2020, 8, 46.
AMA Style
Nguyen TTH, Moslehpour M, Vo TTV, Wong W-K. State Ownership and Risk-Taking Behavior: An Empirical Approach to Get Better Profitability, Investment, and Trading Strategies for Listed Corporates in Vietnam. Economies. 2020; 8(2):46.
Chicago/Turabian StyleNguyen, Tran T.H.; Moslehpour, Massoud; Vo, Thi T.V.; Wong, Wing-Keung. 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, no. 2: 46.
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