Date
2008
Dewey
Economie financière
Sujet
Corporate performance; Ownership Structure; Privatization; Transition Economies; Vietnam
JEL code
P31; L33; L32; G34; G32
Conference name
FMA European Conference Program
Conference date
06-2008
Conference city
Prague
Conference country
République tchèque
Author
Tran Thi, Que Giang
Type
Communication / Conférence
Item number of pages
37
Abstract (EN)
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.