Tóm tắt Luận án Research on characteristics of the Board of Directors affecting the Financial Results of family businesses in Vietnam

ch gaps On a theoretical basis, practical studies have been widely used to build access frameworks develop research as well as to develop research hypotheses to predict the relationship between Corporate Governance and performance of the business. In the world, there are many researches on BOD characteristics in joint stock companies in general and family businesses in particular. The majority of research focused on research subjects is joint stock companies. A number of trends and research results can be summarized as: Firstly, researching on the BOD size and the Financial Results. In terms of this research, there are always conflicting results and specially focus on comparing the differences between family businesses and non-family businesses. Secondly, researching on leadership duality (CEO and Chairman of the BOD) and the relationship with the Financial Results. Thirdly, researching on the independence of members of the BOD Fourthly, researching on the diversity of the BOD (gender, age, capacity, experience, qualifications ...) and Financial Results of the company. For family businesses, in addition to some similar research results of joint stock companies, the directions showing the differences in the research on the BOD's characteristics of the family business are: Fifthly, primarily researching on analyzing the relationship between family ownership and the efficiency of family businesses. Sixthly, researching on the relationship between the structure of the B Directors and the performance of family businesses in Vietnam. Seventhly, researching on the processes or intergenerational transfers in Vietnamese family businesses. 2.3.3. Research Gaps Firstly, there are many theoretical and practical research methods for family business research objects in the world. However, the biggest argument in the family business field is how to define a family business to compare with a none- family business. Each definition has different criterions will affect to research results. Therefore, thesis will provide general definition which is suitable with practical Vietnamese situation and experimental research methods for Financial Results in family business. If one definition of family research is not clear and lack of essential conditions in variable number research, all hypotheses will not have science meanings. Secondly, most research about Corporate Governance and BOD characteristics in Vietnam focus on listed joint stock company. BOD characteristics research in family business is the foundation of finding basic specipalities, differences between BOD characteristics in Vietnamese family business and non-family business. Thirdly, most family business in Vietnam is SMEs or unlisted company. Therefore, listed family company research is essential for effective Corporate Governance and orientation for other company and management agency to support and promote family business development in Vietnam. Experimental research results about the effects of BOD characteristics to Financial Resutlts will not be the same because of different time, space and research methods. It is still necessary to provide more practical proof to enhance Financial Results and promote effective performances of BOD in family business. CHAPTER 3 HYPOTHESES AND RESEARCH METHODS 3.1. Research hypotheses 3.1.1. BOD size There are two research methods that distinguish different opinions about the relationship between BOD and Financial Results. The first opinion is BOD size has a reverse relationship with Financial Results. A large size of BOD will be a determinant which decrese Financial Results of that company (According to Dalton and Partners, 1992; Lipton and Lorsch, 1992; Yermach, 1996). According to research of Mohammad Badrul Muttakin (2010), A large size of BOD combines with family control will reduce the effective performance of the company. A big BOD has to face with arise problems of representative costs (Jensen and Meckling, 1976). On the other hand, a big BOD will create the dependence, subjectivity in effective management control. Information communication will be also complex and all decisions will be prolonged. They will make Financial Results decline. Some research of Mishra and partners (2011), Ibrahim and partners (2011) show the smaller size of BOD will create better management for company which have family controls. This opinion is same compare with some research results in Vietnam with general listed company. It is a proof for reverse relationship between BOD size and performance results of the company (Vo Hong Duc and Phan Bui Gia Thuy, 2013; Truong and partners, 1998). It might be understood by differences in management style of Vietnam which is effected by “Power distance”. When BOD size is bigger, the authority and teamwork of each personal in BOD will be decreased. The second opinion shows the same dimensional relationship between BOD size and Financial Results of the company. The bigger size of BOD, the better Financial Results (Pfeffer, 1972; Klein, 1998; Coles and partners, 2008). Big size of BOD will create the better support and advisory for the Board of Managers (Klein, 1998). Moreover, an BOD with a big size will collect information easier to make a decision, which will affect positively to Financial results (Dalton and partners, 1999). Some researches about family business show the big size of BOD combines with family control will increase efficiency because they have experiences, expertise knowledge and social relationship will empower for family business (Astranchan, 2002; Setia-Atmajia, 2009). In the first stage of building a company, all decisions mostly are made by the founders and family members so a small size BOD will be more effective. However, in other next stages, when the size of the company is bigger and the performance is more complex, a bigger size of BOD will adapt more easily for business fluctuations. Therefore, it will be a difference between most of research in Vietnam about BOD size with the object is all listed joint stock company. Thesis supports the opinion of the positive effect of BOD size to Financial Results of family company based on the family business features, benefits of directors and dedication abilities to company power. The hypothesis is set: H1: BOD size has the same dimensional relationship with Financial Results of family business. 3.1.2. Leadership duality Leadership duality and concurrent position of BOD and Directors researches show different results even contradictory results. According to Dahya and partners (2009), shareholders and investors think that Chairman of BOD should not concurrently hold the position of General Director or Management Director because this concurrent position will lead to personal assets appropriation affecting shareholders’ benefits. Therefore, the separation of BOD Chairman and CEO of company will contribute to the protection for the minority shareholders from the acquisition of BOD whose members is family members. In Europe, there is up to 84% of companies in Finland, Germany, Netherlands, Sweden and United Kingdom have the separation between the function of Chairman BOD and CEO (Heidrick and Struggles, 2009). According to Fama and Jenson (1983) opinion, the concurrent position will make BOD lose their management control ability, which lead to the increase of representation costs. Researches supported this opinion can be listed: Bolton research (2006), Vo Duc and Phan Thuy (2013), Le Quang Canh and Nguyen Vu Hung (2015). However, there are still some researches proved the same dimensional relationship between the concurrent position and financial results of business such as research of Hermalin and Weibacj (2003), Bhagat and Black (2002). Some researches in Vietnam showed that the separation between Chairman of BOD position and CEO will ensure the control, reduce performance costs and enhance management ability, which affect positively to financial results (Dao Thi Thien Trang and partners, 2014; Vo Hong Duc and Phan Bui Gia Thuy (2013a). The concurrent position help BOD can control the Board of Director independently and become the real representative for all shareholders and the business owner. In family business, all family members have rights to control BOD and hold important positions such as Management Director (Porta and partners, 1997). Therefore, the leadership duality is more popular in companies which have the control from family than non-family companies (Lam and Lee, 2008). The leadership duality in family business management will provide more opportunities for managers and taking over the ownership of minority shareholders, which affect negatively to financial results. On the other hand, this concurrent position will create a powerful basis and strong control ability, which against the power of outside team and protect minority shareholders from the acquisition of family business. Therefore, this research will support for the opinion of the leadership duality is only good for company without family control and has reverse effect to financial results of family business. The hypothesis will be: H2: There is a reverse relationship between the concurrent position of BOD Chairman and CEO and Financial Results of family business. 3.1.3. The proportion of independent BOD members In family business, members of BOD actually are family members. The independent members take an important role when the company develop to a complex size. According to a research in US, there are more than 80 companies having up to 3rd generation family ownership, the appearance of one BOD member without family controls will be important element to the existence of these companies (Fred and Alden, 1998). In Corporate Governance point of view, the representative theory and other theories show the role of independent BOD members. These members will contain the family control in development orientation of the company. These members will not only utilize the knowledge, skills, experiences and professional abilities which family members are lack of but also increase the discipline of BOD meetings, focus on the business strategies without problems of family. The independent members also take the medium role when family members have opposite opinion in business matters. Some experimental researches about the relationship between the proportion of independent BOD members and financial results have different conclusions. According to Anderson and Reeb (2004), Daily and partners (2003), the independent members have positive affect to financial results of family business, their appearance in BOD can reduce arguments of management shareholders and minority shareholders, they can prevent family members from dispossessing assets through excessive compensation, special dividends or unwarranted perks. However, other researches show that the independence in BOD will affect negatively to company performance (Setia-Atmaja and partners, 2009; Mohammad Mittakin and partners, 2010). Research of Chen and partners (2005), Ibrahim and partners (2011) have opposite opinion, there isn’t any effect to financial results from the proportion of independent members in BOD. They argue that independent members are nominally not really independent, not enough to perform the function of managing, supervising and protecting minority shareholders before family members. Therefore, the studies show different results on the relationship between the proportion of independent board members and business results due to differences in space, time and reliability of data used. However, from the perspective of representative theory and other management theories implies that independent BOD members will positively impact on the results of joint stock companies and listed companies in general. Because of the above foundations, the research hypothesis is set: H3: The proportion of independent BOD members has positive impact on financial results of the family business. 3.1.4. The diversity in BOD members There is no unified definition of diversity of the BOD but it is often can be understood from a demographic view. More simply, the diversity of BOD is that there are many different people with many different demographic factors within BOD of the company such as age, race, gender, education and profession standards, independent members, foreign members or experience and attitude ... The diversity of BOD is often approached on 2 theoretical points of view: (i) The theory of representatives; (ii) Resource dependency theory. According to the theory of representatives, BOD is set up to minimize the "representative costs" through the structure and composition of BOD. Thus, the diversity in the members of the BOD will contribute to reduce representative costs. From the perspective of resource dependence theory, “BOD has a role to access the necessary resource for the success of the company, therefore it is essential to utilize the resources of intelligence, creativity as well as the relationship of those who can provide the resources needed for the existence and prosperity of a company.” Therefore, the diversity of BOD will bring some benefits to family companies: (i) Firstly, creativity and different perspectives create a larger number of opinion and solutions for any problems (Watson, Kumar and Michaelse, 1993). This diversity will also limit the ability of the group thinking phenomenon, members can contribute information from a variety of sources. (ii) Secondly, accessing to resources and connections. By selecting members of BOD with different characteristics, the company can easily access to different resources due to the support from a diverse range of industries, experience, and qualifications. (iii) Thirdly, public relations and investor’s relations. Some family businesses may benefit more from complying with social expectations than non-family businesses do. In the world, many countries' legal documents require an BOD of joint stock companies to have a diverse structure, gender, age and ethnic group with the purpose of creating a diverse voice, diverse experience, capable of bringing resources and relationships that can benefit the company. However, there are also potential costs surrounding the diversity of the BOD. According to some research documents on social psychology, they show that different demographic limits communication between small groups, creates conflicts and reduces attractiveness among individuals. Therefore, the diversity in BOD can lead to conflicts and lack of cooperation among members of BOD. Some conclusions from the research results about the diversity in the composition of the Administration affect financial results: H4a: The proportion of women in the Board of Directors has a positive impact on business results of family companies. H4b: Educational level is positively correlated with business results of family companies. H4c: The age of the Board members has the same dimensional relationship with the family business results H4d: There is a negative correlation between the proportion of foreign members in BOD and the business results of family companies. 3.1.5. Ownership rate of family members on BOD The research of the relationship between family ownership and company performance is based on the representative theory (Jensen and Meckling, 1976), "There is a conflict of benefits among person who authorized, which leads to the authorizing person has to face the acts of opportunity and moral risks of the representative”. Representation and control problems in family companies is reflected in the number of family members and the ownership ratio of board members and related individuals. The research results will vary depending on the context and time of the research. However, most of the studies focused on the impact of family ownership on the financial results and the endogenous relationship between these two factors. One of the characteristics of a family company is the dominance shown by the high concentration of ownership of family members in BOD. The concentration of ownership will empower family members to help them achieve their targets better than the minority shareholders. Therefore, the control of family can minimize or eliminate representative issues stemming from conflicts of shareholders and managers that help proactively control the company's operations, positively affecting the financial results (Maury, 2006). However, there are also opinions that family ownership reduces the performance of the company due to the family nature has conservative mind, arbitrary control that harms the benefits of minority shareholders. and company benefits. Research hypothesis of the thesis: H5: Ownership of family members in BOD has a positive relationship with the family business results. 3.1.6. The Proportion of family members in BOD The percentage of family members in BOD of family companies is determined by the number of family members in BOD among the total family members. According to some studies, when the number of family members in the Board accounts for a half of the seats in BOD, that enterprise has family ownership (Jonchi Shyu, 2011). In addition, even though the family has only one member of BOD, their ownership rate and related people accounting for a large proportion they are also considered to be dominant in making decisions. For family companies, due to the “Familiess” feature, the participation rate in terms of the number of family members in BOD has directive feature in reducing management control and especially greatly influencing the making strategic decisions affecting the company's financial results. Thus, this relationship is usually linear relations in the positive direction H6: The number of family members in BOD has a positive relationship with Vietnamese family business results. 3.2. Research methods 3.2.1. Qualitative research method The author uses the desk research method to find a definition of family company in accordance with the research direction of the thesis, the author has synthesized practical studies in many regions and countries in the world especially in Asian countries, combined with the author's review summarized, the author systematized into 6 approaches and selected the approach followed experimental research to determine the criteria of a family company. Besides, the author also uses professional solution method to perform 2 phases before and after having the results of the research to reinforce and support the explanation of research results in accordance with the reality in Vietnam. The author interviewed 10 experts including: 2 experts who are managers from the head of the department or above in the State Security Commission; 2 experts are leaders of businesses (Chairman or members of BOD, CEO or members of the Board of Managers); 2 experts who are consultants, supporters and legislators of Corporation Governance; 2 experts are researchers on the same subject in the University. Content of general interview in the appendix of the thesis. The results of the thesis and expert interview contents are the foundation for the author to make some recommendations and discussion in chapter 5. 3.2.2. Quantitative research method (i) Research model: The research model of the thesis is formed based on the basis of an overview of foreign and domestic documents combined with the identification of operating characteristics of family business to show the relationship between BOD features and financial results of family business. In order to orient the factors that belong to the characteristics of BOD which may affect the business results of the listed family business, the thesis inherited the research results from Table 1.3 summarizing the research overview in the chapter 1 with 4 groups of factors affecting business results are: (i) The size of BOD; (ii) The leadership duality; (iii) The proportion of independent BOD members; (iv) The diversity of BOD. These results are inherited from previous studies, and applied in Vietnamese conditions. Especially, the thesis has pointed out that there are 2 groups of factors that are distinct characteristics expressing the basic characteristics of family business, which help distinguish them from non-family business about characteristics of the ownership ratio of family members in BOD and the percentage of family members in BOD will also affect the company's financial results. Regarding to dependent variables, financial results are measured based on two groups: (i) Indicators reflecting accounting book value (ROA, ROE); (ii) The index reflects the market value (Tobin’Q) according to the research of author Pham Nguyen Hoang (2013). To ensure the rigor of the research model, through a preliminary discussion and consultation with a number of experts, the control variables reflect the characteristics of the company, firm size, growth rate, number year of operation, number of years of listing in stock market are added to the model. Source: Author Figure 3.1: Thesis research model (ii) Data and research sample The thesis uses secondary data, information collected from 3 types of reports: Financial statements, Annual reports and CG reports. For listed companies, the requirement to disclose information on the stock market is one of the important contents to comply with the Securities Law and Circular No. 155/2015 TT-BTC dated 06 October 10, 2015 by Ministry of Finance. The research sample of the thesis is family businesses satisfied the identification criteria and having sufficient information for research in the overall listed companies on both HNX and HOSE. The total number of listed companies as announced by the SSC accounted for to December 2017 was 728 companies, of which HNX had 384 companies and HOSE had 344 listed companies. Regarding to the enterprise structure, according to the report of the Steering committee for enterprise Innovation and Development under the Ministry of Finance evaluating the situation of restructuring, equitization, divestment, restructuring of state-owned enterprises (SOEs) and enterprise development in the first 6 months of 2018, only 150 out of about 700 SOEs enquitized listing. Thus, out of the 728 listed companies, the remaining 578 are privately owned. Regarding to the number of family businesses, the thesis has filtered out 57 companies meeting the family identification criteria according to the thesis's research. Thus, 57 family companies in the sample show that family companies account for 9.87% in the private business sector. This is a relatively small - Size of company - Growth Rate - Operating years (Age) - Listed years in stock market The size of BOD The Leadership duality The Proportion of independent members in BOD The Diversity of BOD The ownership ratio of family members and related person The proportion of family members in BOD Financial Results - ROA - ROE - TOBIN’Q percentage but suitable for studies in China - a country that has many similarities with Vietnam in culture, tradition, financial system and ownership structure. In Chinese stock market, the total number of listed companies at the end of 2017 was 3485, of which private ownership accounted for 65% that means 2265 businesses in which family companies accounted for 10% of the total private companies (DRC/ERI-OECD, 2005) On the other hand, in terms of the capitalization ratio of family businesses to the total market capitalization from 2012 - 2017, it ranges from 18-22%. Thus, with only 9.87% of the number of family businesses but accounted for 22% of the total market capitalization. This is the foundation to ensure the representation in the sample research. Regarding to the study period, research was done in the period of 2012 - 2017 to ensure the latest updates in terms of data, the companies listed before 2012 and the earlier are also removed. Thus, with 57 family companies, the data collected over 6 years (2012 - 2017) will create a well-balanced balance sheet with 342 observations. This is data that also ensures the representation relatively. (iii) Methods of data analysis The thesis uses descriptive statistical methods, correlation analysis methods, regression analysis methods with