Transparency and disclosure Index (TDI) are calculated
based on three main components: the disclosure of
ownership structure and investor's rights (18 scores), the
financial disclosure (50 scores), and the disclosure of the
structure of the Company’s Administration and
Management Board (30 scores). The total score that the
company achieved on the questionnaire was 98 scores
(100%). The method of scoring questions on the set of
the transparency and disclosure criteria is as follows:
questions without disclosed information are given "0"
score; otherwise, questions with disclosed information
are given "1" score; some questions with the importance
of disclosed information is given "2" scores provided that
the information is disclosed fully and promptly (19
questions). Companies that violate disclosure on the
market as notified by the State Security Commission are
deducted 2 scores for each violation. The transparency
and disclosure index of the company is calculated as
follows
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listed
companies is decreased more and more.
- When information asymmetry is reduced among the
parties, the listed companies can reduce the cost of equity
and increase the firm performance.
2.3 PREVIOUS EMPIRICAL STUDIES
2.3.1. Studies of disclosure index in the world
The listed companies’ disclosures in the world were
showed through on the following indicators: Corporate
Governance Score (OECD, 2004); Transparency and
Disclosure Index (TDI) of Standard and Poors (Patel,
2002); Information Disclosure and Transparency
Rankings System (SFI, 2006); Governance and
Transparency Index of Singapore (2012). The above
indicators aim at the information transparency and
reducing information asymmetry between investors and
company managers.
2.3.2 Studies disclosure index in Vietnam
Le Truong Vinh and Hoang Trong (2008) were the first
pioneers to study the information transparency and
disclosure of the listed companies at HOSE. Next, Gray
Tower, Kelly Anh Vu, and Glennda Scully (2011) at
Curtin University, Australia had used the corporate
governance score set to establish the "VnDI" disclosure
10
index with 84 questions and to research on 45 listed
companies at HOSE and HNX in year 2008.
Ta Quang Binh (2012) studied the level of disclosure of
199 listed companies on VSEM in year 2009. The set of
questionaire criteria was established based on the
Enterprise Law year 2005 and Securities Law year 2006.
Hieu and Lan (2017) applied the criteria set of Tower et
al., (2011) to establishVietnam’s voluntary disclosure
index with 42 questions based on the Circular no.
52/BTC/2012 on The disclosure of the listed companies
for researching 205 listed companies on VSEM.
Truong Dong Loc and Nguyen Thi Kim Anh (2016)
developed a set of transparency and disclosure indecies
based on TDI of S&P (2002) with 53 criteria and
assessed 278 listed companies on HOSE in year 2014.
Le Thi My Hanh (2015) studied the transparency of
financial information of 178 listed companies on HOSE
in years 2011-2012. The Linker scale method has been
used to score 13 criteria on the transparency of financial
information of the listed companies.
There is afew study on the effects of disclosure index on
cost of equity, firm performance and profitability of
listed companies in VSEM.
2.3.3 Factors affecting the transparency and
disclosure of the listed companies
* Corporate governance: Cheung et al., (2007); Zhang
and Li (2008); Andrade et al., (2014) pointed out that
corporate governance characteristics are closely related to
the disclosure level. The composition of the
Administration Board has a significant influence on the
informtion transparency and disclosure of the listed
companies. On Vietnam Stock Exchange Market, Ngo
Thu Giang and Dang Anh Tuan (2013), Nguyen Thi
11
Phuong Hong, and Le Hoang Trung (2016) found a
connection between the company characteristics and the
disclosure activities of the listed companies. Disclosure is
better done at listed companies with independent
management between the Board of Directors and the
Board of Administration.
* Corporate size: Stiglbauer (2010); Dang Ngoc Hung
(2016), Nguyen Thi Phuong Hong, and Le Hoang Trung
(2016) pointed out that firm size is positively correlated
with the information transparency and disclosure of the
listed companies.
* Ownership structure: Stiglbauer (2010) also indicated a
positive correlation between ownership structure,
information transparency of corporate governance and
firm performance. The disclosure levels of the listed
companies are influenced by management ownership,
family ownership, state ownership, foreign ownership
(Fan and Wong, 2002; Eng and Mak, 2003; Cheng and
Courtenay, 2006).
* Out-side control: Many studies concluded that auditing
company had affected the level of financial disclosure of
listed companies (Dang Ngoc Hung, 2016; Nguyen Thi
Phuong Hong and Le Hoang Trung, 2016).
* Legal system: The legal system is an important cause
that influence on the quality of information transparency
and disclosure of the listed companies on VSEM
(Nguyen Thi Hai Ha, 2011). Law regulations on
disclosure are the compulsory basis that the listed
companies had to implement and comply with World
Stock Exchange Markets.
2.3.4. Impact of transparency and disclosure on the
cost of equity of the listed company
12
The effect of asymmetric information on the cost of
equity based on financial economic theory is a
relationship between yield and risk. Information
asymmetry increases investment risks; therefore,
investors require higher yields (increase cost of equity).
Barry and Brown (1985) had concluded that improving
disclosure level can reduce the cost of equity by limiting
the risk of portfolio diversification inability. Verrecchia
(1982) found that information transparency reduced the
information asymmetry level and agency cost, thereby it
decreased cost of equity as well. There are two types of
the cost of equity that are reduced due to information
transparency, including increasing market liquidity by
reducing transaction cost (Amihud and Mendelson, 1986;
Diamond and Verrechia, 1991) and reducing information
risks to investors (Coles et al., 1995). Yang and Li
(2013); Khlif et al., (2015) concluded that the disclosure
inversely affected to the cost of equity of the listed
companies.
2.3.5. Impact of information transparency and
disclosure on the performance of the listed company
Aksu and Kosedag (2005) illustrated that the listed
companies acquiring high transparency and disclosure
index often achievied highly profitable. Research by
Stiglbauer (2010) shown that the information
transparency in corporate governance had a positive
correlation with firm performance. Sharif and Lai (2015)
concluded that the disclosure was proportional to the
profit of the listed companies.
Research by Ngo Thu Giang and Dang Anh Tuan (2013);
Dinh Bao Ngoc and Nguyen Chi Cuong (2016)
concluded that information transparency and disclosure
are proportional to the profit of the listed companies in
VSEM.
13
2.4 Conclusion
First, the information transparency and disclosure of the
listed companies are strictly related when the liested
companies discloses its information on World Stock
Exchange Market and Vietnam Stock Exchange Market.
Second, the basic theories to explain the factors affecting
the information transparency and disclosure of the listed
companies, and the impact of the information
transparency and disclosure on the cost of equity and
performance are asymmetric information theory, agency
theory, and signal theory. Third, the most relevant
empirical studies and economic theories reviewed in the
dissertation provide a basis for explaining the hypotheses
set out in the following chapter.
CHAPTER 3: METHODOLOGY
3.1. DATA COLLECTION METHODS
The dissertation’s sampling method is to study all listed
companies (at least 5-year listed) on HOSE and HNX
(except UpCom). According to the collection results, 484
companies are selected with consecutive data by years
from 2014 to 2016; which includes 271 listed companies
on HOSE and 213 listed companies on HNX. There are
1452 samples being observed. Research data for analysis
are the annual report of the listed companies; annual,
semi-annual, and quarterly financial statements,
disclosure reports of the listed companies at the State
Security Commission, HOSE, and HNX and the website
of the listed companies.
3.2 SET UP CRITERIA OF INFORMATION
TRANSPARENCY AND DISCLOSURE
3.2.1 Basis for setting up criteria set for evaluating
transparency and disclosure
14
The dissertation uses the basis for setting up a set of the
disclosure indexes of the following three models: (i)
disclosure according to the Corporate Governance Score;
(ii) transparency and disclosure index according to
Standard and Poors (2002); (iii) management and
transparency index and (iv) legal framework for
disclosure of the listed company on Vietnam Stock
Exchange Market (Circular 121/2012/TT-BTC; Circular
200/2014/TT-BTC; Circular 155/2015/TT-BTC; Decree
108/2013/ND-CP; Decree no. 105/2013/ND-CP).
3.2.2 Theoritical Framework
Due to the limitation of the number of pages, the
construction of a set of the transparency and disclosure
criteria of the listed company is not presented in
summary.
Figure 3.4: Theoritical framework of the dissertation
3.3 DATA ANALYSIS
The dissertation uses descriptive statistics to describe the
governance and financial characteristics of the listed
15
companies. To determine the impact of factors on the
information transparency and disclosure and the impact
of information transparency and disclosure on cost of
equity and performance, the random effects model
(REM) and fixed effects model (FEM) are used to
estimate at models (3.4), (3.8) and (3.12) in the
dissertation. Hausman test is laterly used to find an
appropriate estimation model. However, the estimation
results from these two estimations cannot be effective
due to the endogenous phenomena in the models. Two-
stage least square method (2LSL) and Generalized
Method of Moments (GMM) are used to overcome the
endogenous phenomenon when it appears in the models.
Some tests named Sagan, Hansens’J and Wu-Hausman
were used to determine the validity of the instrument
variables and eliminate the endogeneity in the regression
models.
3.4 Experimental research model
3.4.1 Factors affecting information transparency and
disclosure of the listed companies
The dissertation develop an equation to determine effects
of the independent variables in the model 3.4, which are
the disclosure of in the past, the members of the
Administration Board, the concurrent assumption of
Administration Board’s Chairman of Administration
Board cum Director General, the number of independent
members of Board, firm size, ROA, and Tobin Q.
The variables of numbers of Directors on Board,
leverage, ownership structure, and listing place are used
as instrumental variables of the firm size variable in
model 3.4.
16
Model 3.4
itititit
ititittiit
TOBINQROAFsize
MemIndDualBSizeTDITDI
765
4321,1 .
Table 3.6: Independent variables in model 3.4
Sign Measurement method Expected
mark
TDI Transparency and disclosure index
BSize Members of the Administration
Board
+
Dual Dummy variable, is 1 if the
chairman of company cum general
director, is 0 if otherwise.
-
IndMem Independent members in Board +
FSize Firm size (logarit of total asset) +
ROA Return of Asset (time) +
TOBINQ Market value per Book value of
firm (time)
+
3.4.2 Effect of the information transparency and
disclosure on the cost of equity of the listed companies
The dissertation develop an equation to determine effect
of transparency and disclosure index on the cost of
equity; it has some variables including transparency and
disclosure index, management ownership, firm size,
leverage.
Variables, such as independent members in Board, listed
years, foreign ownership, and listing place, are used to
overcome the endogenous phenomena in the estimation
models of 2SLS and GMM in model 3.8.
Model 3.8
itititittiit LevFsizeBSizeTDICE 432,1
17
Table 3.8: The variables being used in the equation effect
of transparency and disclosure index on the cost of equity
Sign Measurement method Expected
mark
TDI Transparency and disclosure index -
Ma_owner The management ownership (%) +
FSize Firm size (logarit of total asset) -
Lev The leverage of company (time) -
3.4.3 Effect of the information transparency and
disclosure on firm performance of the listed company
The dissertation develop an equation to determine effect
of transparency and disclosure index on performance; it
has some variables including transparency and disclosure
index, members of Administration Board, duality of
Chairman of Administration Board, management
ownership, foreign ownership, leverage, auditing
company, listing place and the sector.
Model 3.12
itit
ititit
ititititit
Category
ListingAuditLevownerFo
ownerMaDualBSizeTDIFP
9
8765
4321
.
.
Table 3.10: The variables being used in the equation of
effect of transparency and disclosure index on performance
Sign Measurement method Expected
mark
TDI Transparency and disclosure index +
BSize Members of the Administration Board -
Dual Dummy variable, is 1 if the chairman
of company cum general director, is 0
if otherwise.
-
18
Sign Measurement method Expected
mark
FSize Firm size (logarit of total asset) +
Lev The leverage of company (time) -
Ma_owner The management ownership (%) +
Fo_owner The foreign’s ownership(%) +
Audit Dummy variable, is 1 if large auditing
companies (Big4), is 0 if otherwise.
+
Listing Dummy variable, is 1 if listing place
in HOSE, is 0 if otherwise.
+
Category Dummy variable, is 1 if firm’s
category in non-finace, is 0 if
otherwise.
+
CHAPTER 4: FINDINGS AND DISCUSSIONS
4.1 ESTABLISHMENT OF A SET OF CRITERIA
OF INFORMATION TRANSPARENCY AND
DISCLOSURE ON VIETNAM STOCK EXCHANGE
MARKET
4.1.1 Basis for establishing criteria of information
transparency and disclosure indecies of the
dissertation
* Circular 155/2015/TT-BTC in year 2015
The information transparency and disclosure index of the
listed company on Vietnam Stock Exchange Market is
applied under Circular 155 in Chapter 1 with Articles 3,
4, 5, 6, 7; Chapter 2 with Articles 8, 9, 10; Chapter 3 with
Articles 11, 12, 13 and Chapter 7 with Articles 26, 27,
28, 30, 31. Financial statements, accounting reports
according to Vietnamese accounting standards
(TT200/2014/BTC or TT133/2016/BTC), annual reports
19
and corporate governance reports are in compliance with
TT155/2015/BTC being used.
* Circular 121/2012/TT-BTC in year 2012
Corporate governance regulations of the listed company
in the content of Circular 121 are specified in Circular
155/2015/BTC.
* Set of the information transparency and disclosure
criteria of Standards and Poors
Transparency and disclosure Index (TDI) are classified
into three main parts: ownership structure and investor
rights, transparency in financial disclosure, the structure
of Administration and Executive Board, which has 98
questions in a questionare. The dissertation uses S&P
criteria (2002) and combines disclosure regulations from
Circular 155/BTC to develop this set of criteria.
4.1.2 The criteria of information transparency and
disclosure of the listed company on Vietnam Stock
Exchange Market
The method of assessing the amount of disclosed
information similar to the S&P method is used. The
dissertation differentiated the level of information
transparency in some questions having more detailed
information in the context.
- The contents that do not comply with the regulation of
the criteria is scored 0. Each information detail provided
on the question is scored 1.
- The evaluation criteria are designed to show
compliance with Vietnamese law and international law,
according to the practice applied for the listed company
and the voluntary disclosure characteristics.
- The answers can be found on financial statements,
annual reports, corporate governance reports, websites of
20
the listed companies, and websites of HOSE, HNX, and
State Security Commission.
Transparency and disclosure Index (TDI) are calculated
based on three main components: the disclosure of
ownership structure and investor's rights (18 scores), the
financial disclosure (50 scores), and the disclosure of the
structure of the Company’s Administration and
Management Board (30 scores). The total score that the
company achieved on the questionnaire was 98 scores
(100%). The method of scoring questions on the set of
the transparency and disclosure criteria is as follows:
questions without disclosed information are given "0"
score; otherwise, questions with disclosed information
are given "1" score; some questions with the importance
of disclosed information is given "2" scores provided that
the information is disclosed fully and promptly (19
questions). Companies that violate disclosure on the
market as notified by the State Security Commission are
deducted 2 scores for each violation. The transparency
and disclosure index of the company is calculated as
follows:
100
79
1 x
S
S
TDI
tc
i
i
j
Where:
TDIj: Transparency and disclosure index of the j
th
company
Si: Score of the surveyed i
th criterion
Stc: Total score of the set of evaluation criteria
The results in Table 4.4 showed that the transparency and
disclosure score of 484 selected companies varied from
36.7 to 79.6 scores, with an average score of 62.5 (at
average level). The biggest score of the transparency and
21
disclosure belongs to the company's financial disclosure
is 37.5 scores; the disclosure on the ownership structure
and investor's rights is lower than its required 5.9 scores;
similarly, information about the structure of Adminis-
tration Board and operational activities are lower than its
required 12 scores. The analysis results show that listed
companies have low to moderate levels of information
disclosure in all categories.
Table 4.4 : The index of information transparency and
disclosure of the listed companies in VSEM
Content Min Max Ave Mode STD
Ownership structure
and investor rights
5.1 17.3 12.5 12.2 1.6
Financial transparency
and disclosure
11.2 40.8 31.5 31.6 4.1
Board and management
structure and process 7.1 26.5 18.6 18.4 2.7
Total score 36.7 79.6 62.5 63.3 5.8
Source: The analysis results using data source by author
4.2 OVERALL INFORMATION OF THE LISTED
COMPANIES IN THE DISSERTATION
* Research samples
There are 505 listed companies in HOSE and HNX
surveyed in the dissertation. Companies lacking extreme
information and data, and the ones listed less than five
years are eliminated to ensure that the selected listed
companies have a similarity in listing time and
governance characteristics. 484 listed companies have
enough data in three consecutive years from year 2014 to
year 2016 be selected. There are 1452 observations
selected in VSEM to ensure the analysis scale of the
dissertation. The results are presented in Table 4.6.
22
Table 4.6: The number of listed companies of survey in
the dissertation
Code Sector HNX HOSE (%)
01 Financials 23 17 8,26
02 Consumer Staples 20 31 10,54
03 Real Estate 7 32 8,06
04 Industrials 99 76 36,17
05 Materials 22 45 13,84
06 Consumer Discretionary 28 30 11,98
07 Ultilities 0 18 3,72
08 Energy 3 8 2,27
09 Health Care 8 8 3,31
10 Information Technology 3 6 1,85
Total 213 271
Source: The analysis results using data source by author
* Characteristics of governance and finance corporate
Analysis of financial characteristics of the listed
companies in Table 4.8 shows that the firm size and
leverage were less volatile during that period. However,
the company's cost of equity increased after three years:
from 7.7% in year 2014 to 10.7% in year 2016. Changing
the cost of capital also has a significant affected on
company profits. The return on equity ratio decreased
from 9.2% in year 2014 to 8.3% in year 2016; similarly,
the return on assets ratio decreased from 5.2% in year
2014 to 4.9% in year 2016.
23
Table 4.8: Summary characteristics of the listed
companies in years
Variables Year Min Max Ave STD
Listing year 2014 0 14 5,3a 2,4
2015 1 15 6,3b 2,4
2016 2 16 7,3c 2,4
TDI 2014 43,9 73,5 61,4a 5,6
2015 36,7 78,6 62,9b 5,7
2016 42,9 79,6 63,3b 5,9
Firm’s size 2014 23,330 34,125 27,289 1,693
2015 23,282 34,377 27,395 1,712
2016 23,287 34,545 27,472 1,727
Leverage (time) 2014 0,015 0,967 0,498 0,232
2015 0,007 0,971 0,498 0,231
2016 0,001 0,967 0,487 0,242
Cost of equity 2014 0,000 0,100 0,077b 0,008
(time) 2015 0,054 0,069 0,062a 0,002
2016 0,000 0,327 0,107c 0,058
ROA (time) 2014 -0,365 0,386 0,052 0,071
2015 -1,587 0,784 0,054 0,109
2016 -0,418 0,374 0,049 0,075
ROE (time) 2014 -3,927 0,559 0,092 0,239
2015 -2,401 0,982 0,098 0,194
2016 -1,875 0,491 0,083 0,196
TOBIN_Q (time) 2014 0,297 6,774 1,065 0,495
2015 0,235 27,633 1,098 1,294
2016 0,195 17,687 1,126 0,949
MBR (time) 2014 0,254 14,454 1,140 1,036
2015 0,154 57,846 1,178 2,690
2016 0,098 26,709 1,185 1,487
Source: The analysis results using data source by author
24
4.3 FACTORS AFFECTING ON THE LEVEL OF
INFORMATION TRANSPARENCY AND
DISCLOSURE OF LISTED COMPANY
Measuring the effects of administrative and financial
factors on the level of information transparency and
disclosure of listed companies on VSEM, the dissertation
uses some estimation methods such as REM, FEM and
instrumental variables (2SLS and GMM). Estimated
results from the models are presented in detail in Table
4.17.
The variables: Board of Directors, Foreign ownership,
Management ownership, leverage, listing place, TDI in
the past are used as instrumental variables for firm size
variables based on pair correlation coefficients in Table
4.16.
The results of the 2SLS and GMM estimation methods
from the "model 4" are consistent with the test results.
The results of the 2SLS and GMM estimation models
show that the level of information transparency and
disclosure is influenced by factors such as TDI in the
past, numbers of independent members of Administration
Board, corporation size, ROA, firm value, and have the
same direction with the estimated results at the basic
estimation model (REM model).
The dissertation concludes: (i) the number of independent
members of Administration Board is positively correlated
with the level of information transparency and disclosure;
increasing numbers of independent members of
Administration Board will reduce information asymmetry
between managers and shareholders; (ii) firm size is
positively correlated with the information transparency
and disclosure of listed companies; (iii) firm performance
measured by the ROA ratio has a positive effect on
information transparency and disclosure. The companies
25
having high profit margins will disclose more
information, and their agents will use this for better
contracting; (iv) firm value measured by TobinQ is
positively correlated with the level of information
transparency and disclosure of listed companies; (v) the
degree of information transparency and disclosure in the
previous period is positively correlated with the
disclosure in the current.
Table 4.17: Factors affecting on the level of information
transparency and disclosure of listed companies
Variables REM FEM 2SLS GMM
constant 20,31*** 25,35 14,01*** 15,38***
(7,49) (1,06) (3,35) (3,77)
TDI t-1 0,548
*** -0,337*** 0,586*** 0,602***
(20,13) (-7,57) (18,39) (19,44)
Board’s size 0,125 0,116 0,0599 0,0441
(1,20) (0,67) (0,64) (0,47)
Duality of the -0,499 -2,149*** -0,417 -0,489
Chairman (-1,43) (-2,69) (-1,23) (-1,45)
Independent 0,358** -0,0992 0,287* 0,365**
members (2,43) (-0,26) (1,77) (2,28)
Firm’s size 0,268*** 2,147** 0,426*** 0,344**
(2,78) (2,44) (2,48) (2,06)
ROA 6,686*** 0,603 6,599*** 6,752***
(4,06) (0,27) (3,93) (4,16)
TOBIN_Q 0,140 -0,358 0,138* 0,135*
(1,00) (-0,88) (1,78) (1,79)
Observations 968 968 968 968
R2 (%) 71,07 1,7 42,27 42,42
Wald/ F test 564,8*** 9,6*** 548,5*** 599,2***
Hausman(FE/RE) 669,6
***
Wu-Hausman 1,85 ns 0,95 ns
Sagan/ Hansen’s J 7,54 * 7,54 *
26
Source: The analysis results using data source by author
Note: * Significant at the 10% level, ** significant at the 5% level, ***
significant at the 1% level. The analysis results use Hausman test to
select model REM/FEM; Sagan, Hansen’s J test to identify
instrumental variables in GMM; Wu-Hausman test to identify
endogeneity variables; the number in parentheses presents for t and
z-value in the model.
4.4 EFFECT OF INFORMATION
TRANSPARENCY AND DISCLOSURE ON THE
COST OF EQUITY OF LISTED COMPANY
The results of the 2SLS and IV-2SLS regression models
indicate that the cost of equity of listed companies is
influenced by factors such as the degree of information
transparency and disclosure, firm size, leverage and are
proportional to the estimated results in the basic
estimation model (FEM). The firm size is positively
correlated with
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