1. OWNERSHIP STRUCTURE AND INFORMATION DISCLOSURE: AN APPROACH AT FIRM LEVEL IN VIETNAM Quach M. Hung and Pham T. B. Ngoc University of Economics HCMC Hoa Sen University SMALL TALKS BIG IDEAS – UEH April 2015 Presented at the International Conference in Finance and Economics (ICFE, Ton Duc Thang University) and Hoa Sen Research Seminar (Hoa Sen University)

2. Corporate disclosure Corporate disclosure is the communication between the firm managers, controlling owners and the outside investors about the firm performance, financial situation or potential development or even risks. (Healy and Palepu, 2001) This process could be obliged by law (through regulated financial, annual reports) or voluntary (by press release or firm online news).

3. Ownership concentration The ownership concentration is the situation when one or a few shareholders hold large percentage of stock of a firm. (Jung & Kwon, 2002) When the stock holding is equivalent to the voting right, the result is the power concentration.

4. The VNI confronted a decreasing trend from the range 950-1000 in the years 2007-2008 to be now sustainably above 500 in recent years (Bloomberg) the corporate disclosure problem – market failure: the cost for acquiring information becomes higher for the outside investor (Jiang, et al, 2011)  the investment environment is less attractive. The fund attraction progress for the capital market in order to lower the domestic cost of capital could be in vain if the corporate disclosure problem is not resolved (Jiang, et al, 2011; Lawrence, 2013).

5. Ownership concentration and corporate disclosure - WHY?

6. Emerging and transition economies are dominated by young firms which are hold mainly by entrepreneurs or the family members. Controlling owners have incentives to hide firm specific information or disclose them in a selective way in order to benefit their self-serving activities. => Hidden information could not be reflected into the stock price. When the ownership concentration rises, less amount of information are disclosed to the public.

7. Conflict between the owners and the corporate managers rises when the manager acts for his own benefit not for the owner ones. Large shareholders treat the firm as their private firm. Close supervision limits the moral hazard of the managers. The asset of the controlling owners is ties with the stock price. The outside investors could punish the hideous activities of the insiders by discounting it. => When the ownership concentration rises, more information are disclosed to the public because the interest of the owner and investors are aligned.

8. State vs. Private ownership The number of partially privatized former SOEs is dominating the Vietnamese financial market. State joint stock firm: its largest owner is related to the state. Government agency is believed not effective and possibly corrupted. Hence, their benefit from controlling cash flow, contract or corruption must be hidden from the public at all cost. Hence, the information disclosure of these firms could be low.

9. Research questions Does ownership concentration have significant influence on the corporate disclosure for the case of Vietnam? How does government ownership have impact on the corporate disclosure?

10. Ownership concentration and the information disclosure

11. Government ownership and the information disclosure

12. The main model

13. Control variables NAMEDEFINITIONMEASUREMENTARGUMENT VOLDay average trading volume The average amount of stock trading in a each trading day. High trading volume suggest for effectiveness of information capitalization in the stock price. SIZEThe size of firm Total share of the firm at the beginning of the year Large firms could influence the market and industrial index. INDSIZE The size of the industry Total SIZE of all firms in the industry Too small industry will be sensitive with the firm stock return.

14. How to measure corporate disclosure? Roll(1988)

15. Constructing the dependent variable

16. Industrial return

17. Measuring the corporate disclosure

18. Comparison progress between FE & RE models Source: Park (2011)

19. Descriptive statistics The variables data of 195 listed firms on HoSE from 2006 to 2011:

20. Figure 1: Informativeness level by year.

21. Fitted value of Corporate disclosure against Ownership concentration.

22. Fitted value of INFO against TOPHOLD of Private joint stock firms.

23. Table 2: The Impact of Ownership Concentration on Corporate Disclosure.

24. Robustness check

25. Table 3: Weighted regression by FE and RE model

26. CONCLUSION Ownership concentration favors corporate disclosure. The effect comes mainly from the private sector. With the state joint stock firm, the insignificant result could be explained that the good effect is offset by the bad side. A strong trend of enhancing of disclosure situation through time is confirmed.

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