ASSESSMENT OF CORPORATE GOVERNANCE IN VIETNAM STATE-OWNED ENTERPRISES

The state-owned-enterprises (SOEs) sector is one of pillars in Vietnamese economy: 28% of GDP, 30% of the state budget, 17% bank credit
Active participation from the private sector with SOEs reform (improving governance) are keys for Vietnam economic growth.
Overall corporate governance of listed VSOE is a missing piece of information
A comprehensive Corporate Governance Index (CGI) can: judge how corporate governance reforms are working; evaluate the risk; rank VSOE and use for research purposes

1. INTERNATIONAL CONFERENCE  “Sustainable Economic Development and Business Management in the Context of Globalisation ”, (SEDBM-5) ASSESSMENT OF CORPORATE GOVERNANCE IN VIETNAM STATE-OWNED ENTERPRISES Ho Chi Minh National Academy of Politics Hanoi, 2022 Le Quang Minh; Le Thach Anh ; Dinh Trung Son 1

2. Content Introduction Literature review Methodology and data collection Research results Limitation and further research Discussion and conclusion 2

3. 1. Introduction The state-owned-enterprises ( SOEs) sector is one of pillars in Vietnamese economy: 28% of GDP, 30% of the state budget, 17% bank credit Active participation from the private sector with SOEs reform (improving governance) are keys for Vietnam economic growth. Overall corporate governance of listed VSOE is a missing piece of information A comprehensive Corporate Governance Index (CGI) can: judge how corporate governance reforms are working; evaluate the risk; rank VSOE and use for research purposes 3

4. 1. Introduction (Cont.) This paper evaluates the corporate governance of VSOE (listed in HOSE and HNX) based on CGI and then proposes possible solutions to foster corporate governance practices CGI for 50 listed VSOE for the period 2016 – 2020 using 4 crucial corporate governance mechanisms: Shareholder rights and equal treatment among shareholders; Role of stakeholders related to shareholders; Disclosure and Transparency; Responsibilities of the Board of Directors 4

5. 2. Literature review L iterature on constructing a comprehensive Corporate Governance Index for listed VSOE is still limited: The Corporate Governance Report on Standards and Codes (ROSC) for Vietnam (WB, 2013) The ASEAN Corporate Governance Scorecard (ACGS) – Vietnam Country Report 5-Year Assessment 2012 – 2017 (SSC&IFC, 2017) 5

6. 3. Methodology and data collection The CGI built based on the reference to the Vietnam Corporate Governance Code of best practices, OECD Principles of Corporate Governance; OECD Guidelines on Corporate Governance in SOEs, and the 2020 Corporate Governance Evaluation Criteria of the HOSE. The CGI of this study is built by self-scoring based on publicly available information about enterprises CGI is composed of four sub-indices, which in turn include 35 elements. V ariables are coded as “1” if a firm has the attribute and “0” otherwise Sub-index score was calculated by averaging score of 50 firms, then sum-up the four sub-indices values to arrive at the overall CGI. 6

7. 3. Methodology and data collection(Cont.) Components Number of questions Shareholder rights and equal treatment among shareholders 8 B. Role of stakeholders related to shareholders 8 C. Disclosure and Transparency 10 D. Responsibilities of the Board of Directors 9 Total 35 Table 1. Distribution of questions about the contents of state-owned enterprise governance 7

8. 3. Methodology and data collection(Cont.) B ased on the list of 733 public companies listed as of December 31, 2020, shortened it to 140 state-owned enterprises listed on the stock market, then: (1) Enterprises operating in the banking and insurance sectors were excluded from the sample (2) Enterprises in which the state does not hold 50% of the capital during the 2016-2020 period . (3) Enterprises are not listed on the stock market continuously during the period 2016-2020 50 largest listed SOEs by market capitalization, account for 33% of the market value of state-owned enterprises 8

9. 4. Researching results Year mean sd min max 2016 18.08 3.193 11 30 2017 18.44 3.394 12 29 2018 18.92 3.343 14 29 2019 19.44 3.447 14 30 2020 19.96 3.774 13 29 Table 2. Descriptive statistics of CGI scores 9

10. 4. Researching results (Cont.) Figure 1. Average governance score of each section for the period A. Shareholder rights and equal treatment among shareholders B. Shareholder rights and equal treatment among shareholders C. Disclosure and Transparency D. Responsibilities of the Board of Directors 10

11. 5. Limitations and further research An important limitation of this research is that the data is collected from annual reports and not from questionnaires collected directly from enterprises Another limitation of the built-in corporate governance index is the use of equal scores for questions Final, the research sample is comprised of the 50 largest SOEs listed in the HOSE and HNX, thus the results might not be generalized to other smaller firms 11

12. 5. Limitations and further research (Cont.) Further research may be designed to collect data directly from enterprises via surveys The sample might be expanded to capture a more comprehensive picture of SOE governance in Vietnam Final, future studies can focus on identifying the factors that have an impact on CG quality and exploring whether or not an increase in CG quality may lead to better financial performance. 12

13. 6. Conclusion and discussion Although the system of legal documents has relatively fully regulated the basic requirements and principles of SOE governance according to international practices, improving the quality of governance is still difficult. I n recent years, corporate governance has received more attention from politicians and legislators. The legal framework, such as Enterprises Law 2020, on corporate governance, is revised according to international standards . T he corporate governance indicators can suggest measures that SOEs need to take to improve governance quality in the coming years T he governance self-scoring also provides deeper insight into the corporate governance practices of SOEs in Vietnam. The practice of corporate governance in Vietnam may take the form of countermeasures 13

14. Thank you for your attention! 14