• Title/Summary/Keyword: Ownership Concentration Degree

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The Impact of Ownership Structure on Listed Firms' Performance in Vietnam

  • VO, Dut Van;TRAN, Truc Viet Thanh;DANG, Nga Thi Phuong
    • The Journal of Asian Finance, Economics and Business
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    • v.7 no.11
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    • pp.195-204
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    • 2020
  • The aim of this study is to estimate the impact of ownership structure on the performance of listed firms in transition economy. Buiding upon agency theory, hypotheses on such relationship are proposed. A detailed panel data of 502 non-financial companies listed on Ho Chi Minh Stock Exchange and Hanoi Stock Exchange over the period from 2013 to 2018, and the system generalized method of moment estimation are employed to test the proposed hypotheses. To ensure the reliability of data, this study excludes companies that violate information disclosure regulations or that are subject to special supervision by the State Securities Commission of Vietnam. Some firms with inadequate information, firms that lack the financial data required for creating variable or firms that have inconsistent construction are also re-screened. We only collect the data of enterprises that have ownership structure of two or more components. Estimation results reveal that state ownership has an U-shaped relationship with the performance of Vietnamese listed firms, while foreign ownership and the degree of ownership concentration have an inverted U-shaped relationship with listed firms' performance. The article provides governance implications that Vietnamese listed firms should decrease state ownership and foreign ownership to improve firm performance in order to boost investors' confidence.

The Effect of Ownership Structure on Transfer Pricing Decisions: Evidence from Foreign Direct Investments in Vietnam

  • TRAN, Quoc Thinh;TRAN, Mai Uoc;LUU, Chi Danh
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.12
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    • pp.183-189
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    • 2021
  • Transfer pricing is a matter of concern for countries. It affects the interests of the parties involved in the commercial transaction. Through manipulation of prices in transactions, businesses take advantage of tax rates in a country to adjust profits for economic gain. This affects the fairness and rationality of economic transactions between related parties. The article uses a two-year time series from 2018 to 2019 of 50 foreign direct investment enterprises in Vietnam. The article uses ordinary least squares to test the hypotheses of the research model. The article uses four independent variables related to ownership structure affecting transfer pricing decisions including total ownership, organization ownership, concentration ownership, and area ownership. Research results show that two variables have a positive influence on transfer pricing decisions including total ownership and organization ownership. Organization ownership has a higher degree of influence than total ownership. To be able to control transaction activities related to transfer pricing, Vietnam's state management agencies need to pay attention to perfecting the legal framework based on supplementing and amending regulations related to transfer pricing. Legal regulations need to be regulated based on international common practices to ensure uniformity on a global scale.

The S-Shaped Relationship Between Internationalization and Performance: Empirical Evidence from Laos

  • PHAN, Tu Anh;NGUYEN, Thuy Thi Kim;PHAN, Triet Minh
    • The Journal of Asian Finance, Economics and Business
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    • v.7 no.11
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    • pp.357-366
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    • 2020
  • The purpose of this study is to investigate the impact of internationalization on the business performance of firms in Laos as a transition economy. Using a panel dataset collected by the World Bank for 285 firms during the period 2009, 2012, and 2016 in the service and manufacturing industries, the two-steps Heckman regression results found robust evidence for the fact that the S-curve tie exists between the degree of internationalization and business performance of firms in Laos while controlling other factors. Specifically, if firms have a degree of internationalization lower than 0.4374, they will suffer losses due to the high cost of preparing for phase 1 which is market penetration. Then, when the degree of internationalization continues to increase from 0.4374 to 0.9131, firms will gain benefits from internationalization (phase 2), however, these benefits will deteriorate when the degree of internationalization is greater than 0.9131 (phase 3), meaning that firms will no longer be able to exploit economies of scale or advantages in target markets, or product cycles will fall into a state of decline. Interestingly, we also found that firms with a high concentration level of ownership and internationalization activities may achieve better performance than those with a low concentration of ownership and one which carried out internationalization activities.

The Monitoring Effects of Institutions, Outside Directors, and Outside Blockholders on Manager's Decision: The Case of Antitakeover Measures Adoption (경영자의 의사결정에 있어서 기관투자가, 비상임이사, 외부 대주주의 감시효과: 반인수조치 채택사례분석)

  • Choo, Hyun-Tai
    • The Korean Journal of Financial Management
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    • v.11 no.1
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    • pp.263-284
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    • 1994
  • This study examines the monitoring effects of institutions, outside directors, and outside blockholders by seeing managers' selection of antitakeover measures. In this paper, we hypothesize that managers use antitakeover techniques to entrench themselves when they are not monitored closely. Consequently, we hypothesize that institutional ownership, outside membership on board of directors, outside directors ownership, and outside blockholder ownership are less in firms which adopt harmful antitakeover measures. This paper analyzes whether the degree of monitoring by institutions, outside directors, and outside blockholders influences managers' adoption of different types of takeover defenses. We find interesting empirical results. First, aggregate institutional ownership is positively correlated with the likelihood of antitakeover techniques adoption. This result implies that institutional investors are passive. Second, total and active blockholder owner-ship is higher at firms that do not propose any defensive tactics. passive blockholder owner-ship is highest at fair price firms but low at poison pills firms. Ownership concentration by outside investors increases monitoring and reduces agency problems. Thirid, outside board monitoring is ineffective.

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The Concentration of Economic Power in Korea (경제력집중(經濟力集中) : 기본시각(基本視角)과 정책방향(政策方向))

  • Lee, Kyu-uck
    • KDI Journal of Economic Policy
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    • v.12 no.1
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    • pp.31-68
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    • 1990
  • The concentration of economic power takes the form of one or a few firms controlling a substantial portion of the economic resources and means in a certain economic area. At the same time, to the extent that these firms are owned by a few individuals, resource allocation can be manipulated by them rather than by the impersonal market mechanism. This will impair allocative efficiency, run counter to a decentralized market system and hamper the equitable distribution of wealth. Viewed from the historical evolution of Western capitalism in general, the concentration of economic power is a paradox in that it is a product of the free market system itself. The economic principle of natural discrimination works so that a few big firms preempt scarce resources and market opportunities. Prominent historical examples include trusts in America, Konzern in Germany and Zaibatsu in Japan in the early twentieth century. In other words, the concentration of economic power is the outcome as well as the antithesis of free competition. As long as judgment of the economic system at large depends upon the value systems of individuals, therefore, the issue of how to evaluate the concentration of economic power will inevitably be tinged with ideology. We have witnessed several different approaches to this problem such as communism, fascism and revised capitalism, and the last one seems to be the only surviving alternative. The concentration of economic power in Korea can be summarily represented by the "jaebol," namely, the conglomerate business group, the majority of whose member firms are monopolistic or oligopolistic in their respective markets and are owned by particular individuals. The jaebol has many dimensions in its size, but to sketch its magnitude, the share of the jaebol in the manufacturing sector reached 37.3% in shipment and 17.6% in employment as of 1989. The concentration of economic power can be ascribed to a number of causes. In the early stages of economic development, when the market system is immature, entrepreneurship must fill the gap inherent in the market in addition to performing its customary managerial function. Entrepreneurship of this sort is a scarce resource and becomes even more valuable as the target rate of economic growth gets higher. Entrepreneurship can neither be readily obtained in the market nor exhausted despite repeated use. Because of these peculiarities, economic power is bound to be concentrated in the hands of a few entrepreneurs and their business groups. It goes without saying, however, that the issue of whether the full exercise of money-making entrepreneurship is compatible with social mores is a different matter entirely. The rapidity of the concentration of economic power can also be traced to the diversification of business groups. The transplantation of advanced technology oriented toward mass production tends to saturate the small domestic market quite early and allows a firm to expand into new markets by making use of excess capacity and of monopoly profits. One of the reasons why the jaebol issue has become so acute in Korea lies in the nature of the government-business relationship. The Korean government has set economic development as its foremost national goal and, since then, has intervened profoundly in the private sector. Since most strategic industries promoted by the government required a huge capacity in technology, capital and manpower, big firms were favored over smaller firms, and the benefits of industrial policy naturally accrued to large business groups. The concentration of economic power which occured along the way was, therefore, not necessarily a product of the market system. At the same time, the concentration of ownership in business groups has been left largely intact as they have customarily met capital requirements by means of debt. The real advantage enjoyed by large business groups lies in synergy due to multiplant and multiproduct production. Even these effects, however, cannot always be considered socially optimal, as they offer disadvantages to other independent firms-for example, by foreclosing their markets. Moreover their fictitious or artificial advantages only aggravate the popular perception that most business groups have accumulated their wealth at the expense of the general public and under the behest of the government. Since Korea stands now at the threshold of establishing a full-fledged market economy along with political democracy, the phenomenon called the concentration of economic power must be correctly understood and the roles of business groups must be accordingly redefined. In doing so, we would do better to take a closer look at Japan which has experienced a demise of family-controlled Zaibatsu and a success with business groups(Kigyoshudan) whose ownership is dispersed among many firms and ultimately among the general public. The Japanese case cannot be an ideal model, but at least it gives us a good point of departure in that the issue of ownership is at the heart of the matter. In setting the basic direction of public policy aimed at controlling the concentration of economic power, one must harmonize efficiency and equity. Firm size in itself is not a problem, if it is dictated by efficiency considerations and if the firm behaves competitively in the market. As long as entrepreneurship is required for continuous economic growth and there is a discrepancy in entrepreneurial capacity among individuals, a concentration of economic power is bound to take place to some degree. Hence, the most effective way of reducing the inefficiency of business groups may be to impose competitive pressure on their activities. Concurrently, unless the concentration of ownership in business groups is scaled down, the seed of social discontent will still remain. Nevertheless, the dispersion of ownership requires a number of preconditions and, consequently, we must make consistent, long-term efforts on many fronts. We can suggest a long list of policy measures specifically designed to control the concentration of economic power. Whatever the policy may be, however, its intended effects will not be fully realized unless business groups abide by the moral code expected of socially responsible entrepreneurs. This is especially true, since the root of the problem of the excessive concentration of economic power lies outside the issue of efficiency, in problems concerning distribution, equity, and social justice.

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