Lv ths transparency of financial information and investors behaviors in vietnamese stock market

ACKNOWLEDGEMENTS First and foremost, I would like to thank Dr Dominic Mwenja for his valuable supports during the process of learning and completing my dissertation My greatest thanks also go to him b[.]

First and foremost, I would like to thank Dr Dominic Mwenja for his valuable supportsduring the process of learning and completing my dissertation My greatest thanks also

go to him because of his effort to organize the doctorate program and create chances for

me to access the worldwide knowledge

Secondly, my dissertation would not have been possible without the help of Dr PhamThi Nhuan Through the beginning to the end of the process of doing my research, shewas enthusiastic to encourage and provide me with precious advices I can fulfill mydissertation thanks to her advices Thank you very much!

I am truly indebted and thankful Dr Pham Hung, the director of Center for SystemDevelopment – Hanoi National University for his attempt to organize the program.Moreover, I would like to thank all of the faculties and staffs of the Center andCalifornia Miramar University, U.S as well because their knowledge and support meduring my learning process

Last but not least, it is great pleasure to thank all of my family members and my friendsfor their encouragement and inspiration given to me on my way of learning and doing

my dissertation

Table of Contents

Page

Dedication iv

Acknowledgements v

Table of Contents vi

List of Tables x

List of Figures xiii

Abstract xiv

Chapter I: Introduction ……….……… …… 1

General introduction of the research 1

Report of the issues 3

The purposes of the study 4

The research questions and hypothesis 5

Significance of the research 6

Definition of the terms 6

Scope and limitations of the study 8

Chapter II: Literature Review 9

Introduction 9

Literature review 9

Transparency and Disclosure of Financial Information 9

Financial Information Transparency 10

Requirements of Financial Information Disclosure 12

Business Administration 15

Agency theory 15

Management theory 16

Stakeholder theory 18

Corporate Social Responsibility 19

Efficient market hypothesis 20

Investor behavior 22

Reality research 23

Financial information transparency and disclosure 23

Financial information transparency 23

Requirements of financial information disclosure 26

Ownership structure 29

Business administration 30

Management model 34

Stakeholder theory 37

Corporate social responsibility 41

Efficient market hypothesis 45

Investor behavior 48

Summary and Interpretation 51

Literature review 51

Practical bases 55

Chapter III: Research Methodology 62

Introduction 62

Research structure 62

Research questions and hypotheses 62

Quantitative method 63

Independent variables 64

Semi-independent variables 65

Dependent variables 66

Processes 67

Principle of behavior 68

Tools 69

Introduction 69

Rationale of selected tool 70

Development of questionnaire 71

Questionnaire construction 73

Rate of response 74

Reliability and validity 74

General sample and sampling plan 75

Valid standards 76

System sample (probability) 77

Data collection 77

Data analysis 78

Introduction 78

Methods of Data Analysis 78

Chapter IV: Findings Of The Research 83

Introduction 83

Research Questions 83

Hypotheses 84

Descriptive features of respondents 85

Analysis of research questions 1,2,3 87

Descriptive analysis of Investors’ behavior and three independent variables 87

Correlation analysis between Investors’ behavior and three independent variables 88

Analysis of research question 4 91

The analysis of Descriptive and Independent sample t-test for Research question 4 91

ANOVA for Question 4 93

ANOVA Comparison in the Ownership Structure variable based on the age groups 93

ANOVA in financial transparency variable based on age groups 95

ANOVA in the variable of the Structure of management board based on age groups 97

ANOVA in Ownership structure based on Income groups 99

ANOVA in the Financial transparency variable based on income groups 102

ANOVA in the Structure of Management Board based on Income group 104

ANOVA analysis in the variable of investors’ behavior based on the groups of experience 107

Hypotheses 109

Multiple regression analysis to test the hypothesis 109

Estimate of the validity of the structure using factor analysis 111

Estimates of reliability using Cronbach’s Alpha coefficient 114

Chapter V: Summary, Discussion, Conclusion, Limitation And Research in the future

Research summary 116

Discussion of findings 117

Research question 1,2,3 118

Research question 4 118

Practical inference 121

Conclusion 122

Research limitations 123

Recommendation for the further research 124

References 126

Appendix 134

LIST OF TABLES

Table 4.1: The result of Frequency of Investors' Behavior, and Three

Appendicesindepenent variables (Ownership Structure, Financial Transparency, Structure of Management Board) N = 305Table 4.2: The results of the Pearson correlation coefficients among

the independent variables (Ownership Structure, Finance Transparency, Structure of Management Board) N = 305Table 4.3: The results of Pearson correlation analysis of Investors'

behaviors and Independent variables (Ownership Structure,Financial Transparency, Structure of Management Board)

N = 305Table 4.4: Results of the Means and Independent sample t-test of

Male and FemaleTable 4.5: The results of ANOVA Comparison and Post Hoc of the

considerable disparities in the Ownership structure variablebased on Age groups N = 305

Table 4.6: The results of the descriptive information of each age

group in the Ownership Structure variableTable 4.7: The results of the ANOVA and Post Hoc Comparisons

of the considerable disparities in the financial transparency variable based on age groups N = 305

Table 4.8: The results of the descriptive information of each age

group in the financial transparency variable

Table 4.9: The results of the ANOVA and Post Hoc Comparisons

of the considerable disparities in the variable of theStructure

of management board based on age groups N = 305Table 4.10: The results of the Descriptive Information of Each age

group in the variable of the Structure of Management boardTable 4.11: The results of the ANOVA and Post Hoc Comparisons

of the considerable disparities in the Ownership structure based on Income groups N = 305

Table 4.12: The results of the Descriptive information of each income

group in the Ownership Structure variableTable 4.13: Results of the ANOVA and Post Hoc Comparisons on the

Considerable disparity in Financial transparency variable based on Income groups N = 305

Table 4.14: The results of the Descriptive information of Each income

group in the Financial transparency variableTable 4.15: The results of the ANOVA and Post Hoc Comparisons

of the Considerable disparity in the variable of theStructure of Management Board based on income groups

N = 305Table 4.16: The results of the Descriptive information of Each Income

Group for the variable of the Structure of managementboard

Table 4.17: The results of ANOVA and Post Hoc comparisons of

significant differences in the variable of investors’ behavior

by the groups of experience N=305Table 4.18: Descriptive information’s results of each investment

experience group for the variable of investors’ behaviorsTable 4.19: Multiple regression analysis of the variable of investor

behaviorTable 4.20: KMO and Bartlett’s test of Distribute for investor behavior

Table 4.21: Explained total variance of initial eigenvalues about the

questionnaire designTable 4.22: Rotated component matrix

Table 4.23: Cronbach’s Alpha coefficient of the 4-component scale

of investor behavior (N= 305)

LIST OF FIGURES

AppendicesFigure 2.1: Preliminary model of variables in this research p 61

Figure 4.1: Age distribution of the samples in this study p 85

Figure 4.2: Educational level distribution of the samples in this study p 86

Figure 4.3: Income distribution of the respondents in this study p 86

Nowadays, business management is no longer a new topic all over the world.However it is necessary to research clearly about the effects of the transparency offinancial information on investors' behaviors in stock market With a large number ofaccounting frauds and misleading reports which occurred in the past six years, sinceVietnam's stock market came into being, the fidelity of financial and businessinformation becomes an increasingly important topic to investors and the public

There are a few empirical researches conducted with the aim of exploring thetransparency of financial information in the Vietnamese stock market The purpose ofthis study is to find out the relationship between the transparency of financialinformation and investors' behaviors The study examined the perceptions of investors

in Ho Chi Minh Stock Exchange (HOSE) on the variable components of the financialinformation transparency, investor demography and investors' experience as thevariables significantly explained the behaviors of investors in HOSE

This study utilized mixed methodology, used 19 closed questions, along withopen questions in the survey instrument The questionnaire, with Likert's scale from 1

to 9 points, is used to ask participants about their level of agreement or disagreement (9

= Strongly Agree, 5 = Neutral, 1 = Strongly Disagree) Collected data was analyzedusing SPSS analysis tool Five different statistical analysis tools were used in theresearch; descriptive statistics, correlation analysis, analysis to verify independentsamples, ANOVA analysis, and multivariate regression analysis

In this research, investor behaviors were measured by a tool which is aquestionnaire of investor behavior 400 respondents were involved in the process ofdata collection Using the method of system sampling, they completed thequestionnaire at a door outside the office of an insurance company The resultsindicated that ownership structure, financial transparency, and the administrativestructure are variables which significantly explained the behaviors of investors.Therefore, the improved transparency of financial information could increaseinvestment in Vietnam's stock market.

CHAPTER ONE: INTRODUCTIONChapter one introduces the financial transparency, ownership structure, board structure of management (board structure), and its impacts on the attitude and

behaviors of the investors This chapter includes: a general introduction to the

research, problem statement, research purposes, research questions and hypotheses, the importance of the study, fundamental base of the research and the scope and the boundary fixing

General introduction of the researchSome accounting scandals before renewed attention to corporate transparency.According to signaling theory, under information asymmetry, corporations with superior information transparency signal better corporate governance Prior research also indicates that corporations that have better corporate governance signal better performance (Chiang, 2005)

An example of transparency of corporate governance from India in 1996 showed that, Confederation of Indian Industry (CII), a leading industry association, took the first initiative on corporate governance by developing a code for the Indian companies This was followed by Securities and Exchange Board of India (SEBI) appointing a committee under the chairmanship of Kumaramangalam Birla to study the corporate governance measures to be implemented When India was making headway towards these reforms, the international financial scandals (Enron and WorldCom) shook the entire world community These scandals led to a considerable debate on the need for a strong corporate governance, with countries around the worlddrawing up guidelines and codes of practice to strengthen governance (Sanan & Yadav, 2011)

In nearly a decade, the transparency of corporate financial information has had

important influences on the investment strategies of investors The increasing number

of researches shows that the reliability and validity of business financial information are two main factors affecting the investment decisions of investors (Young, 2003; Beverly, 2004; Robert, et al., 2004).The recent cases such as accounting frauds, misleading financial statements and the poor business management were made public,including the financial scandals at Enron, WorldCom, Adelphia, Tyco, Global

Crossing, NiCor, Sprint, and Merck In many scandals, these above ones have made investors lose confidence in financial markets around the world (Kulzick, 2004; Jere,

et al., 2009) Since the Enron scandal, the poor corporate management due to the lack

of financial information transparency has shaken the public confidence (Young, 2003)

To understand the powerful influence of financial information transparency oninvestors' attitude, the definition of the transparency terminology is very important Florini (1998) said that transparency is the opposite of secret Secret means freely hiding some one's behaviors while transparency means freely disclosing them

Financial transparency is a type of transparency; it is typically related to financial issues, including the accuracy, completeness, radical and information update

(Vishwanath & Kaufmann, 2001) Financial transparency, captures the intensity and timeliness of financial disclosures, and their interpretation and dissemination by analysts and the media (Robert, et al., 2004) In the sensitive investment environment today, many investors focus on the importance of the information transparency in companies' strategies The lack and uncertainty of information are inherent

characteristics of finance, because the people who are involved in the capital markets participate in commercial activities of the investment and information (Adimati & Pfleiderer, 2000; Robert, et al., 2004; Jere, et al., 2009)

Ho Chi Minh Stock Exchange was founded in 2001 and came into operation

on December 10th of the same year The principal functions of HOSE include:

providing means for securities trading, creating rules of the stock market, accepting money orders and placing the list of securities in order; supervising securities

transactions, managing and reporting market information Time for securities trading

is from 8.30 am to 10.30 am, from Monday to Friday By the end of 2008, the stock market has had 697 listed companies, 114 stock brokerage companies, 47 securities dealers and Gross domestic product of stock is $423.912 million The total transactionvalue is U.S $ 723.495 million and domestic transactions account for 76% of stock exchanges HOSE is supervised by the State Securities Commission (HOSE, 2004)

Report of the issues

It seems a truism to say that during a period of increased economic

uncertainty, investors’ demand for credible information will increase However, the nature of the increased demand is layered and needs elaboration At its most basic, investors are likely to require more information about company value than they did before, and accounting disclosures should help satisfy that demand (Richard, et al., 2011)

In the last decade, the national and international markets have suffered from many financial crises The first reason for the crises of these markets is the lack of transparent financial information This has negatively affected the public's confidence toward the capitalist market (Sridharan, 2002) On the contrary, U.S Congress has begun the Enron court in January 2002 The court focused on the wrong accounting information reported by leaders of the company When the court progressed, it is expanded to include the larger scopes in terms of the independent external agencies, such as Arthur Andersen, an auditing company of Enron

Scandals like Enron's one have heavily negative impacts not only on the public's confidence, but also on the U.S stock market Kulzick (2004) reported,

"Although only a part of this was attributable to fraud, political momentum built

rapidly to install greater controls to decrease the likelihood of future corporate fraud and to increase financial transparency in the U.S financial market" (p.43).

The financial reporting and auditing scandals on both sides of the Atlantic have led to a global realisation of the importance of sound corporate governance (CG)practices in alleviating the agency problems in the corporate form of business and for efficient allocation of capital in international markets (Aksu & Kosedag, 2006)

According to Baek et al (2009), cost-effective and timely availability of information to its users is critical According to Ho et al (2008), accurate and reliable

information enables investors to make better investment decisions Disciplining measures like codes of conduct, whistle-blower policies, penalties for financial indiscipline, etc., rely on information presented in the financial statements

In Vietnam, the frauds in the stock market such as Bach Tuyet Cotton

Company's, etc had raised the concerns about the information transparency in the Vietnamese market; a young market.The low appreciation of financial information can lead to the later serious problems in the market As a result, it is more essential to research investors' perception of the information transparency. Transparent and full disclosure of information is especially vital for Vietnam where external capital is necessary to sustain the high growth rate and the biggest agency problem centres on asymmetric information and expropriation by majority shareholders (Truong, 2005)

The purposes of the studyThe effects of the financial information transparency on investors' confidence

in the global market are chosen for this part because of unprecedented rate of

accounting frauds and misleading reports which have dominated news bulletins since

2000 The problems at Enron, WorldCom, Adelphia, Tyco, and Sunbeam are the dailynews, as the rapid collapse of Arthur Anderson A report issued by the National audit agency in October 2002 suggested that every ten listed companies, one informed its

interest within five years (cited in Atkin Company, 1999).

The objectives of financial information transparency laws would create the supervisory frameworks for the accounting practices They were made to improve the investors' confidence in capital financial market The purposes of this study were to examine the relationship between financial information transparency and investors' attitudes; test the theory of corporate management, business operations, trading behavior of investors and decision-making process of investors, which was created to enhance investors' confidence in Vietnam financial market and identify areas

requiring future researches

The research questions and hypothesisThe purpose of this study was to examine the main factors (ownership

structure, board structure, and financial transparency) which could explain the effects

of the financial information transparency on the investors' attitude in Vietnamese companies listed in Ho Chi Minh City stock market The findings of this study can have an important contribution to future plans about the investors' attitude because of its deep analysis on the inherent characteristics in the investors' attitude

This study investigated the attitudes and perception of investors about the financial information transparency In particular, the researcher tried to identify the effects of certain independent variables on a single dependent variable The main independent variable which was used in the research is the financial information transparency The dependent variable is the attitude of investors The main questions raised in this study is that: how can the financial information transparency convince investors to invest and how often in the stock market?

The research questions and hypotheses of this study namely:

Research questions and hypothesis

RQ1: Is there any relationship between the perception of HOSE investors

about transparency level of ownership structure and investors' attitudes in Vietnam's stock market?

H1: There is the existing positive relationship between the perception of

HOSE investors about transparency level of ownership structure and investors'

attitudes in Vietnam's stock market

RQ2: Is there any relationship between the perception of HOSE investors

about financial transparency level and investors' attitudes in Vietnam's stock market?

H2: There is the exsiting positive relationship between the perception of

HOSE investors about financial transparency level and investors' attitudes in

Vietnam's stock market

RQ3: Is there any relationship between the perception of HOSE investors

about transparency level of board structure and investors' attitudes in Vietnam's stock market?

H3: There is the existing relationship between the perception of HOSE

investors about transparency level of board structure and investors' attitudes in

Vietnam's stock market

RQ4: Is there any difference in the attitudes of HOSE investors with different

levels of demographic and experience?

H4: There is the existing difference in the attitudes of HOSE investors with

different levels of demographic and experience

Significance of the researchThe research examined the importance of the role of investor protection behaviors issued by the Government for the ethics of corporate leaders as well as the relationship between the financial information transparency and the confidence level

of investors This study aims at investigating the influence of financial information transparency on Vietnamese investors; and offering some suggestions for further

researches on the effects of financial information transparency and the improvement

of enterprises' management on the confidence of investors

Definition of the termsThe theoretical background of this study was based on the theoretical basis of the conducted researches The basis includes findings of relevant researches in the area of financial information transparency, structural wonership transparency,

business management (board structure) and investors' attitude

Transparency: Transparency as a strategic communications imperative has a

huge role to play in ensuring that all stakeholders understand the impact and value of those intangibles Effective communication has become almost as essential as good performance to attracting and retaining investors, employees, and customers, as well

as in achieving full valuation of a company's assets (Binneman, 2011)

Financial information transparency: Florini (1998) said that transparency is

the opposite of secret Secret means freely hiding some one's behaviors while

transparency means freely disclosing them Financial transparency is a type of

transparency; it is typically related to financial issues, including the accuracy,

completeness, radical and information update (Vishwanath & Kaufmann, 2001) Financial information is the product of corporate accounting and external reporting systems that ensure and routinely disclose audited, quantitative data concerning the financial position and performance of publicly hled firms Audited balance sheets, income statements, and cash – flow statements, along with supporting disclosures, form the foundation of the firm-specific information set available to investors and regulators (Bushman and Smith, 2003)

Corporate governance transparency: Governance transparency, captures the

intensity of governance disclosures used by outside investors to hold officers and directors accountable (Robert, 2004) Governance transparency also understood as

disclosures of board of management, representative of the organization, and business actions to the society (North, 1994; Lashgari, 2004).

The transparency of ownership structure: is understood as disclosure of the

number of stockholders (S&P, 2002, Truong, 2005)

This study used the quantitative method and a questionnaire to further assess the attitudes of such investors in Vietnam's stock market The dependent variable is the attitude of investors

To answer the questionnaire, the survey focused on three independent

variables and one dependent variable Each independent variable is connected to two types of information transparency (signal and be exposed) and 3 enterprise

management theories (agents, managers, and deposit holders) The independent variables are the transparency of ownership structure, financial transparency, and transparency of management process

There are four demographic variables: gender, age, educational level and income and one variable: experience The dependent variable is the attitude of

investors; this variable is affected by the independent variables The study was

conducted using the quantitative method and closed questions as a survey tool The questionnaire includes closed questions and opened questions at the end The

researcher asked participants to rate the questions based on the scale from 1 to 9. 

Scope and limitations of the studyThe main purpose of this study is to analyze the effects of the financial

information transparency on the investors' attitude in Vietnam stock market As a result, the decisive factors are those who are familiar with the stock market; have experience of share purchasing from the Ho Chi Minh Stock Exchange; those who are

18 years old or older and who are ready to complete the questionnaire based on their investment experience Those who have no experience of share purchasing from the

HCM Stock Exchange are not included in this survey.

CHAPTER TWO: LITERATURE REVIEW

IntroductionChapter II presents the theoretical overview of main concepts in this research All relevant theories are summarized for this topic in order to facilitate the

implementation of theories for this research The scientific overview about previous researches brings a proper history and recognizes the priorities of others’ researches

This literature review only focuses on theory and conclusions which are directly appropriate to the topic and issues mentioned in the dissertation

Chapter II begins with the transparency of financial information and

information disclosure requirements, including a properly theoretical overview about business management, corporate social responsibility, and investor behaviors

Literature reviewTransparency and Disclosure of Financial Information

This literature review focuses on the theories on transparency of financial information and impacts of business governance on belief of investors It starts with the concepts and theories on financial information transparency, and then theories on business governance, both parts are important to understand belief of investors and their investment strategies

In practice, financial disclosures provide shareholders with information on the financial and operating results of a company to enable them to understand properly the nature of its business, its current state of affairs and how it is being developed for the future The information disclosure also help many shareholders determine that

management is running the enterprise with the best interest of all shareholders in mind(Wang, 2010)

In recent years, financial disclosures have become a serious concern for investors When investors fail to notice or understand financial disclosures, they may not understand important terms and risks associated with their investments (Truong, 2005) Based on assumptions derived from Corporate Social Responsibility (CSR) practices and the Social Contract Theory (SCT), positive attitudes toward disclosures may be enhanced when responsible and ethical practices in disclosing financial information are perceived by investors (David, et al., 2005; Wang, A., 2007; Torres,

et al., 2007)

Financial Information Transparency

Audited financial statements are extensively used as source of information on companies, in particular, the financial situation of the company They facilitate

appropriate monitoring of the firm and its profitability Investors use this information

to forecast future performance of the enterprise and as a basis to value securities It is

of vital importance that the transactions disclosed by the companies should be of internationally recognized standards and it should also include information about contingent liabilities and off-balance sheet transactions, as well as special purpose entities (Shital and Sharvani, 2011)

Theoretical basis for this part is the Signaling Theory created by Spense in

1973 Spense believed that information between a company and its investors is

asymmetric Such information asymmetry makes investors misunderstand the status

of real operation in a company (Aksu & Kosedag, 2006) According to Modigliani and Miller (like Chen, 1999), this theory supposes that because managers often have better information than external investors, they sell company’s shares when they find that it is valued highly and they sell bonds if they believe that share is undervalued

Investors understand this aspect, and therefore they consider the purchase and sale of shares internally as a bad sign According to the Signaling Theory, information asymmetry among internal and external investors can create an unbalanced advantage

of transaction for internal traders in financial markets (Chen, 1999; Truong, 2005; Spence, 1973) Information asymmetry is likely to create higher risks for external investors who cannot clearly understand the prospects for efficiency of a company (Leland & Pyle, 1977; Bhattacharya, 1979; Poitevin, 1990; Ravid & Saring, 1991)

Chen (1999) defined financial transparency as clearly and thoroughly

understanding what is happening inside an enterprise The definition of financial transparency stated by Chen is applied to the annual reports of enterprises, quarterly reports, and other published documents After the scandals of Enron, the expectations

of investors about financial transparency in the stock market have increased Holzner

& Holzner (2002) thought that transparency is “Demand for the freedom of

information, condensed by a modern advance to comprehensive transparency, having

a long and complicated history, often raised before the scandal” (p 152) Good administration of information transparency depends on the good method of business administration and good moral behaviors (Holzner, et al., 2002; Barth & Schipper, 2008)

Transparency is an opposite aspect of secret, and secret is related to the fact that somebody deliberately conceals behavior or actions carefully in order to benefit agroup or an individual, for example insider trading However, awareness of the level

of information transparency is experienced by an individual and follows specific and personal feelings Financial information transparency is a type of transparency which

is often consistent with business financial issues (Vishwanath, & Kaufinann, 2001)

According to the research conducted by Uddin and Gillett (2002), most of the financial crises in the past 10 years may be due to the lack of financial transparency of

companies Hanson (2003) said that the lack of financial transparency is due to incomplete regulations which are designed to monitor methods of business

administration and moral behaviors of companies

Florin (1998) suggested that financial transparency is a correctly responsible behavior Financial transparency of a company is measured by their efforts to discloseinformation (Chen, 1999) A phenomenon of shortage of financial transparency is insider trading Insider trading is not only an obstacle for increasing market efficiencybut also increases the anxiety of investors in capital markets (Fried, 2003; Pritchard, 2003) Insider trading often brings asymmetric information to the public (O’Hara, 2000)

Requirements of Financial Information Disclosure

Financial disclosures are one such internal mechanisms which enable investorsand other outside parties to monitor firm performance by reducing information

asymmetries (Sanan & Yadav, 2011)

Information is reported by representatives of State-owned enterprises to the public and mentions the requirements of SEC Such information disclosure must be supervised and controlled by the internal control systems as well as third parties, including the Board of Directors of companies and SEC in the USA For example, financial forecast of a company should be approved by the Board of Auditors of the Board of Management and State Accountant Only after the approval, information is reported to SEC and published to the public (Admati & Pfleiderer, 2000) Examples

of transparent issues about these types of information disclosure can include

inappropriate information, inadequate information, inaccurate information, and/or untimely information (Admati, et al., 2000; Truong, 2005; Vishwanath, & Kaufmann, 2001; Bartley, et al., 2011)

XBRL is a computer-based, free, and open standard used for tagging

business-related data (including financial statement concepts) with a broad set of relevant information (Bartley, et al., 2011) The eXtensible Business Reporting Language(XBRL) has the potential to improve the transparency of financial reports; however, its complexity creates the risk of introducing errors that are a threat to its usefulness XBRL is a complex echnological change in financial reporting of nearly

unprecedented scope Prior to June 2009, the date of the first mandated XBRL filings,the SEC made available a Voluntary Filing program (VFP) to assist in addressing the difficulties of creating XBRL documents (Bartley, et al., 2011) The SEC stated

in the VFP rule that ‘‘XBRL exhibits will be required to accurately reflect the

information that appears in the corresponding part of the official filing’’ (SEC 2005) Consistent with the SEC’s requirement, the researchers define differences between thedata in the XBRL documents and a company’s official documents as errors in the XBRL documents

In early 2009, the SEC issued the final amendments to its mandatory XBRL filing rules Interactive Data to Improve Financial Reporting requires registrants that apply U.S GAAP or International Financial Reporting Standards to file supplemental XBRL documents in addition to the current HTML- or ASCII-formatted filings for Forms 10-Q, 10-K, and 8-K, among others (SEC 2009)

Vishwanath and Kaufmann (2001) created a model to measure financial transparency to study their methodology They gave the three targets as follows: (a) approachability, (b) appropriateness, and (c) quality and reliability Approachability isfocused on communication of business operations about financial information with the public This concept is checked by the verification of internet, radio, TV,

newspapers, and public notices about financial information of companies The

limitations of approachability measurement include lack of educational qualifications and/or knowledge of recipients about how to apply the used means to impart financial

information

The second target, appropriateness, is relevant to applicability of financial information provided for certain investors Because it is difficult to determine which information is appropriate, Vishwanath and Kaufinann have confirmed that

appropriateness depends on circumstances or conditions which a certain user

encounters For example, banks get and verify appropriate information through balance sheets and income statements of companies when analyzing the cases of loan

or mortgage On the other hand, reports of dividend payment are the financial

information which is very important and appropriate for shareholders to control their portfolio (Vishwanath & Kaufmann, 2001)

Appropriateness of information provided by companies is different because different readers have requirements of different information Inappropriate

information can make users misunderstand and make investment decisions which are wrong and near to the favorable point for their professional or personal financial strategies Therefore, companies take moral responsibilities for providing appropriate information for different users to evaluate At the same time, users must be able to consider all information published by companies and appropriately select their own specific needs (Vishwanath et al., 2001)

The third target, quality and reliability, shows that financial information published must be effective, clear and simple In general, the quality of financial information of companies is supervised by external independent organizations such asState accountants and lawyers, and control agencies like SEC The published

information must be also consistent with Generally Accepted Accounting Principles

of the USA (GAAP) Quality and reliability of financial information disclosed are regulated incompletely because in fact compliance with standards is not implemented

or supervised by external independent units, or by the internal board of supervisors

who raise issues on financial information disclosure (Vishwanath & Kaufmann, 2001) Vishwanath and Kaufmann (2001) said that lack of financial transparency and weak responsibility of the government will strengthen each other This unregulated environment emphasizes the importance of transparency improvement in the whole economy not just in small industries Measures such as the measures developed by Vishwanath and Kaufmann are useful tools

There are also problems about information transparency outside the

boundaries of the United States For example, after the scandals of financial

transparency in Parmalat Food Company of Italy and Dutch retailer Ahold have become public, officials of the European Union (EU) have asked more than 7,000 companies within EU to check their financial statements in accordance with

International Financial Reporting Standards (IFRS) (Jucca, 2004)

Business administration

The corporate governance of a firm is disciplined both by external as well as internal mechanisms Due to practical limitations, firms often adopt internal

disciplining devices (Sanan & Yadav, 2011)

Business administration is related to relationship administration among

shareholders of the enterprise, which has already existed in business operations since there is the model of liability limited company (Lashgari, 2004) In other words, business administration includes unofficial and official contract agreements among shareholders of enterprise (North, 1994) There are many theories about business administration, and different authors have studied business administration in various ways In 1996, Hawley and Williams completed a research of business administration

in American enterprises for Organization for Economic Cooperation and

Development (OECD) The authors complied with the guide for business

administration published by OECD and explained that the main theories on business

administration include agency theory, management theory, and stakeholder theory.Agency theory

Agency theory appears in business administration and interacts with

behavioral researches on relation between employer and contractor or between

employer and employee Agency theory can also be applied to State organizations andnon-profit organizations Agency theory has been initiated and developed from the researches on incomplete information in the contracts of insurance industry (Spence and Zeckhauser, 1971; Ross, 1973) However, this theory is popularized early in order

to apply to State organizations (Jenson and Meckling, 1976; Harris and Raviv, 1978)

The major objective of this agency theory is how to make employees or contractors (representative) work for the best benefits of employer when employees orcontractors have advantage of information rather than employer and have different benefits from employer Sappington (1991) gave a valuable discussion about the issues encouraging employers – agents The issue about representatives is especially dominant in the Anglo cultures, tends to disperse business ownership when companies

do not have the board of supervisors and have indirect or less direct relationships withtheir investors (Monks, 1994) When all shareholders own minor interests and create dispersed ownership that any investor spends their time or money supervising the board of management for other investors is unreasonable In any situation, small shareholders may lack the power and impacts to obtain the information which the board of management should publish (Monks, 1994)

In the research on agency theory, Hawley and Williams (1996) suggested that

in the financial aspect, the key issue in business administration is to build rules and incentives (are implied or apparent contracts) in order to effectively adjust behaviors

of managers (representatives) as desires of employer (owner) (p 21) According to thesuggestions of the agency theory, governments in the world have developed different

regulations to supervise business administration Important regulations on business administration in the U.S market include regulations of Securities and Exchange Commission (SEC), Generally Accepted Accounting Principles (GAAP), and the latest ones are regulations under Sarbanes-Oxley Act of 2002 (SOX).

Management theory

Information on individual board members and key executives is needed by investors in order to evaluate their experience and qualifications and assess any potential conflicts of interest that might affect their judgement Companies should disclose the selection process and the range of candidates from who selection is to be done Companies are expected to disclose information on the remuneration of board members and key executives so that investors can assess the costs and benefits of remuneration plans and the contribution of incentive schemes, such as stock option schemes, to company performance (Shital and Sharvani, 2011)

Discussion related to the concepts of management theory was initiated by Pfeffer (1972), when she confirmed that the Boards of Management is superabundant because internal managers have been set into good positions to represent the best interests of shareholders in a company The research of Pfeffer (1972) showed that thereal value of external directors is their presence in a Board of Management which increases belief of external investors She found that the more an industry is regulated,the more external members participate in the Board of Management of company in order to ensure organizations, banks and other interest groups Pfeffer’s research is one of the starting points of management theory

Donaldson extended the concepts given by Pfeffer and developed the

management theory in 1985, which suggested that internal managers are put into the best positions to create sustainable methods of business administration (Donaldson & Davis, 1991) Donaldson & Davis (1994) explained that managers are the people who

manage enterprises effectively and work carefully to gain high profits for enterprise and shareholders When commenting on the management theory, Donaldson & Davis suggested that a non-executive board of management is an ineffective control

mechanism because members are not properly relevant to the company, and therefore they lack professional knowledge needed to lead the company to work effectively

The management theory is the origin of organization and business

administration because it includes the systems of psychology, sociology and behavior (Boyd, 1995; Donaldson & Davis, 1991) Especially, in the typical CEO structure, themanagement theory explains that the managers, who have better information, make clear and accurate decisions to shareholders (Desai, Kroll, & Wright 2003)

Stakeholder theory

According to the stakeholder theory, business administration must meet the demands of all stakeholders Stakeholders include a lot of groups and organizations such as employees, customers, suppliers and community members who have

legitimate concern about a company and whom the company depends on (American Law Institute, 1992)

In 1984, Freeman built the stakeholder theory, which has brought an importantcontribution to modern financial management organizations and theories on business administration (Freeman, 1994) Hill & Jones (1992) developed on the basis of the stakeholder theory that company not only belongs to shareholders but also belongs to stakeholders The stakeholders should also take responsibility for the company and participate enthusiastically with members of the board of management in order to supervise company’s performance (Hill & Jones, 1992) When giving further

explanation about the stakeholder theory, Clarkson (1994) has said that, “Company is

a system including stakeholders operating in the greater social system, providing infrastructure, laws and market for company’s operations The purpose of company is

to create assets or values for stakeholders by converting their capital into products andservices” (p 22)

In 1995, Blair built on the basis of the stakeholder theory of Freeman to propose that objectives of directors and board of management should be to maximize creation of general assets of company (p 322) He explained that to have the best impacts on company’s performance, directors and managers should be given

incentives like ownership These incentives strengthen prospects of creating assets forshareholders while they bring leaders of company motivations to increase values for all stakeholders (Blair, 1995)

Corporate Social Responsibility

The research of Wang (2010) shows that consumer responses are favorable toward firms that are socially responsible This means that when information about socially responsible efforts are made public by either independent sources or firms themselves, consumers’ evaluations of those firms are positively affected Moreover,the research has found that positive attitude toward a firm’s business practices could substantially improve the effectiveness of a firm’s

business, whereas a firm’s business practice, perceived to be unethical, can create negative attitudes that damage a firm’s corporate image.

Jackson (2003) developed a model in order to explain impacts of investors’ decisions on company’s performance by focusing on two concepts of internal and external conditions External conditions consist of protection actions such as

regulations of SOX Act and SEC, promoting company’s leaders to announce

information These external conditions help investors have complete information to evaluate investment opportunities and develop their strategies

Jackson (2003) confirmed that an internal condition is the fact that a company

is responsible for providing training for people using financial information of the

company Although market experts are responsible for providing analysis reports, Jackson (2003) said that improving knowledge and capacity of a person to understandcompany’s financial statements is very important to practices of successful

investment Rogers (2003) pointed out that investors should have confidence in the practice methods of business administration, even for businesses with the most

effective operations “Market model” of investors requires their time to learn how to check the quality of information and to meaningfully understand announced

information

Corporate Social Responsibility (CSR) was developed by Epstein in 1987 CSR model includes business ethics, corporate social responsibility, and is created in order to explain relationships and interactions of an enterprise with internal and external stakeholders (Epstein, 1987) The model of Corporate Social Responsibility not only inspects aspect of enterprise performance but also assesses enterprise’s operations (Epstein, 1987) Ross (2000) had further development of CSR model by setting up three main measurement methods: verification to confirm that investors canremove general harmful factors and other bad companies out of their investments, shareholder activism to confirm that company can achieve discussions and suggest CSR issues through its annual shareholders’ meeting, and community development which believes that a company can set up its trust through the interactions with the community According to the CSR model, corporate social responsibility has a

positive relationship with performance of enterprise and is the concern of investors when creating their long-term portfolio (Waring & Lewer, 2004)

Efficient market hypothesis

Efficient market theory can be traced back to 1970 and Efficient Market Hypothesis of Fama (EMH) In this famous hypothesis, FAMA has developed three levels of efficiency which can be applied to the market The first level, strong

efficiency, stated that all public and private information has impacts on current stock price of a company All information includes internal information With this level, no internal or external people can obtain higher benefits The second level, partially strong efficiency, suggested that all public information is considered as a part of factors of current stock price of a company Therefore, foundation analyses include economic analysis, which separate industry and company cannot use to achieve higherbenefits The third level, weak efficiency, believed that all price information of a company in the past is reflected in current stock price Thus, technical analysis cannotsupport an investor to find higher benefits (Chen, 1999; Sarno & Thornton, 2004) Technical analysis is based on data and transaction information in the past to predict stock price in the future Foundation analysis is based on economic situation and corporate performance to analyze reasonable stock price (Chen, 1999)

Malkiel (2002) has developed on the basis of efficient market theories to suggest that company’s stock price will reflect information published about the company Improving accuracy and on time of published information can help the stock market have higher efficiency Sarno & Thornton (2004) said that current asymmetric information can increase speculation of stock price differences in the market This behavior can create advantage for speculators of stock price differences who get company’s information first

Jackson (2003) extended the efficient market theory and divided this theory into two groups of the two different types The first group consists of experts in the financial market such as market analysts The experts often have interests of obtainingperfect financial information based on their educational qualifications or knowledge The second group is “market model” or medium investor This group frequently has relatively little knowledge or time to read or understand the financial information published This second class of investors is based on professional qualifications of

financial analysts to compile the published information into reference documents or investment advices If the first group assesses and compiles the published information

to the market effectively and the published information is meaningful, the group of experts has an input approach with the complete source of information to move the stock price Responsibility of market experts is to analyze the announced information and protect medium investors who have not been able to understand the announced information meaningfully (Jackson, 2003)

Investor behavior: Theory of Reasoned Action

Ajzen and Fishbein (1980) developed the theory of reasoned action to predict human behaviors The theory of reasoned action includes the systems of physiology, psychology and behavior as well as the role theory The theory of reasoned action explained that human beings often organize their behaviors intentionally (decision is originated in their minds) and transform this decision into action When humans receive the information related to their intention, it will change humans’ decision and reflects in their actions (Ajzen & Fishbein, 1980)

Donaldson and Davis (1994) extended the theory of reasoned action to apply

to the business environment They suggested that corporate efficiency will reflect behaviors of the group of senior managers Positive behaviors of the group of senior managers in a company can make business administration become positive, and this positive action (intention) will lead corporate efficiency to the high quality (actions) Behaviors and actions of investors are frequently based on corporate efficiency including social, operational and financial responsibilities of company’s leaders

In 2002, Uddin and Gillett supplemented applications of the theory of

reasoned action to business They explained that the theory of reasoned action has twocomponents: building investor behavior and investor’s opinion for their actions Regulations, business administration, corporate efficiency, and structure of salary will

have direct influences on intention and actions of investors Corporate viewpoint and investors’ viewpoint are expected to have strong correlation Positive corporate viewpoints will directly promote investors’ viewpoints and have impacts on their behaviors and actions in the stock market Negative corporate viewpoints can make investors reconsider the inclusion of shares of a company in their portfolio or stop their investment in the stock market

The following part is the summary of the research which verified the current theories on financial information transparency, financial information announcement, ownership structure, business administration, and investors’ confidence

Reality researchesBehavior and confidence of investors have recently changed because of financial scandals of companies including scandals in Enron, Arthur Andersen, and WorldCom In addition, the accounting fraud in Tyco and doubtful packages of reward in Tyco and GE has helped the public aware of immoral corporate behaviors (Moor, & Swartz, 2003) Healey & Kim, (2003) found that confidence of investors in the world has reduced since the Enron scandal because of problems about financial transparency and information disclosure of companies

Financial information transparency and disclosure

Overview of this practical document is financial information transparency and impacts of ownership structure and business administration on increase of investors’ confidence This part begins with an overview of researches on financial information transparency and then it is the overview of researches on ownership structure,

business administration and investors’ confidence

Financial information transparency

In 2004, Born, Giaccotto and Ritsatos published a research studying insurance industry of USA in accordance with the signaling theory and financial information

transparency They used a sample of non-empirical research, compared reasons, and quantified Overview of the theory of Born, Giaccotto and Ritsatos is complete and current in the comparison and contrast of theories The empirical researches of the signaling theory and financial information transparency have been verified,

determined a flaw in the theory regarding the fact that whether regulations and

supervision have reduced the asymmetric level of information between insurance companies and investors The research hypotheses of Born, Giaccotto and Ritsatos suggested that there is a directly proportional relationship between announcements about acquisition of insurance company’s shares and assets of insurance company, and also stated that regulations and supervision have reduced positively the

asymmetric level of information between insurance companies and investors (Born, Giaccotto and Ritsatos, 2004)

A plan was to select a probability sample and the system drew results of the fact that the data have created the sample including 49 insurance companies trading

on the New York Trading Floor or American Stock Exchange Reliability and

appropriateness are established and the data collection processes are clearly described.The findings of Born, Giaccotto and Ritsatos have supported their hypotheses and used Tobin’s Q ratio (Q ratio) to process and analyze data Q ratio is calculated by dividing market prices of assets and liabilities of insurance company by their book value T-test is used to test differences of average surplus profits between companies with high Q ratio and companies with low Q ratio, and differences of average surplus profits among business sectors (Born, Giaccotto and Ritsatos, 2004)

Interpretation of Born, Giaccotto and Ritsatos for their findings is the fact that assets of an enterprise have a directly proportional relationship with disclosure about acquisition of enterprise’s shares on the open market They also concluded that regulations and supervision have reduced positively the asymmetric level of

information between insurance companies and investors when comparing to the companies within the unregulated industry This leads to the conclusion that insurancecompanies can increase their assets through the acquisition of shares on the open market

It is implied that improvement of business administration can lead to

improvement of information asymmetry between insurance companies and investors The findings of Born, Giaccotto and Ritsatos have supported the signaling theory Thestrengths of the research of Born, Giaccotto and Ritsatos are the fact that hypotheses and variables are clear in the acquisition of shares and information asymmetry, and reliability and appropriateness of the measurement methods of consequence variables create the quality of data, data analysis is highly appreciated, and the processes are clearly defined for reuse

In 2005, Truong announced a research to verify the high-tech industry in Vietnam in accordance with the signaling theory and financial information

transparency He used a non-experimental research sample, compared reasons, and quantified Overview of Truong’s theory is complete and current in comparison and contrast of the theories on financial information transparency The empirical

researches of the signaling theory and financial information transparency have been verified, determined a flaw regarding impacts of financial information transparency

on operational efficiency of company, especially in the structure of the Board of Directors and ownership The research hypotheses of Truong suggested that there is a directly proportional relationship between the size of Board of Directors and

operational efficiency, and also stated that there is a directly proportional relationship among financial transparency and information disclosure and operational efficiency (Truong, 2005)

A plan was to select a probability sample and the system drew results of the

fact that the data have created the sample including 225 high-tech companies in Vietnam The targets for measuring information transparency of S&P have been used

to measure the information transparency of the selected companies The targets of information transparency measurement have been developed by S&P for the

transparency of the ownership structure, investors’ relationships, financial

transparency, information announcement, and the structure of the board of

management There are 98 targets within the five categories with a total of 98 points One point is added to a company if a target is met (Truong, 2005) Reliability and appropriateness are set up and the processes of data collection are clearly described The findings of Truong have supported his hypotheses A multiple regression model (MRM) is used to process and analyze data MRM is a modeling technique widely used and very flexible, and can be applied in making business decisions (Truong, 2005)

Truong’s interpretation for his findings showed that transparency of company has a directly proportional relationship with operational efficiency of company This leads to the conclusion that the companies with good method of business

administration have a directly proportional relationship with operational efficiency This implication means that improvement of business administration can make

corporate performance improved, and external investors can freely believe in the information provided by company’s leaders to make investment decisions The findings of Truong support the signaling theory

Strengths of Truong’s research are the fact that his hypotheses and variables are clear for corporate transparency and corporate performance, and the reliable and appropriate measures are selected for consequence variables to generate the data quality, data analysis is highly appreciated, and the processes are clearly defined for reuse The limitations raised by Truong are the samples including high-tech

companies of Vietnam He has not also defined clearly high-tech company in the research Therefore, it is difficult to popularize the findings to other countries The researches in the future should mention risks for external conformity, and then

reapplication

Requirements of financial information disclosure

In 2001, Gelb and Strawer announced a research having verified the publicly traded companies of the U.S in terms of information disclosure and financial

information transparency They used a non-experimental research sample, compared reasons, and quantified Overview of the theory of Gelb and Strawer is complete and current in comparison and contrast of the theories on financial information

announcement The empirical researches on financial information transparency and disclosure have been verified, and they determined a flaw in the current theory

regarding an alternative explanation: corporate responsibility and financial

information disclosure so that financial transparency is increased The research hypothesis of Gelb and Strawer showed that the companies which are more

responsible for the society are more capable of providing more complete information (Gelb and Strawer, 2001)

A plan was to select a probability sample and the system drew results of the fact that the data have created the sample including 233 companies publicly traded in U.S The annual reports, 10-Ks, quarterly reports, other published documents, and programs about investor relationship which are provided by companies are used to measure the levels of financial information disclosure and social responsibility of selected companies (Gelb and Strawer, 2001) Reliability and appropriateness are set

up and the processes of data collection are clearly described The findings of Gelb andStrawer have supported their hypotheses and they used the method of multiple

regression analysis to process and analyze data Multiple regression analysis is a

modeling technique widely used and very flexible, and can be applied in making business decisions (Gelb and Strawer, 2001)

Interpretation of Gelb and Strawer for their findings suggested that corporate social responsibility and financial information have a significant relationship with investors’ concerns This leads to the conclusion that the companies with the high quality of announced information will positively keep the relationships with investors.The findings of Gelb and Strawer have supported the theory of financial information announcement The strengths of the research of Gelb and Strawer are the clear

hypotheses and variables about financial information disclosure and corporate social responsibility, and the reliably and appropriately selected measures of consequence variables generate the data quality, data analysis is highly appreciated, and the

processes are clearly defined for reuse

In 2003, Rezaee, Olibe and Minmier announced a research having verified the publicly traded companies in the U.S in terms of financial information disclosure and business administration They used a non-experimental research sample, compared reasons, and quantified Overview of the theory of Rezaee, Olibe and Minmier is complete and current in comparison and contrast of the theories on financial

information announcement The empirical researches on financial information

disclosure and financial transparency have been verified, and they determined a flaw

in the current theory on business administration: the roles of announcements of the board of auditors The hypotheses of Rezaee, Olibe and Minmier suggested that there

is a relationship between financial disclosure and efficiency of the board of auditors, and there is a relationship between business administration and efficiency of the board

of auditors (Rezaee, Olibe and Minmier, 2003)

A plan was to select a probability sample and the system drew results of the fact that the data have created the sample including 100 publicly traded companies

which have listed in the Fortune 100 in the U.S The indicators of financial statement analysis are used to measure financial performance of the selected companies The indicators of financial statement analysis are divided into liquidity, asset management,debt management, profit, and coefficients of market value (Rezaee, Olibe and

Minmier, 2003)

Reliability and appropriateness are set up and the processes of data collection are clearly described The findings of Rezaee, Olibe and Minmier have supported their hypotheses and they used the method of multiple regression analysis to process and analyze data Multiple regression analysis is a modeling technique widely used and very flexible, and can be applied in making business decisions (Rezaee, Olibe andMinmier, 2003)

Interpretation of Rezaee, Olibe and Minmier for their findings suggested that efficiency of the board of auditors has a directly proportional relationship with

business administration and financial announcement This leads to the conclusion that the companies with the high efficiency of the board of auditors will improve their business administration It is implied that improvement of business administration canmake business administration improved, and external people can freely trust in the information provided by companies to make investment decisions The findings of Rezaee, Olibe and Minmier have supported the theories of financial announcement

The strengths of the research of Rezaee, Olibe and Minmier are the clear hypotheses and variables about financial disclosure and business administration, and the reliably and appropriately selected measures of consequence variables generate the data quality, data analysis is highly appreciated, and the processes are clearly defined for reuse The limitation of this research is that investigation indicators do notinclude the important regulations of the Sarbanes-Oxley Act which was enforced as a law in 2002 The authors suggested that the researches in the future should mention