Introduction
Research background
In recent years, the acceleration of privatization in developing countries has become crucial for socioeconomic development In Vietnam, privatization plays a vital role in the reform process, serving as a key driver for the transformation of State-owned enterprises (SOEs) as the country integrates into the global economy.
Since Vietnam became an official member of the World Trade Organization (WTO) in 2007, it has become essential to create a capital mobilization regime that aligns with market mechanisms and international practices This is crucial for investing in the overall development of the socioeconomic landscape, as long-term economic growth cannot be sustained if it relies solely on traditional revenue sources.
SOEs, Vietnam Government has to considered privatization of SOEs as a mean of solving this problem and bringing steadily economic development to the country According to Asian
According to a 2015 paper by the Development Bank, Vietnamese State-Owned Enterprises (SOEs) have demonstrated lower production output compared to their private sector counterparts, negatively impacting economic growth Data from 2009 to 2013 indicates that SOEs maintained a low net turnover as a percentage of long-term investment, particularly when compared to both domestic and foreign private enterprises In competitive markets, state ownership is often viewed as less favorable than private ownership due to several factors: the state's focus on social and political objectives rather than maximizing firm value, the appointment of management from political allies instead of experienced professionals, and the associated higher transaction costs.
Before 1986, Vietnam had a centralized-planning economy, which had only two types of firm ownership in the economy including State and collective enterprises (Tran, Nonneman
Under the central planning system, the government managed and distributed social properties, resulting in a weakened market mechanism due to price distortions in products and services In 1992, the Vietnamese government initiated the "Doi Moi" reform program aimed at enhancing the performance of firms and revitalizing the economy.
2 performance of SOEs Vietnam economy was changed from centralized to market based economy through privatization Compared to most other economies, economic growth of
Vietnam's stability has led to a gradual privatization process, with small state-owned enterprises (SOEs) transitioning to larger ones over time.
Figure 1 Vietnamese’s SOEs reform, period 2009-2013
The restructuring of Vietnamese State-Owned Enterprises (SOEs) aims to improve socio-economic efficiency, reduce the government's financial burden, and focus investments on SOEs that require support Recently, Vietnam has seen a significant rise in public and publicly guaranteed debt relative to GDP, reaching a concerning level As of the end of the reporting period, public debt accounted for approximately 61.3% of GDP, highlighting the challenges faced by the government in managing its financial obligations.
2015 and continuously increasing Public debt ratio is considered growing three times faster than GDP, reflecting persistently high budget deficits and lower-than-projected nominal GDP
The International Monetary Fund (2016) forecasts that the ratio will increase to 70% by 2018, with a decline expected only from 2020 onwards The sluggish pace of state-owned enterprises (SOEs) privatization is identified as a key factor influencing the allocation of the nation's financial resources.
The government is eager to expedite the privatization process, demonstrating a strong commitment to completing this initiative efficiently.
3 plan to sell stakes at many large companies at now However, to restructure or privatize SOEs may also require public funds
Figure 2 Vietnam Public Debt to GDP ratio (2006- 2015)
Source: Data from Ministry of Finance
Figure 3 Predicted public and publicly-guaranteed debt ratio in Vietnam (2015-2021)
Many state-owned enterprises (SOEs) continue to operate under outdated corporate governance and management practices even after privatization, resulting in an inefficient working environment Additionally, management mechanisms and policies, including wage and bonus structures, remain unchanged from the pre-privatization era In 2013, the Vietnamese government addressed these issues with new initiatives.
Vietnam Public Debt to GDP (2006-2015 )
Year tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Decree No 189/2013/ND-CP aims to address issues such as corporate value and debt settlement to expedite the privatization process in Vietnam While many state-owned enterprises (SOEs) have become more efficient post-privatization, some have faced bankruptcy or dissolution due to the loss of state guarantees and insufficient competitive capabilities Additionally, the failure of numerous privatizations can be attributed to a lack of attention to corporate governance and organizational capital within the Vietnamese context.
Despite the privatization of state-owned enterprises (SOEs), the government remains a significant supermajority shareholder in many of these firms This continued state control limits the ability of privatized SOEs to make independent decisions, potentially leading to management challenges Consequently, the leaders of these firms may find their authority diminished, undermining the original goals of privatization.
Problem statement
State-owned enterprises (SOEs) are entirely owned by the government, with their assets managed by public sector employees (Tran et al., 2015) The privatization of these SOEs results in the creation of diverse ownership structures.
Ownership structure encompasses various types, including dominant shareholders, concentrated ownership, insider ownership, foreign ownership, institutional ownership, and government ownership Notably, dominant shareholders exert the most influence, as they primarily control the company's operations.
Wattanakul (2002), the ownership transformation may divide into two cases: full privatization and partial privatization In partial privatization, it can be subdivided into State-dominant ownership and private-dominant ownership
Previous research has highlighted the impact of state ownership on firm performance Musallam (2015) found that privatized companies with significant state ownership benefit from robust government protection and mechanisms, enabling them to achieve superior performance.
Some studies suggest that privatized firms may struggle with profit maximization due to the state's differing political objectives, which can negatively impact firm performance and weaken corporate governance Conversely, other research indicates a positive correlation between private ownership and corporate performance.
Private shareholders can enhance firm performance through improved governance, supervision, and investment control, which raises the important question of how dominant ownership structures affect the performance of privatized state-owned enterprises (SOEs).
The transformation of State-Owned Enterprises (SOEs) involves restructuring their capital structure, which is crucial for guiding business activities, particularly in developing countries According to Adewale and Ajibola (2013), privatization enhances the significance of capital structure in these regions Dharwadkar, George, and Brandes (2000) noted that effective debt mechanisms thrive in the robust governance frameworks of developed nations However, this approach may falter in emerging economies like Vietnam, where the legal system lacks clarity and stability, and corporate information is often opaque Consequently, firms in such contexts are anticipated to maintain low debt levels.
Equity ratio could show a better performance in Vietnam
This study investigates the impact of ownership structure—specifically state-dominant and private-dominant ownership—alongside capital structure, represented by the debt-to-equity ratio, on the performance of privatized state-owned enterprises (SOEs) in Vietnam Additionally, it explores how these ownership structures moderate the relationship between capital structure and firm performance.
Research objectives
This research focuses on privatized state-owned enterprises (SOEs) in Vietnam, aiming to analyze the privatization process and its impact on the performance of these firms The primary objective is to investigate how the privatization of Vietnamese SOEs affects their overall performance, with specific goals outlined for a comprehensive understanding of the subject.
- Determine the direct impacts of capital structure on firm performance of privatized
This article examines the effects of private-dominant ownership and state-dominant ownership on the performance of privatized state-owned enterprises (SOEs) in Vietnam It aims to identify how these ownership structures influence the operational efficiency and overall success of these firms in the Vietnamese market.
- Explore the moderating roles of private-dominant ownership and State-dominant ownership respectively on the relationship between privatized SOEs’ performance and capital structure.
Research questions
The study will contribute to the research literature on privatization by examining the following question:
- Is capital structure significantly affected on firm performance of Vietnamese privatized
- Is private-dominant ownership structure significantly affected on firm performance of
- Is State-dominant ownership structure significantly affected on firm performance of
- Is moderating roles of private-dominant ownership structure significantly affected on the relationship of firm performance and capital structure?
- Is moderating roles of State-dominant ownership structure significantly affected on the relationship of firm performance and capital structure?
Research scope
The study analyzed data from all privatized Vietnamese state-owned enterprises (SOEs) listed on the Ho Chi Minh and Hanoi Stock Exchanges It utilized panel data from annual reports and audited financial statements over the five-year period from 2011 to 2015 to conduct theoretical testing Consequently, the findings of the study statistically illustrate the impact of privatization on the performance of Vietnamese privatized firms during this timeframe.
Research contribution
This study contributes to better understanding on privatization in previous literature
While many previous studies have concentrated solely on the status of privatization, some research has explored the impact of privatization on firm performance.
7 used the outdated data Thus, this study will contribute to the current literature on privatization with recent data set in context of Vietnam
This study investigates the relationship between ownership structure—specifically private-dominant and state-dominant ownership—and capital structure, measured by the debt-to-equity ratio, in relation to the performance of privatized state-owned enterprises (SOEs) in Vietnam.
This study utilizes hierarchical multiple regression analysis to examine the moderating effects of ownership structure, as highlighted by Cohen & Cohen (1983) Despite numerous studies on the impact of privatization on firm performance, there is a lack of systematic data regarding the percentage of private sector ownership in privatized state-owned enterprises (SOEs) Consequently, the effects of privatization under private-dominant versus state-dominant ownership on firm value remain unassessed This research aims to enhance understanding of the ownership and capital structures of privatized firms in the emerging market of Vietnam.
This study utilizes data from a comprehensive range of privatized firms in the Vietnamese market, addressing limitations in prior research that focused on specific industries or firm sizes By providing a systematic dataset, it offers valuable insights for the Vietnamese government, potential investors, and scholars in developing suitable ownership structures for various types of state-owned enterprises (SOEs) and evaluating firm performance Additionally, this research enhances the existing literature on privatization and suggests directions for future studies.
Research structure
This research is divided into five chapters as follows:
Chapter one – Introduction: states the background of the research, research questions, research contribution and objectives doing this research as well as general methodology and scope
Chapter two of the literature review examines the academic literature related to the privatization of Vietnamese state-owned enterprises (SOEs) It focuses on the impact of ownership and capital structures on the performance and outcomes of these enterprises.
8 firm performance On ground of preceding literature, it will develop the hypotheses and model
Chapter three – Methodology outlines the detailed approaches employed for data collection and analysis It incorporates descriptive statistics and regression analysis to test the hypothesis and explore correlations.
Chapter four – Data analysis: analyses the collected data that contain the results from using descriptive analysis and regression analysis, and applying some other methods
Chapter five concludes the research by summarizing the findings and their implications It also offers recommendations for future studies to enhance understanding in the field.
Literature Review
Privatization
Privatization has emerged as a global trend significantly impacting economic growth Since 1989, over 70,000 enterprises in Central and Eastern Europe have undergone privatization, making it a crucial focus for many developing nations This process has gained importance across various industries and service sectors, positioning privatization as a viable economic policy strategy for governments worldwide.
Privatization, often referred to as "reformation," "transformation," or "equitization," involves the transfer of assets or businesses from a wholly state-owned enterprise to the private sector, resulting in the establishment of a joint-stock company (JSC) The privatized JSC operates under the Enterprise Law and is recognized as a "public firm."
Privatization was implemented with the government's strong belief in enhancing the efficiency of state-owned enterprises (SOEs) and boosting revenue This process involved transferring ownership from the state to the private sector, necessitating careful strategies and adequate time for execution.
Zhang (2005) emphasized that privatization represents a significant initiative aimed at enhancing efficiency and effectiveness in various sectors This process is crucial for fostering competition and improving service delivery.
Privatization programs have emerged as a means to establish new contractual relationships in government and offer positive alternatives to public programs Both developed and developing countries recognize that these initiatives can significantly enhance firm performance, thereby contributing to economic growth for both private enterprises and the nation as a whole Analysis of both developing and advanced industrial economies indicates that privatization leads to improved profit efficiency and stimulates economic growth (Al-Otaibi, 2006).
State-owned enterprises (SOEs), which were established by capital of State, maintain its
100 percent of State ownership By privatization, SOEs were divided into shares, which attached the rights and responsibilities for business operations on the hands of shareholders
This meant it would be no longer controlled completely by Government The formation of a partnership between State and private parties would depend on the choice of privatization
Privatization can be categorized into two main types: outsider privatization, which involves foreign and local investors through methods such as initial public offerings (IPOs), direct sales, and strategic alliances, and insider privatization, which includes the State, managers, and employees through labor buyouts or voucher sales The key distinction between these types lies in the level of shareholder involvement in business operations both before and after the privatization process (Phuong, 2012) Furthermore, according to Wattanakul (2002), privatization can be classified as either partial, where the government retains some shares, or full, where the State completely divests its shares.
To achieve full privatization, where 100 percent of shares are owned by the private sector, the evaluation considered the size of State-Owned Enterprises (SOEs) and their significance to the national economy, particularly in strategic sectors like aviation and electricity The partial privatization led to an ownership structure categorized into three groups, with state-dominant ownership being one of them.
In practice, achieving equal private and government ownership is rare due to the challenges in distributing governing power within a business Consequently, ownership structures typically fall into two categories: state-dominant ownership, where the state holds more than 50% of shares, and private-dominant ownership, where the private sector holds over 50% of shares Partial privatization of state-owned enterprises (SOEs) often reflects these ownership dynamics.
Figure 4 Choices of ownership privatization
The purpose of privatization is not only to reduce the number of SOEs and the level of
State ownership in Vietnam but also to improve the economic and financial performance of
SOEs by ownership shifts (Boubakri, Cosset & Guedhami, 2004) According to Castater
The privatization process initiated in 2003 aimed to enhance the financial and operational efficiency of privatized firms for the benefit of public welfare It was anticipated that privatization would yield significant economic advantages, with improved efficiency and quality being primary goals By fostering increased competition, privatization sought to boost output, lower prices, optimize resource utilization, and establish well-functioning markets along with a fair investment environment.
Changing the ownership structure of State-Owned Enterprises (SOEs) can enhance their efficiency by motivating specific entities to fully utilize their resources This approach is viewed as a financial solution rooted in privatization, aimed at improving ownership dynamics and clearly defining the rights and responsibilities of all parties involved in the company.
Privatization has enabled the mobilization of capital from private investors, allowing individuals, organizations, and even foreign entities to participate in the business activities of former state-owned enterprises (SOEs).
State-Owned Enterprises (SOEs) can raise funds to enhance their charter capital, expand operations, and adopt new technologies Privatization has enabled employees and managers to become shareholders, thereby increasing their commitment to the company (Thi, 2012) Additionally, as noted by Adam (2007), privatization can attract more investment, particularly foreign direct investment, which facilitates technology transfer, management skills, human resource development, and access to international markets, ultimately contributing to the growth of corporate operations.
The government aimed to expedite the privatization process to enhance performance compared to previous state-owned enterprises (SOEs) Research indicates that privatized SOEs have yielded positive financial outcomes Wattanakul (2002) provided evidence showing that the privatization of firms in developing countries leads to increased net income from sales and assets.
Private investors were encouraged to strengthen firm efficiency, improve organization in firms
In summary, the privatization of SOEs aims to the following objectives:
(1) To decrease the State governance, increase private ownership;
(2) To mobilize capital from private sectors for specific purposes;
(3) To increase the participation of employees/managers which leading to strengthen their commitment to their enterprise;
(4) To result a better firm performance.
Privatization in Vietnam
As of the end of 2015, the Vietnamese government held public debt amounting to 61.3% of GDP, with state-owned enterprises (SOEs) contributing to over half of the nation's bad debt.
The Vietnamese government has been actively pursuing the privatization of state-owned enterprises (SOEs) over the past few decades due to their inefficiency This process involves the government deciding on the percentage of state shares to retain while selling either fully or partially to private sector investors, both domestic and foreign, as well as to the employees of the enterprises.
13 auction or through stock market It was a major process for Vietnamese economy transferring from the centralized to market based economy
Traditional theories are effective in developed economies due to their efficient legal systems and strong governance In contrast, emerging economies often face imperfect legal frameworks, which hinder the protection of minority shareholders and debt-holders' rights.
Sarkar, 2005) Even though, in economies with emergence of rigid legal regulations, law was still ineffectively enforced Therefore, this study considered all the rationales in Vietnam’s weak corporate governance
Vietnam's privatization process has been implemented through four primary methods: the sale of underperforming small state-owned enterprises (SOEs), the establishment of foreign joint ventures combining SOEs with foreign companies, the privatization of SOEs, and the creation of private entities (Thi, 2012) This gradual and cautious approach to privatization reflects Vietnam's economic context at each stage.
The Vietnamese Government's Decree No 59/2011/ND-CP, issued on July 18, 2011, aimed to transform 100% state-owned enterprises (SOEs) into joint stock companies to attract both domestic and foreign investment However, the privatization process of SOEs has been slow and steady, resulting in less development than anticipated Despite this, Vietnam has experienced significant economic growth in recent years, indicating that the slow pace of privatization has not adversely affected the country's economy in the short term.
(Sjửholm, 2006) However, in longer term, there might lead to unpredictable consequences if
Vietnam is not intensifying efforts to fully privatize state-owned enterprises (SOEs), which continue to play a significant role in the economy Since the initiation of the "doi moi" reform program in 1986, the number of SOEs has decreased from over 10,000 to 4,210 privatized firms by 2015.
14 blooming in period middle of 1998 to 2006 with 3,576 SOEs equitized However, there was a slow progress from 2007 until now According to report on privatization of SOEs of
Between 2007 and 2010, the Department of Corporate Finance, Ministry of Finance (2015) reported that only 30% of the planned privatization was achieved The slow progress in the privatization process was attributed to various objective factors, including company evaluations and bad debts (Thi, 2012) Furthermore, the total number of privatized state-owned enterprises (SOEs) from 2011 to 2015 remained limited.
In the past two years, the target for privatizing state-owned enterprises (SOEs) in 2014-2015 was set at 432; however, only 153 SOEs were actually privatized, resulting in a mere 35% achievement of the planned goal.
Table 1 Number of Vietnam SOEs being privatized from 1992 to 2015
No Period Number of privatized SOEs
1 Pilot stage of privatization (1992 - middle of 1996) according to Decision
No.202-CT dated June 8 th , 1992
2 Expanding the pilot stage (middle of 1996 - middle of 1998) according to following Decrees No.28/CP dated May 7 th , 1995 and No.25/CP dated March
3 Promoting pilot stage (middle of 1998 - 2010) according to following Decrees
No.44/1998/ND-CP dated June 29 th , 1998; No.64/2002/ND-CP dated June
19 th , 2002; and No.109/2007/ND-CP dated June 26 th , 2007
4 Privatization to restructure SOEs (2001 until now) according to Decision
No.929/QD-TTg dated July 17 th , 2012; Decree No.59/2011/ND-CP dated July
The article references data from the Ministry of Finance and Vietnamese legal documents, highlighting the latest updates and regulations It emphasizes the importance of accessing comprehensive resources for academic research, particularly for master's theses The content is aimed at providing valuable insights and facilitating the download of essential documents for students and researchers.
After proceeding privatization since 1996, to accelerate the process, Vietnam Government has changed the method of privatization from direct sales to public offerings according to
In 2002, the Vietnamese Government imposed restrictions on the shareholding of non-state owners in state-owned enterprises (SOEs), allowing individuals and entities to purchase only 5% and 10%, respectively However, since 2005, the privatization process has primarily utilized initial public offerings (IPOs), enabling foreign investors to acquire up to 49% of privatized SOEs (Thi, 2012) This policy shift has successfully attracted more foreign investment and boosted the overall market capitalization Currently, regulations permit foreign investors to own up to 49% of non-financial enterprises in Vietnam Recently, the Government issued a new decree to further enhance this framework.
Decree 60.2015/ND-CP, issued on June 26, 2015, permits foreign investors to own up to 100% of shares in certain sectors, marking a significant advancement by the Government to accelerate the privatization process and attract more foreign investment As illustrated in Table 2, several privatized state-owned enterprises (SOEs) have foreign ownership nearing 49%, with some of these companies being among the largest in their respective sectors.
Table 2 Vietnamese privatized SOEs with foreign ownership of around 49%
Vietnam Dairy Product JSC (Vinamilk) Food products 45.05 49.00
Refrigeration Electrical Engineering Corporation Industrial machinery 5.30 48.00
Binh Minh Plastics JSC Plastics 29.51 48.99
The article is based on data and information extracted from the annual reports of various corporations for the year 2015 It emphasizes the importance of utilizing these reports for comprehensive analysis and insights into corporate performance.
In 2015, Vietnam marked a significant milestone by successfully offloading shares, which contributed to the enhancement of its stock market Prior to this achievement, the Ministry of Finance reported that 96 state-owned enterprises (SOEs) with a total charter capital of 3.14 billion USD had been organized.
In 2007, initial public offerings (IPOs) on the Ho Chi Minh Stock Exchange (HSX) and the Hanoi Stock Exchange (HNX) contributed $2.29 billion to the State budget, with a paid-in capital of $1.9 billion (Thi, 2012) Recently, the State Capital Investment Corporation (SCIC) announced plans to sell its entire stake in ten major state-owned enterprises (SOEs), including Vinamilk, the largest listed company in Vietnam This initiative is projected to generate approximately $4 billion for the State.
The conversion of USD to the state budget would significantly aid the government in addressing its substantial public debt Additionally, the government's initiative to privatize Vietnam Airlines, which began in late 2014 and yielded successful results by late 2015, stands out as a key achievement in its recent privatization efforts Through relentless dedication, the Vietnam government has made considerable progress towards full privatization, although many state-owned enterprises (SOEs) still remain partially privatized.
As Sriboonlue (2007), reasons for privatization would vary among different countries In context of Vietnam, there are two main reasons for privatization becoming an urgent case
Effects of ownership structure on firm performance
Ownership structure significantly influences management incentives, corporate governance mechanisms, and agency relationships, as highlighted by Lei (2009) The privatization of state-owned enterprises (SOEs) leads to diverse ownership structures that vary with economic contexts, necessitating an appropriate ownership framework to enhance firm performance Alipour (2013) supports this by noting that ownership structure is a critical factor in the performance of Iranian corporations Additionally, Iwasaki et al (2010) emphasize the challenges in governance structures of privatized SOEs The arguments for privatization stem from ownership literature, political perspectives, managerial views, and agency theory, all pointing to the inefficiencies of SOEs (Boubakri et al., 2008) Guimaraes (2003) further asserts that public enterprises often prioritize political over economic objectives, leading to inefficiencies Post-privatization, ownership shifts to the private sector, altering decision-making dynamics away from government control.
The ownership structure of a company, which includes factors such as dominant shareholders, concentrated ownership, insider ownership, and foreign ownership, plays a crucial role in influencing corporate governance and performance.
Various ownership structures exist, including individual, managerial, employee, institutional, and state ownership (Djankov & Murrell, 2002; Tsegba & Ezi-Herbert, 2011).
State-Owned Enterprises (SOEs) have developed strategies to identify potential investors with robust financial resources and a commitment to long-term investment These potential investors include both domestic and foreign entities, highlighting the inclusive approach of SOEs in attracting diverse investment sources.
“private” shareholders As mentioned above, SOEs have 100% of charter capital hold by the
The government initially controlled the firms, but after privatization, their shares will be distributed among various owners If the government establishes an ownership structure for these shares, it will influence the direction of the firms.
Ownership concentration is a critical factor in corporate governance, as highlighted by Su and He (2012) The presence of a dominant shareholder can lead to a situation where this largest shareholder exerts total control over management and business operations (Lei, 2009) Research by Tsegba and Ezi-Herbert (2011) indicates that such dominant ownership significantly impacts corporate governance practices.
Since the large shareholders have the power of control, they can benefit minority shareholder
To exert dominant control in ownership, a shareholder must possess at least 50% of the shares In Vietnam, privatized state-owned enterprises (SOEs) are categorized into two main groups: those with state-dominant ownership, where the government retains control, and those with private-dominant ownership, which includes individuals, employees, foreigners, and institutions.
2.3.1 Effects of State ownership on firm performance
Phung and Mishra (2016) demonstrated that state ownership can enhance firm efficiency by providing advantages such as improved access to resources and capital State-owned firms often benefit from favorable government relations, which facilitate easier mobilization of capital through bank loans Additionally, firms with dominant state ownership can leverage close connections to monitor managers effectively and receive state assistance in specific situations (Le & Buck, 2011).
State-owned enterprises (SOEs) benefit from government support due to their majority ownership, which allows them access to more resources, greater authority, and favorable treatment compared to privately held firms Research by Iwasaki et al (2010) indicates that certain regulations and administrative measures can enhance the performance of SOEs relative to private sector companies in the same market Consequently, firms with state-dominant ownership are better positioned to operate, expand their market presence, and attract more customers Additionally, Tran et al (2015) highlight that SOEs often receive various incentives as they are viewed as instruments of government policy.
State-owned enterprises (SOEs) often prioritize social or political objectives over maximizing firm performance, which can negatively affect their overall effectiveness (Phung & Mishra, 2016) The differing goals associated with state ownership can lead to adverse impacts on firm performance.
In Vietnam, a study by Carlin and Pham (2008) revealed that former state-owned enterprises (SOEs) experienced a decline in profitability, particularly when there was a high concentration of state ownership This indicates that both the state and private firms only benefited from government support under such conditions.
Conducting the study in China, Su and He (2012) found that firm performance was negatively related to State ownership but positively related to public and employee share ownership
2.3.2 Effects of private ownership on firm performance
A study conducted in Malaysia by Musallam (2015) found that state ownership negatively impacts corporate performance, whereas foreign ownership has a positive effect The research also revealed a linear relationship between both types of ownership and corporate performance Similarly, Na (2002) noted that foreign investors contribute valuable management expertise and control functions as emerging markets integrate into the global economy Their international experience enables them to introduce advanced technology and fresh capital from abroad.
According to Sjửholm (2006), external investors significantly enhance firm performance by offering improved oversight and balancing management discretion, thereby diminishing the influence of internal investors, including government entities.
20 in East European that majority of foreign shareholder would control a firm to perform pretty well, in contrast to insider controls of firms led to failed performance of privatized firms
Phuong (2012) highlighted that many privatized firms retain State ownership, with strategies often influenced by political perspectives, leading to suboptimal outcomes Her research in Vietnam revealed that dominant outsider and foreign ownership positively affects firm performance due to enhanced monitoring capabilities Additionally, Tran et al (2015) noted that private ownership allows for greater flexibility in setting primary goals and organizational structures, which can enhance performance Following privatization, managers gained the authority to restructure organizations, improve operational efficiency, recruit effective employees, and align company governance with key objectives.
Several factors influence firm performance, including economic conditions, industry upgrades, capital structure, and government mechanisms However, establishing an appropriate ownership structure is crucial, as it lays the foundation for effective management and ultimately leads to improved performance.
Effects of capital structure on firm performance
A firm’s capital structure referred to the mix of its financial liabilities Capital structures expressed how a corporation arranges its assets through combination of equity and liabilities
Capital structure is a critical factor influencing firm profitability and presents complex challenges in corporate finance (Adewale & Ajibola, 2013) It significantly impacts business revenue and determines the earnings available to shareholders (Nawaz & Naseem, 2011) Choosing an appropriate capital structure is essential for any business, with many effective structures relying heavily on debt However, state ownership can facilitate easier access to debt for state-owned enterprises (SOEs), which may negatively affect firm performance Research by Fu-Min et al (2014) indicates a significant negative relationship between capital structure and firm performance among Vietnamese SOEs.
A high debt ratio can lead to increased firm value by reducing free cash flow, which limits unfavorable investments Fu-Min et al (2014) identified that the negative relationship between capital structure and firm performance arises from inefficient investments linked to debt and shareholder reactions to leverage Conversely, a positive relationship may stem from the trade-off between agency costs of debt and equity, as well as the limited liability effect of debt However, in Vietnam's context of weak governance and ineffective law enforcement, the debt mechanism fails to address agency problems The absence of regulations protecting creditor benefits allows managers to evade debt responsibilities and take excessive risks at creditors' expense Consequently, a lower Debt to Equity ratio is preferable for enhancing firm performance.
Effects of firm size as moderating firm performance
Many prior literatures stated that firm size was an important predictor of the performance
Research by Abbasi and Malik (2015) indicates a significant relationship between firm size and performance, revealing that larger firms benefit from advantages such as better access to credit and lower loan rates, which enhances their competitive edge Similarly, Fu-Min et al (2014) found that an increase in a firm's assets correlates positively with its performance Additionally, larger firms possess superior capabilities and resources, resulting in a lower likelihood of bankruptcy (Titman & Wessels, 1988) Consequently, this study utilized firm size as a control variable to assess the operating environment of these enterprises.
Summary of literature reviews
In response to global trends, the Vietnamese Government recognizes the critical need to accelerate privatization to enhance the national economy Research indicates that former state-owned enterprises (SOEs) have shown significant improvement post-privatization, highlighting the impact of capital and ownership structures on firm performance.
22 in different ways Therefore, this study is conducted to examine the previous theoretical studies on the relationship between firm performance and capital structure and ownership structure
This study analyzes the ownership structure of listed privatized state-owned enterprises (SOEs) in Vietnam, utilizing statistical data to explore the economic relationships between various variables It aims to provide insights for enhancing ownership structures, given that the primary goal of privatization is to boost firm efficiency The research will investigate the impact of dominant ownership—defined as shareholders holding more than 50% of shares—on firm value, considering both private-dominant and state-dominant ownership scenarios.
Hypotheses
This study aims to evaluate the applicability of privatization theories within the context of Vietnam The hypotheses were formulated by adapting the arguments of Dharwadkar et al to align with the study's objectives The first hypothesis posits that there is an adverse effect on the relationship between debt ratio and firm performance, challenging the traditional theory of debt financing.
Hypothesis 1: Privatized firms with higher Debt to Equity ratio will have lower performance
The second and third hypotheses investigate the link between firm performance and dominant ownership structures, specifically Private-dominant ownership (PDO) and State-dominant ownership (SDO) It is anticipated that firms will improve their performance post-privatization, as dominant ownership can exert control and focus on maximizing profit objectives Consequently, the study puts forth the following hypothesis.
Hypothesis 2: Firms with private-dominant ownership structure will decrease the negative effect of debt to equity ratio on privatized SOE’s performance tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Hypothesis 3: Firms with State-dominant ownership structure will decrease the negative effect of debt to equity ratio on privatized SOE’s performance
The study investigates the moderating effects of dominant ownership structures, specifically private-dominant ownership (PDO) and state-dominant ownership (SDO), on the relationship between the debt-to-equity ratio and firm performance It is hypothesized that these ownership structures will positively influence the impact of the debt-to-equity ratio on the efficiency of privatized firms, suggesting that a higher debt-to-equity ratio may not necessarily lead to decreased performance when moderated by these ownership types.
Hypothesis 4: Private-dominant ownership will decrease the negative effect of debt to equity ratio on privatized SOE’s performance
Hypothesis 5: State-dominant ownership will decrease the negative effect of debt to equity ratio on privatized SOE’s performance.
Research models
The conceptual model focuses on the anticipated changes in State ownership structure aimed at improving the performance of former State-Owned Enterprises (SOEs), while also considering the negative impact of debt financing on firm performance.
The moderated model, illustrated in Figure 6, is constructed on the premise that capital structures and ownership structures operate independently of each other.
Figure 6 Moderated model tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Research Methodology
Research process
This study utilized quantitative analysis with a focus on secondary data, distinguishing it from other research that relies on surveys or interviews A consistent and reliable dataset was essential, leading to the collection of data from published annual reports and audited financial statements of privatized state-owned enterprises (SOEs) listed on HSX and HNX over the past five years (2011 to 2015) Information was sourced from reputable platforms, including official websites of the selected privatized firms and published journals, ensuring the study's validity The sample comprised 309 listed privatized firms, including 156 with private-dominant ownership.
774 observations and 153 State-dominant ownership firms with 747 observations Therefore, the result of study would statistically perform how privatization made impact on performance of Vietnamese privatized firms
The study commenced with the definition of the research problem, establishing objectives and contributions to existing literature A thorough literature review was conducted to strengthen the theoretical framework for the developed hypotheses Preliminary calculations were then performed to create a dataset for regression analysis The data panel was analyzed using Eviews software for both descriptive and regression analysis, with additional statistical software utilized as needed Figure 7 illustrates the overall research process.
Data collection
Since the purpose of the study is aimed to the performance of privatized SOEs, it was necessary that firms should be SOEs before privatization, which opposed to private firms
The target population for this study consists of firms that were formerly state-owned enterprises (SOEs) and are now privatized and listed on the Ho Chi Minh Stock Exchange (HSX) or the Hanoi Stock Exchange (HNX) These two exchanges serve as Vietnam's official stock markets, managing capital flow in line with the country's Securities Law and Enterprise Law HSX has been operational since 2000, while HNX began in 2005 Notably, firms listed on HSX have consistently provided more comprehensive information, including at least five recent audited financial statements, compared to those on HNX Additionally, HNX has published an index for the Unlisted Public Company Market (UPCOM), although UPCOM is not recognized as an official stock exchange in Vietnam.
Conclusion and implication tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
Due to the 27 regulations requiring firms to meet specific criteria for official listing, many companies opted for UPCOM instead of HSX or HNX, thus not being recognized as officially listed entities Consequently, this study focused exclusively on data from the two official stock markets, HSX and HNX Additionally, the research utilized information from the annual reports of the Department of Corporate Finance (Ministry of Finance) regarding the privatization of State-owned enterprises By the end of 2015, there were a total of 695 listed companies across HSX and HNX, with 435 of these being former State-owned enterprises, which formed the target population for further analysis.
To ensure a coherent analysis, the target population must exclude firms from the financial sector, including banks, securities, insurance, and diversified financials, due to their distinct corporate structures and revenue streams that result in abnormal indicators.
The study focused on ensuring a non-random selection of privatized firms by adhering to rigorous statistical procedures for data collection, ultimately aiming to obtain valid results.
2015, total SOEs was privatized and listed companies in both HSX and HNX was 435 Data and information of shareholders were taken from published annual reports of these firms
According to Wattanakul’s model of privatization (2002), firms with zero State shares are considered fully privatized and would be excluded from the analysis After excluding 15 financial State-Owned Enterprises (SOEs), 109 fully privatized SOEs, and 2 SOEs with equal private and government ownership, the final sample size consisted of 309 firms This sample was categorized into two groups: 153 firms with State-dominant ownership (SDO) and 156 firms with private-dominant ownership (PDO) The diverse range of industries represented in the sample, excluding financials, means that the findings cannot be interpreted as specific to any one industry.
The study's sample size is demonstrated in section 3 For the latest full download of the thesis, please contact via email at vbhtj mk gmail.com.
Total listed companies Target population
At first, the target population was taken from two stock exchanges websites, HSX and
The study focused on firms listed on the HNX, specifically filtering out those listed in 2016 due to insufficient data Financial sector firms were excluded, as the target population comprised all listed privatized firms A comprehensive review of the history of available listed firms was conducted to determine their status as former state-owned enterprises (SOEs) The analysis utilized annual reports to examine ownership structures post-privatization, eliminating firms that were fully privatized (with 0% state shares) or equally privatized (with 50% state shares) The research primarily relied on secondary data sourced from published annual reports and audited financial statements from the last five years, spanning from 2011 to 2015.
2015) At this point, missing data were realized and removed Subsequently, these following data from financial statement of selected firms were recorded: Total assets, Total liabilities,
Total equity, and Net income This collection was conducted for calculating Return on Assets
(ROA) and Debt to Equity (D/E) ratios Moreover, total assets index were also used to measure firm size Figure 8 describes the data collection procedure
All listed firms on HNX and HSX
Privatized firms excluding full and equal privatization
The annual reports and audited financial statements from 2011 to 2015 are now available for download For the latest updates and comprehensive information, please contact us at vbhtj mk gmail.com.
Data analysis method
Linear regression analysis was conducted to explore the relationship between firm profitability and the predictor variable, Debt to Equity The analysis utilized a proposed equation to perform the regression with Debt to Equity as the sole predictor.
X: predictors (D/E, PDO or SDO), β 0 : a constant (least-squares estimate of the intercept), β: term of coefficient (least-squares estimate of population’s coefficient for X), e: a residual term
The coefficient terms of predictor variables indicate the direction of their effects on predicted outcomes If the predictors show a significant correlation with firm performance (p-value ≤ 0.05), the next step will involve testing for the moderating effects of PDO.
Hierarchical multiple regression analysis was employed for the test of moderating effects
(e.g Cohen & Conhen, 1983) This method adopts gradually procedures as the following equations:
At first, to apply the following equation to test whether the relationship between X and Y is independent of M:
Lastly, to apply the following equation to test whether relationship between X and Y is better with the presence of M:
Y= β 0 + β 1 X + β 2 M + β 3 (X*M) + e tot nghiep down load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg
M: Moderators (PDO or SDO) β 0 : a constant (least-squares estimate of the intercept) β 1 , β 2 , β 3 : term of coefficient (least-squares estimate of population’s coefficient for X, M and XM) e: a residual term
The results from both steps indicate that M serves as a statistically significant moderator in the relationship between X and Y, with a p-value of 0.05 or less Furthermore, M positively influences the improvement of R-squared in the final analysis The regression coefficient of the moderator (β 3 ) estimates the magnitude and direction of this moderating effect.
Variables
The study used three sets of variables including dependent variables, independent variables and control variables
The dependent variables in this study represent measures of firm performance, which may be influenced by ownership and capital structures Firm performance, often synonymous with "firm profitability," can be assessed through market growth or sales The study focuses on Return on Assets (ROA) as a key indicator of profitability, as it effectively reflects the relationship between assets and revenue generation, as noted by Abbasi and Malik (2015).
Profitability is measured by Return on Assets (ROA), which is calculated as net income divided by total assets.
The independent variables included corporate ownership structures and capital structures investigated
The main predictor of firm profitability was Debt to Equity ratio (D/E) Vintila and Duca
The debt to equity ratio is a crucial financial metric that reflects the balance between a firm's equity and debt in financing its assets It plays a significant role in assessing firm performance and is essential for evaluating the financial health of an entity by measuring liquidation risk The ratio is calculated using a specific formula.
In simple linear regression analysis, the predictors examined were the Debt to Equity Ratio, Private-Dominant Ownership (PDO), and State-Dominant Ownership (SDO), with ownership measured by the percentage of shares held by the private sector for PDO firms and by the state for SDO firms.
This study utilized PDO and SDO as moderators to quantitatively assess the levels of private-dominant and state-dominant ownership in privatized state-owned enterprises (SOEs).
The regression equation was enhanced by including firm size (SIZ), measured by total assets, which significantly influences firm performance Larger firms tend to have greater market power, positively impacting their profitability (Adewale & Ajibola, 2013) Consequently, firm size is recognized as a crucial determinant of performance, with its potential effects controlled by using the natural logarithm of assets.
Summary of methodology
The study analyzed a sample of 309 privatized firms listed on the Hanoi and Ho Chi Minh Stock Exchanges Data was collected from published annual reports and audited financial statements over a five-year period, from 2011 to 2015.
2015) The equations applied to test the hypotheses with addition of control variable are following:
X: predictors (D/E, PDO or SDO), β 0 : a constant (least-squares estimate of the intercept), β 1 , β 2 : term of coefficient (least-squares estimate of population’s coefficient for X), e: a residual term
M: Moderators (PDO or SDO) β 0 : a constant (least-squares estimate of the intercept) β 1 , β 2 , β 3 , β 4 : term of coefficient (least-squares estimate of population’s coefficient for X,
The variables utilized for data analysis in this study are summarized in Table 4.
Dependent variable Firm performance Return on Assets (ROA) ROA = Net income/Assets
Predictor Debt to Equity ratio
Moderator Private-dominant ownership (PDO)
The percentage of private sector holding on ownership’s shares State-dominant ownership (SDO)
The percentage of State holding on ownership’s shares
Control variables, such as firm size, are essential in research Firm size (SIZ) can be quantified using the logarithm of total assets This measurement provides valuable insights into the company's scale and operational capacity.
Data Analysis
Descriptive analysis
Descriptive statistics were performed on a sample of 309 firms over a five-year period from 2011 to 2015, resulting in a total of 1,521 observations.
21 missing data), the descriptive statistics for the data are displayed in Table 5 below The study also focuses on two sample panels that differ in dominant ownership: PDO panel and
On sample of 156 PDO firms with observations of 774, firm performance measured by
Return on assets (ROA) varies significantly, ranging from -0.270 to 0.722, with a standard deviation of 0.080, indicating diverse firm performance across different industries, excluding financials The average debt to equity ratio is 1.791, with a maximum of 33.027 and a minimum that reflects substantial variability in leverage among the firms studied.
The average debt level is 0.008, with a standard deviation of 2.733 Additionally, firms with a private-dominant ownership (PDO) structure hold a higher average percentage of shares at 73.8%, compared to firms with a state-dominant ownership (SDO) structure, which average 58.14%.
A study of 153 SDO firms, encompassing 747 observations, reveals that firm performance exhibits significant variability, ranging from -0.543 to 2.527, with a standard deviation of 0.170, notably higher than that of PDO firms Conversely, the average debt amount shows a smaller standard deviation of 2.041, with fluctuations between 0.044 and a higher threshold.
SDO firms typically maintain a low level of debt, whereas PDO firms are required to incur debt for investment purposes.
The average firm size for PDO and SDO is 11.55 and 11.81, respectively, indicating a close similarity Among 156 PDO firms, there are 57 small and medium-sized enterprises (SMEs) and 99 large enterprises, while 153 SDO firms consist of 32 SMEs and 121 large enterprises This suggests that state ownership in large enterprises remains significantly higher than that of the private sector.
PDO (n= 156) Mean Maximum Minimum Std Dev Observations
SDO (n3) Mean Maximum Minimum Std Dev Observations
The debt-to-equity (D/E) ratio is considered the primary predictor for examining the moderating effect of dominant ownership on the relationship between capital structure and firm performance The D/E ratio is categorized into three levels, as outlined in Table 6.
Table 6 Level of Debt to Equity
Preliminary correlation analysis reveals that capital structure and ownership structure significantly influence firm performance As shown in Table 7, the debt-to-equity ratio exhibits a weak negative correlation with firm performance, with values of \$r_{D/E-PDO} = -0.262\$ and \$r_{D/E-SDO} = -0.264\$, supporting hypothesis 1 Furthermore, hypotheses 2 and 3 suggest that the presence of PDO and SDO mitigates the negative impact on firm performance.
The analysis reveals that PDO exhibits a weak negative correlation with firm performance (r = -0.109) and a positive correlation with D/E (r = 0.087) In contrast, SDO's relationship remains unclear due to incomplete data.
36 weak and positive correlation with firm performance (r = 0.082) but negative correlation with
The coefficient of correlation for D/E is r = -0.009, indicating a weak correlation between the variables This weak relationship among the explanatory variables suggests that multicollinearity is not a significant issue, thereby instilling confidence in the regression tests.
Firm performance Debt to equity PDO Firm size
Firm performance Debt to equity PDO Firm size
Regression analysis
4.2.1 Result of relationship between capital structure and firm performance
This analysis examines the relationship between capital structure, indicated by the debt to equity ratio, and firm performance, measured by Return on Assets (ROA) It incorporates firm size as a control variable, represented by the natural logarithm of total assets The findings are presented in Table 8, revealing coefficient terms of -0.007 for the PDO panel and -0.022.
The analysis of the SDO panel reveals that the debt-to-equity (D/E) ratio has a significant negative impact on firm performance, with a p-value of 0.000, supporting hypothesis 1, which posits that firms with higher D/E ratios experience lower performance Additionally, when considering the control variable of firm size, a significant effect on performance is observed for SDO firms (p-value = 0.0176) with a coefficient of -0.023 However, no significant relationship is found for PDO firms (p-value = 0.0751) Consequently, hypothesis 1 is accepted.
In conclusion, the findings highlight the negative impact of capital structure on the performance of privatized state-owned enterprises (SOEs) in Vietnam, indicating that higher debt levels can lead to decreased firm performance This situation arises because these firms often cannot access capital from the stock market due to declining prices, forcing them to rely on bank loans, which results in significant interest expenses Additionally, as former SOEs, these enterprises no longer benefit from preferential rates and advantages, compelling managers to pursue high-risk investments for potential high returns However, the ineffective debt mechanisms in place can yield unfavorable outcomes, ultimately harming shareholders.
Table 8 Regression result of relationship between D/E and firm performance
Variable Coefficient Prob Coefficient Prob
4.2.2 Result of relationship between dominant ownership structure and firm performance
Similarly, the simple linear regression is applied for testing the relationship between dominant ownership structure (represented by PDO and SDO) and firm performance
(represented by ROA) The analysis runs with control variable of firm size to test hypothesis
2 and hypothesis 3 Specially, it will run gradually on PDO panel and SDO panel
4.2.2.1 Result of relationship between Private-dominant ownership structure and firm performance
Table 9 demonstrates the result of significant effect of PDO on firm performance (p-value
The analysis reveals a significant negative impact of PDO on firm performance, indicated by a coefficient of -0.0006, leading to the rejection of hypothesis 2 Additionally, the control variable of firm size shows no significant relationship with firm performance in PDO firms, as evidenced by a p-value of 0.47, which exceeds the 0.05 threshold.
Privatization aims to enhance firm value; however, firms with Publicly-Declared Ownership (PDO) tend to experience a negative impact on their value This finding contradicts previous studies that highlighted the positive effects of private sector involvement, including outside and foreign shareholders, on the performance of certain privatized State-Owned Enterprises (SOEs) in Vietnam.
Table 9 Regression result of relationship between PDO and firm performance
4.2.2.2 Result of relationship between State-dominant ownership structure and firm performance
On the other hand, Table 10 shows the result of firms with SDO has significantly and positively affected on firm performance (p-value = 0.0007 and coefficient = 0.0022)
The control variable of firm size significantly affects performance, with a p-value of 0.000 indicating a negative impact, as evidenced by a coefficient of -0.049 Consequently, hypothesis 3 is accepted.
The positive impact of SDO structures on firm performance can be attributed to several factors Firstly, many of these firms are large enterprises with significant state control, allowing them to benefit from state support and possess a competitive edge over PDO firms Secondly, in the context of Vietnam, firms with a majority of state shares are perceived as state-backed, making them more attractive to investors compared to their counterparts.
Table 10 Regression result of relationship between SDO and firm performance
In conclusion, the analysis of both PDO and SDO panel data reveals that ownership structure significantly influences firm performance, albeit in contrasting ways Specifically, SDO positively impacts firm value, while PDO has a negative effect In Vietnam, the government continues to prioritize state-owned enterprises (SOEs) over private companies Furthermore, the privatization of an SOE does not equate to complete state divestment, as the government often retains a substantial ownership stake, particularly in larger firms.
Creating a fair investment environment is a primary goal of privatization; however, the perception of diminishing state involvement in the overall economy has not been achieved.
4.2.3 Result of the moderating effect of dominant ownership on relationship of D/E and firm performance
As the first test confirmed with the negative relationship between capital structure
This study examines the relationship between debt-to-equity ratio (D/E) and firm performance, specifically focusing on the moderating effects of dominant ownership structures, including private-dominant ownership (PDO) and state-dominant ownership (SDO) Hypotheses 1, 4, and 5 explore how these ownership structures influence the connection between firm profitability and capital structure The interaction term will reveal the nature of the relationship between D/E and return on assets (ROA) A two-stage hierarchical regression analysis will be employed to analyze the data.
4.2.3.1 Result of the moderating effect of private-dominant ownership on relationship of D/E and firm performance
This regression analysis utilizes PDO panel data to investigate the relationship between firm performance and capital structure, independent of private-dominant ownership The results indicate that the debt-to-equity ratio (D/E) significantly impacts firm performance, with a p-value of 0.0000 and a coefficient of -0.007 Additionally, private-dominant ownership (PDO) negatively affects firm performance, evidenced by a coefficient of -0.0005 and a p-value of 0.0077 Firm size also shows statistical significance on firm performance at a 26% level The R-squared value of 7.8% suggests that the regression model has limited explanatory power.
Table 11 Regression result of relationship between firm performance and D/E independent of PDO
By incorporating the interaction term as in Table 12, the result proves that relationship of
The analysis reveals that the relationship between debt to equity (D/E) and firm performance is significantly influenced by private-dominant ownership (PDO), with a p-value of 0.000 indicating strong statistical significance The positive interaction coefficient of 0.0004 suggests that PDO plays a crucial moderating role in enhancing firm performance in relation to D/E ratios Furthermore, the increase in the interaction term's R-squared from 7.8% to 9.8% demonstrates that a higher proportion of private shares in privatized state-owned enterprises (SOEs) positively impacts the adverse effects of D/E on return on assets (ROA) Consequently, the study accepts hypothesis 4, confirming that private-dominant ownership mitigates the negative impact of D/E on firm performance.
41 privatized SOE’s performance Yet, there is no proof to confirm the relationship of the control variable of firm size and firm performance
Table 12 Regression result of moderating effect of private-dominant ownership on relationship of D/E and firm performance
PDO can mitigate the adverse effects of the debt-to-equity ratio on firm performance, suggesting that private shareholders play a crucial role in managing debt levels For PDO firms, the debt-to-equity ratios are categorized as high (33.02716), medium (1.791517), and low (0.008182) If the debt surpasses the high threshold, it may negatively impact performance.
PDO no longer plays moderating role in bring additional profitability to firm
4.2.3.2 Result of the moderating effect of State-dominant ownership on relationship of D/E and firm performance
The analysis reveals that the moderating effect of Social Dominance Orientation (SDO) on the relationship between Debt-to-Equity (D/E) and firm performance is significant, as indicated by a p-value of 0.0000 and a coefficient of -0.019 for D/E Additionally, SDO has a notable negative impact on firm performance, with a coefficient of -0.0018 and a p-value of 0.0029 Firm size also demonstrates statistical significance in influencing performance, with a significance level of 0.0118 The R-squared value of 8.4% suggests that the regression model has a modest explanatory power.
Table 13 Regression result of relationship between firm performance and D/E independent of SDO
Table 14 presents the regression results examining the relationship between firm performance and the debt-to-equity (D/E) ratio, including an interaction term Unfortunately, the findings do not support Hypothesis 5, which posited that the presence of SDO would mitigate the negative effects of the D/E ratio on firm performance, as indicated by a p-value of 0.595, exceeding the 0.05 threshold.
Therefore, there is no evidence to refute hypothesis 5
Table 14 Regression result moderating effect of State-dominant ownership on relationship of D/E and firm performance