000069204 DISCLOSURE AND TRANSPARENCY IN CORPORATE GOVERNANCE: A CASE OF COMMERCIAL BANKS IN VIETNAM CÔNG BỐ VÀ MINH BẠCH TRONG QUẢN TRỊ DOANH NGHIỆP: MỘT TRƯỜNG HỢP CÁC NGÂN HÀNG THƯƠNG MẠI TẠI VIỆT NAM

IN T R O D U C T IO N

In trod u ction

Over the past few years, Corporate Governance has grown rapidly and is now regarded as a critical attribute of the business sector It attracts considerable interest from both professionals and academics, especially in the wake of major corporate collapses such as WorldCom and Enron in the United States, followed by Lehman Brothers and Northern Rock, underscoring the importance of robust governance practices.

Poor corporate governance and a lack of transparency in corporate financial reporting are frequently cited as root causes of financial crises, prompting investors to scrutinize governance practices before making investment decisions A 2002 global investor opinion survey by McKinsey & Company found that institutional investors treat corporate governance on par with financial indicators when evaluating investments The survey revealed that 63% of investors avoid companies with weak governance and 31% avoid countries with poor governance quality, with many investors also willing to decrease their stock holdings in both poorly governed companies and governance-deficient countries.

Corporate disclosure and transparency are among the most fundamental elements of good corporate governance Making information available helps minimize information asymmetry between insiders and outsiders and allows general investors to assess a company’s performance Experts generally agree that the main driver of financial problems in markets is the lack of disclosure and opaque management practices (Lokman, 2011) As Coombes and Watson (2000) note, investors are increasingly basing their investment decisions on a company's corporate governance information Companies with strong corporate governance information and disclosure practices have a better chance of surviving, especially during periods of economic stress.

DISCLOSURE & TRANSPARENCY IN CORPORATE GOVERNANCE

A CASE OF COMMERCIAL BANKS IN VIETNAM

May, 2012 downturns (Mitton, 2002) As such the need to rank com panies’ Corporate Governance information has become increasingly important with investors seeking indicators o f good governance.

Although corporate governance is not yet a popular concept in Vietnam, it has increasingly become a major concern for regulators, shareholders, and other stakeholders The banking sector is chosen for study because, in developing countries with emerging financial markets like Vietnam, banks play a pivotal role in the efficiency and health of the economy Banks perform functions such as lending, payment processing, and other financial services, and they attract many investors on both stock exchanges and OTC markets due to growth opportunities and potential profits Transparency in the banking system contributes to the stability of the financial market as well as to other industries In Vietnam, rumors and social-psychological factors influence corporate culture, making disclosure and transparency in corporate governance more important than ever and a topic worth studying.

1.2 Problem s and attempts to solve the problems

In Vietnam, knowledge and awareness of Corporate Governance among managers, investors, and other market participants are limited, as the governance mechanism is still relatively new and ensuring a sound system is not a top priority for many Information disclosure and transparency—core factors of Corporate Governance—directly affect the rights and benefits of these parties, yet their understanding of this issue remains low Observations indicate that disclosure and transparency in Vietnam’s financial market are weak, with evidence—both subjective and objective—pointing to inefficiencies in the banking sector caused by non-transparent information flows across different channels, especially within banking.

2 0 1 1; Tam Thoi, 2012; Bui, 2012; etc) Hence, Disclosure and Transparency is a problem that is worth to study.

With the rising importance of corporate governance and the critical role of disclosure and transparency in banking, and acknowledging the urgent need to raise transparency in public disclosure for information practices—World Bank (2011) ranks Vietnam’s information disclosure as among the poorest—this study analyzes the level of corporate disclosure and transparency in the Vietnamese banking sector for 2010 The analysis proceeds in two main steps: first, constructing a Disclosure and Transparency Index to enable better cross-bank comparisons, and second, applying a regression model to answer the research question.

“What factors influence the level o f information disclosure and transparency in commercial banks?”

This thesis investigates the role of disclosure and transparency in the corporate governance of Vietnamese commercial banks, organized around two interrelated components: first, an overview of disclosure and transparency and an analysis of their application within the Vietnamese banking sector; second, an empirical study to identify and assess the factors that affect the level of disclosure and transparency in Vietnamese banks.

This paper is organized into five sections following the Introduction: Part II provides an overview of Disclosure and Transparency in Corporate Governance; Part III examines Disclosure and Transparency with special concerns in the Banking Sector; Part IV states the research questions and outlines the research methodology; Part V presents the actual findings and their discussion from 34 banking firms in Vietnam, along with implications and recommendations for relevant stakeholders; Part VI concludes the thesis.

A CASE OF COM MERCIAL BANKS IN VIETNAM

C ontributions o f the r e s e a r c h

Given the increasing importance o f Disclosure and Transparency in Vietnam context and in Vietnamese banking sector, this research is expected to bring about three contributions.

Corporate governance, information disclosure, and transparency have long been focal points in Vietnam and in neighboring economies with similar characteristics Vietnam's banking and financial system resembles its Asian peers, often marked by weak legal protections, high state ownership, and strong cultural factors, which together make governance a central concern for market participants Although research on corporate governance in Vietnamese banks exists, it remains limited and largely qualitative, with few empirical studies Quantitative methods, by contrast, can reveal relationships between governance variables and provide actionable recommendations Therefore, this study adopts a quantitative approach to contribute to the literature on corporate governance in Vietnam and to extend insights from prior research, aiming to produce quantitative findings that apply not only to the banking sector but to other industries as well.

This study compares the level of information disclosure among commercial banks and identifies the factors that incentivize bank managers to disclose more information Its findings give new investors a broad view of disclosure and transparency in the banking sector and clarify the extent of information they are entitled to access and can access Accordingly, information disclosure may act as a signal that informs investment decisions For existing shareholders, the results provide a reference framework to evaluate the accountability and transparency of their banks, supporting more strategic investment choices.

The study’s results provide regulators in Vietnam with practical insights into whether the country’s regulatory requirements raise corporate governance disclosure and transparency They reveal which banks—and which bank characteristics—are most and least likely to comply with corporate governance disclosure practices, enabling targeted monitoring and supervision where it matters most These findings help evaluate the effectiveness of regulatory standards and guide focused oversight to strengthen disclosure practices across the banking sector.

PART 2: OVERVIEW OF DISCLOSURE AND TRANSPARENCY IN

D e fin itio n

There is no universal definition of corporate governance The OECD (2004) defines it as the set of procedures and processes by which an organization is directed and controlled, specifying the distribution of rights and responsibilities among the board, management, shareholders and other stakeholders, and setting the rules and procedures for decision-making It includes defining corporate objectives and the company’s risk profile, aligning corporate activities and behaviors so that management operates the firm in a safe and sound manner, and ensuring compliance with laws, government policies and company policies while protecting the interests of shareholders and other stakeholders Shleifer and Vishny (1997) argued that corporate governance addresses the agency problems between owners and managers and comprises the governance mechanisms that align incentives and monitor performance.

Corporate governance describes how financiers and other stakeholders secure a return on their investments by guiding a company’s strategy and performance According to Melvin and Hirt (2005), it refers to corporate decision-making and control, with particular emphasis on the board’s structure and its working procedures.

Governance and Management are two different concepts While Governance focuses on the structures and processes o f the company to ensure fairness, transparency, accountability,

Effective management focuses on the tools and processes needed to run the business efficiently, aligning operations with strategic goals Corporate governance operates at a higher level to provide the framework for leadership, oversight, and accountability, ensuring the company is well managed and serves the interests of shareholders.

In short, we can see Corporate Governance has the characteristics as:

Corporate governance is built on the separation of ownership and management Shareholders own the firm, but its operations are guided by a governance framework that includes the board of directors, the supervisory board, senior management, and the input of employees, whose interests are not always aligned with those of the owners This potential misalignment necessitates robust governance mechanisms that enable shareholders to monitor, oversee, and control the company’s operations effectively, ensuring accountability and sustained performance.

Corporate governance defines the roles and responsibilities of the company’s key groups—shareholders, the board of directors, the supervisory board, the senior management team, and other stakeholders such as employees and suppliers It also lays out the principles, processes, and decision-making procedures that guide the organization, with the aim of preventing abuse of power, reducing risks from related-party transactions, and mitigating conflicts of interest that can arise from unclear standards or weak compliance with information disclosure and transparency regulations.

In Corporate Governance Principles for Cooperative Insurance Company in Bupa Arabia, the definition o f Disclosure and Transparency are specified clearly.

Disclosure is the process o f disclosing and revealing (financial and non-financial) inform ation o f concern for the investors, performed on periodical basis (specific financial periods) or on immediate basis when the information occurs so that the information shall be available at the same time for all and no party shall make use o f the information before other parties According to Healy and Palepu (2001), “disclosure comprises all forms o f voluntary corporate communications, for example, management forecasts, analysts’ presentations, the annual general meetings, press releases, information placed on corporate websites and other corporate reports, such as, stand-alone environmental or social reports.” Appropriate

May, 2012 corporate disclosure systems means that a good company is able to impress the markets with its integrity.

Transparency is defined as the complete disclosure o f the real financial image o f the company Transparency requires that financial statements or essential events declared shall clearly and explicitly reflect the Company's real position Chima (2012) described transparency as “the characteristics o f being comprehensive, timely, reliable, comparable, and material that enables users o f financial statements to make accurate assessment o f a bank's financial condition” And he confirmed that enhancing disclosure improves bank performance and banking system stability.

In summary, disclosure and transparency is a task o f com pany to ensure the delivery o f corporate information, especially financial one, in a most timely and qualifiedly way.

2 Im portance o f Disclosure and Transparency

A McKinsey Global Investor and Emerging Market Policymaker Opinion Survey on Corporate Governance found that accounting disclosure was the most important factor for 71% of investors, while enhanced disclosure was named the top policy priority by 44% of policymakers (Huang, 2006); these figures underscore the central role of transparent financial reporting in informing investment decisions and guiding governance reforms, with the article outlining the explanations behind why disclosure matters so much to both groups.

Firstly, it is undeniable that Disclosure and Transparency is an indispensable part o f Corporate Governance practices.

The Cadbury Committee (1992) noted that improved disclosure leads to greater transparency, which is one of the most essential elements of healthy corporate governance practices A substantial body of research has shown a link between disclosure practices and governance quality, with Lowenstein (1996) arguing that good disclosure is the most efficient and effective mechanism for prompting managers to improve performance Taken together, these findings imply that transparent reporting enhances accountability, promotes better managerial decision-making, and helps align managers’ incentives with the interests of investors and other stakeholders.

A May 2012 study indicates that firms with greater information disclosure tend to have better corporate governance Accordingly, disclosure and transparency constitute a significant component of corporate governance and of organizations more broadly.

Another critical role o f disclosure is its importance and direct influences on shareholders’ rights and benefits.

Disclosing relevant information enhances transparency and provides adequate information, thereby helping the company’s stakeholders and other market participants to act accordingly (Abdul Rahman, 2006) Full disclosure of a company’s financial position and operations enables shareholders to better assess board and management performance and to make informed decisions (Hideki, 1999) In addition, corporate transparency reinforces governance and stakeholder trust by ensuring that key financial and operational information is accessible and understandable.

Governance disclosure gives investors a clear picture of how a company is monitored and governed, enabling them to compare practices across firms and choose the best investment based on disclosure quality Corporate governance acts as a mechanism to mitigate agency problems between shareholders and management, guiding management toward actions that align with shareholder interests Improvements in disclosure standards and the establishment of governance guidelines are expected to help shareholders ensure that management acts in their best interests, and only through full, transparent disclosure can investors have confidence that their funds are being managed in a manner consistent with those interests.

A strong disclosure regime that promotes transparency is a pivotal feature of market-based monitoring of companies and central to enabling shareholders to exercise their ownership rights on an informed basis Transparent disclosure improves the ability of investors to assess corporate governance, policies, and performance, and it clarifies the structure and activities of enterprises It also broadens public understanding of how companies operate, supporting accountability across markets.

Disclosure and transparency contributes to the economic growth and is paid higher attention in the crisis time.

Accessible, high-quality information is a key driver of economic growth When companies provide transparent disclosure, it helps investors and lenders accurately assess risks and returns, improving the efficiency of capital allocation and reducing the cost of capital In addition, robust corporate disclosure clarifies the extent to which firms meet legal and ethical standards, helping markets function more effectively and contributing to sustained economic growth.

Deficiencies in financial reporting and corporate disclosure have long contributed to business failures, and lack of transparency has repeatedly been blamed for financial crises in Asian emerging markets Despite efforts to tighten reporting standards, the perception persists that corporate transparency in Asia is declining and that the essential information users of financial statements need is not being disclosed effectively Governance structures often fail to prevent or detect these deficiencies, resulting in reporting failures that become more likely as a firm nears insolvency and incentives to distort results rise The 1997 East Asian financial crisis underscored the urgent need for financial and governance reforms, demonstrating how poor disclosure and lack of transparency can mask excessive risk-taking and leverage by global financial institutions.

Hence, high quality disclosure and transparency not only serves to protect investors but helps regulators in maintaining market confidence and systemic stability.

Disclosure and Transparency enhances the management and operation o f the business in various relationships with stakeholders.

T heoretical fram ew ork s o f D isclosu re and T ra n sp a ren cy

Disclosure signals the quality of a firm’s product and business model, its growth strategy, market positioning, and the risks it faces (Chahine and Filatotchev, 2008) By promoting a culture of transparency, companies can earn a positive image among customers, suppliers, and even competitors Rating agencies such as Standard & Poor’s and Moody’s increasingly rely on financial transparency and information disclosure as key criteria for assessing a firm’s management capability and reputation Across the globe, executives recognize the economic benefits of a well-managed disclosure policy.

Section 3: Theoretical frameworks on Disclosure and Transparency

OECD Principles on Corporate Governance (2004) and Standard & Poor’s Corporate Governance Scoring System (2000) are the primary benchmarks used to assess disclosure and transparency across all types of business As foundational standards, they guide how firms disclose information, demonstrate accountability, and strengthen governance practices, making them central to evaluating corporate transparency across diverse industries.

1 OECD Principles on Corporate Governance (2004)

M entioning to Corporate Governance, it must be a mistake without mentioning to OECD (Organization for Economic Cooperation and Development) Principles on Corporate

Governance (2004) outlines OECD‑endorsed best practices for corporate governance that are widely recognized for their practicality and popularity The framework identifies six components of governance standards applicable to both OECD and non‑OECD countries, with Principle V establishing the essential disclosure and transparency framework It requires that companies provide timely and accurate disclosures on all material matters—covering financial condition, performance, ownership, and governance The policy's six subsections (A–F) specify the precise information that must be disclosed to shareholders and public investors, including accounting standards and external audit requirements, to ensure transparency of information See Appendix I for full details of the principle.

OECD Principles are widely adopted in both developed and developing countries and can serve as a valuable tool for enhancing corporate governance in non-traded firms, including privately held and state-owned enterprises Depending on each nation’s legislative environment, these principles may be applied in full or in part and integrated with the country’s corporate governance laws and regulations.

2 Standard & Poor (S& P)’s Corporate Governance Scoring System (2000)

Standard & Poor's (S&P), one of the world’s premier rating agencies, began developing a Corporate Governance rating system in 1998 and has been actively assessing companies’ governance practices since 2000 using the GAMMA framework—Governance, Management, Accountability Metrics and Analysis The approach rests on four components that build the score Typically, S&P asks the company to provide the relevant documentation for inspection and then conducts interviews with officers and other key individuals, including the Board of Directors, the CEO, the Finance Director, key shareholders, and the company’s auditors, among others, before articulating the results on a 1-to-10 scale (1 being the lowest and 10 the highest).

The third component, “Transparency, Audit, and Enterprise Risk Management,” is structured into two sections—“Content of Public Disclosure” and “Timing of and Access to Public Disclosure”—each with subsections “Criteria to Assess” and “Key Analytical Issues.” Overall, the S&P framework aligns with OECD Principles, but the evaluation of disclosed information is presented more clearly to determine whether the company enables the best possible public disclosure; Appendix II provides additional details on these criteria and analytical issues.

S u m m ary

Disclosure and transparency refer to the timely publication of all material information, ensuring accurate, accessible, and credible data for investors and the public By promoting market stability, facilitating shareholders’ evaluation, and building trust in the company’s image, disclosure and transparency have become indispensable pillars of effective corporate governance.

Disclosure and transparency are most often assessed using leading benchmarks like the OECD Principles on Corporate Governance (2004) and Standard & Poor’s Corporate Governance Scoring System (2000) These standards should be applied as the foundational framework to evaluate the level of disclosure and transparency, informing both scientific research and practical observations.

PART III: DISCLOSURE AND TRANSPARENCY IN CORPORATE

C haracteristics o f D isclosu re and T ra n sp a ren cy

This study focuses on the banking industry to assess Corporate Governance, Disclosure, and Transparency It identifies two core questions: What roles do disclosure and transparency play in banking, and which bank-specific characteristics justify a dedicated study of Corporate Governance, Disclosure, and Transparency in the banking sector?

What is the role o f Disclosure and Transparency in banking?

Banks play a pivotal role in the economy by providing financing to commercial enterprises Their significance is reinforced by the globally regulated nature of the banking sector and its access to government safety nets Robust corporate governance within banks is crucial because bank behavior directly shapes macroeconomic outcomes Banks mobilize and allocate society’s savings, serving as a vital source of external financing for firms, particularly in developing economies They also exert corporate governance over the companies they lend to, notably small firms that lack direct access to financial markets Consequently, the governance practices of banks are reflected in the corporate governance of the firms they support, making sound bank governance a prerequisite for sustainable economic growth and development.

Enhanced disclosure, particularly in financial accounting, improves transparency and strengthens market discipline across the economy Basel II's Pillar 3 and Basel Core Principles No 21, together with the OECD Policy Brief on Corporate Governance of Banks, explicitly call for greater bank disclosures so markets can better assess banks’ overall risk and counterparties can price and transact appropriately This heightened transparency enables more accurate risk pricing and stronger market discipline.

As of May 2012, greater disclosure of accurate and timely information about the activities of financial institutions is believed to enable market participants to make an objective assessment of banks' financial health This transparency fosters market discipline that can reduce the likelihood of systemic turbulence in the banking sector.

What are some bank’s “ special” characteristics?

Answering the second question, Levine (2003) argues that banks have two interrelated characteristics that justify a focused analysis of corporate governance, especially in the areas of disclosure and transparency First, banks are generally more opaque than nonfinancial firms Although information asymmetries exist across all sectors, evidence suggests these asymmetries are larger in banking (Furfine, 2001) In banking, loan quality is not readily observable and can remain hidden for long periods Moreover, banks can alter the risk composition of their assets more quickly than most non-financial industries, and they can mask problems by extending loans to clients who cannot service existing debt obligations This reality leads to a broader and more diverse set of stakeholders—many depositors and often more diffuse equity ownership due to regulatory restrictions—which in turn produces weaker monitoring incentives.

Banks are heavily regulated due to their central role in the economy, the opacity of their assets and activities, and their potential to generate fiscal revenue; their high leverage and the prevalence of short-term, risky claims make them vulnerable to runs, and their systemic importance means bank failures can produce large output costs Building on Levine (2003) and Claessens (2011) from the World Bank, scholars have emphasized these “special” features of banks and argued that government oversight—rather than depositors or private investors—primarily monitors banking activity As a result, corporate governance in banks in most countries is anchored in public authority, including banking supervisors and deposit insurers.

As noted by the central bank and regulatory agencies in May 2012, government-backed deposit insurance and other forms of support reduce banks’ funding costs, reflecting their liquidity function in the economy Banks typically hold relatively little equity compared with other firms, and their liabilities are largely deposits that are accessible to creditors on demand, while their assets are predominantly longer-term loans The defining attribute of banks as financial intermediaries is their liquidity production function: by holding illiquid assets and issuing liquid liabilities, they create liquidity for the economy.

This raises questions about whether banks are subject to looser discipline by debt holders, whether bankruptcy is applied less often or in different ways, whether competition is weaker due to entry barriers, and whether a large public safety net creates moral hazard At the same time, banks face greater corporate governance risks because opacity can enable entrenchment and shifting of risks, as well as private benefits and outright misuses—tunneling, insider lending, and expropriation—risks that may be larger than in non-financial firms As with any firm, bank shareholder value can come from increased risk-taking, potentially at the expense of debt claimants and the government.

Corporate governance disclosures, including financial and accounting information, are particularly significant for banking firms due to their inherent opaqueness For banks, accounting reports are often the primary source of information for investors, creditors, and other stakeholders Earnings alone do not fully reveal a bank’s value, because the core business is risk-taking and liquidity provision; a bank’s profitability does not convey its overall financial health until its risk profile is disclosed in a holistic view Moreover, aggregate accounting numbers—such as total profits or total loans—without detailed breakdowns are less informative for banks than for non-financial firms, since the most critical insights lie in the sources of income and expenses and the quality of assets Investors need such detail to distinguish sustainable income from recurring expenses and to assess the resilience of earnings Therefore, enhanced accounting disclosures should be adopted to enable transparent assessment of a bank’s risk, profitability, and asset quality.

In May 2012, regulatory requirements were extended to cover not only publicly traded banks but also privately held and state-owned banks, reflecting the systemic importance of banks to the national economy and their deposit-taking from the general public.

Given the typical characteristics o f Corporate Governance in banking, roles o f Disclosure and Transparency in banks are accordingly more significant.

T h eoretical fram ew ork s o f D isclosu re and T ran sp aren cy in B a n k in g

In terms o f banking organization, the most useful and specific principle is the “Principles on enhancing Corporate Governance fo r banking organizations by Basel Committee”, February 2006.

Regard to the financial markets as well as financial markets regulators and participants, in

In 1999, the Basel Committee on Banking Supervision issued guidance to help banking supervisors encourage sound Corporate Governance practices among banking organizations in their jurisdictions The guidance drew on Corporate Governance principles published earlier that year by the OECD Overall, the Basel Committee's eight principles rest on the same foundation as the OECD framework, but each principle explicitly defines the roles and responsibilities of the Board of Directors.

Disclosure and Transparency: Principle 7 states that the bank should be governed in a transparent manner (see Appendix III for details) In practice, the Basel Committee’s principles largely align with OECD requirements, with one notable exception: the criterion for state-owned banks When a bank is state‑owned, the ownership policy must define the state's objectives, specify the state's role in corporate governance, and outline how the ownership policy will be implemented This provision is especially useful for countries where state‑owned banks exist and dominate the banking system.

L iterature review on D isclosu re and T ran sp aren cy in B a n k in g

The banking sector has attracted significant attention from researchers studying disclosure and transparency in corporate governance To assess the features of disclosure and transparency practices in Vietnam, the literature reviews cover both foreign countries and Vietnam separately From this comparison, good examples from overseas research can serve as valuable references for Vietnam's banking governance.

1 Literature review on Disclosure and Transparency in Banking in foreign countries

Maingot and Zeghal (2008) analyzed Corporate Governance disclosure by Canadian banks, focusing on the nature of disclosed information, the disclosure medium, voluntary disclosure, and determinants of disclosure Information was presented via Corporate Governance web pages, proxy circulars, and annual reports available on each bank’s website, and a list of 54 items was used with a coding scheme that awarded a score of 1 if the item was disclosed and 0 otherwise Their results showed that larger banks tend to disclose more information in the governance sections of their web pages, while smaller banks disclose a greater amount of information in annual reports and proxy circulars Similar results were reported by Kahl and Belkaoui (1981), who investigated the overall extent of disclosure by 70 banks across 18 countries and found differences in disclosure levels among countries and a positive relationship between bank size and the level of disclosure.

Hossain (2001) empirically studied on the extent o f disclosure o f 25 banks in Bangladesh and its relationship between company size, profitability, and audit firm with disclosure level

Using a disclosure index of 61 items that includes both voluntary and mandatory disclosures, the study finds that bank size and profitability are statistically significant determinants of disclosure levels, while the audit firm variable is not significant at conventional levels in the model.

In Asian countries, there are Corporate Governance disclosure reports that may be the good lessons for developing economy like Vietnam.

A study of Malaysia's 100 companies listed on Bursa Malaysia by Homayoun, Rahman, and Ghani (2012) found an acceptable level of reporting for internet corporate governance, indicating that more than half of the sample met the criteria.

Malaysian companies recognize the importance of practicing sound corporate governance and fully support the recommendations of the Malaysia Code of Corporate Governance (MCCG) To measure and reveal how these principles are applied, an Index of Disclosure was developed to assess transparency and compliance across firms.

Hossain (2008) applied a regression model to a sample of 38 Indian banks, including both public and private institutions, and found that bank size, profitability, board composition, and market discipline variables significantly explain disclosure levels, while age, assets-in-place, and business complexity do not The disclosure index used consisted of 184 items, providing a concrete measure of financial reporting practices The study offers insight into how developing economies, particularly India, perform financial reporting duties and how the banking sector implements disclosure standards.

2 Literature review on Disclosure and Transparency in Banking in Vietnam

In 2011, World Bank published the project named “Corporate Governance Scorecard in

The Corporate Governance Scorecard Project in Vietnam for the year 2010 is implemented by the World Bank and the International Finance Corporation (IFC) in cooperation with the State Securities Commission of Vietnam and the Global Corporate Governance Forum.

In 2008, the World Bank launched an international project to assess corporate governance practices against the OECD Principles across countries worldwide The study uses a set of questions for each dimension of corporate governance, and responses are categorized into three levels: Observed, Partially Observed, and Not Observed.

Vietnam's 2010 Corporate Governance Scorecard assessed the governance practices of the 100 largest listed firms on the Hanoi and Ho Chi Minh Stock Exchanges across diverse sectors, including banking and finance The final results showed that, together with board responsibilities, disclosure and transparency were the weakest areas and lagged behind global benchmarks The report concludes that a strong, sustained commitment to good corporate governance has yet to take hold in Vietnam, a finding that mirrors the 2009 results (page 13).

The two figures below represent the specific results o f 32 questions in terms o f Disclosure and Transparency (Detailed o f these questions are provided at appendix IV).

■ Observed Partially observed ■ Not observed

Figure 1: Disclosure and Transparency - areas o f better performance

■ Observed I Partially observed ■ Not observed

Figure 2: Disclosure and Transparency - areas o f poorer performance

Evidence suggests that the prevalence of good disclosure practices among Vietnamese companies is overshadowed by weak ones, with disclosures often perfunctory and lacking detail Gaps include little reporting on board remuneration, the roles and responsibilities of the company’s top executives, the engagement and attendance of individual directors, and the foreseeable risks facing the business Information on directors, including board experience and skills, is frequently superficial As a result, disclosure and transparency in Vietnamese companies remain inadequate and in need of substantial improvement to meet governance standards and investor expectations.

Although the project evaluated Corporate Governance Disclosure and Transparency Practices only in listed companies, its findings provide a valuable overview of common governance practices in Vietnam, and the banking sector is not an exception Therefore, it is reasonable to examine the banking sector’s performance in disclosure and transparency to see whether it follows the same practices and yields similar results.

During the conference “Restructuring the Banking System—International Experiences and References to Vietnam,” organized by the National Finance Supervising Committee in Hanoi on December 21, 2011, Mr Mameer Coyal, head of regional finance and private sector operations for the World Bank in Vietnam, stated that transparency and information disclosure are crucial to successful restructuring He noted, however, that Vietnam currently exhibits significant limitations in these areas.

About Corporate Governance Disclosure and Transparency, Bui (2011), in an article using qualitative method, mentioned that information disclosure in banks is not enough, the indicators to supervise and implement are unclear The financial reporting standards and accounting in banks has not been issued timely and also shows a gap in comparison with international standards.

In Vietnam, the accounting standards system which was issued by the Ministry o f Finance and Vietnam A ccounting & Auditing Association have just been evaluated to be complied at about 95% with international accounting standards However, the applicable o f accounting system in credit institutions has been only at around 50% o f international accounting standards Currently, there are only five State Owned Commercial Banks that have conducted the financial statements auditing by two methods, namely Vietnam accounting standards and international accounting standards (because these banks were in the projects named “Restructuring the State owned commercial banks” funded by World Bank) Meanwhile, many Joint Stock Commercial Banks only audited their annual financial statements based on Vietnam accounting standards.

Bui (2011) identified a weakness among regulators in fulfilling their duties related to Disclosure and Transparency He noted that on November 6, 2009, the Ministry of Finance issued Circular 210/TT-BTC guiding the application of international accounting standards—based on IAS 32 and IFRS 7—for financial statements and explanatory information for financial instruments Consequently, Circular 210/TT-BTC will apply from fiscal year 2011 to all business units across all industries and sectors in Vietnam, covering transactions related to financial instruments The required financial statements and notes under this circular differ from the banking-focused standards set out in Decision 16/2007/QD-NHNN dated April 18, 2007 However, the State Bank has not issued any guidance documents to implement these standards for Vietnamese credit institutions.

R E SE A R C H M E T H O D

C O N C L U S IO N

Tiêu đề	Disclosure and transparency in corporate governance: a case of commercial banks in Vietnam
Tác giả	Do Thu Hien
Trường học	Hanoi University
Chuyên ngành	Finance and Banking
Thể loại	Bachelor's thesis
Năm xuất bản	2012
Thành phố	Hanoi

Định dạng
Số trang	110
Dung lượng	9,14 MB