Summary of the dissertation: Measuring the level of non-financial information disclosure and factors affecting the level of non-financial information disclosure of companies listed on the stock exchange in Vietnam

Summary of the dissertation: Measuring the level of non-financial information disclosure and factors affecting the level of non-financial information disclosure of companies listed on the stock exchange in Vietnam.

MINISTRY OF EDUCATION AND TRAININGUNIVERSITY OF ECONOMICS HO CHI MINH CITY

-

DUONG HOANG NGOC KHUE

MEASURING THE LEVEL OF NON-FINANCIAL

INFORMATION DISCLOSURE AND FACTORS AFFECTING THE LEVEL OF NON-FINANCIAL INFORMATION

DISCLOSURE OF COMPANIES LISTED ON THE STOCK

EXCHANGE IN VIETNAM

Major: Accounting Code: 9340301

SUMMARY OF THE DISSERTATION

HO CHI MINH CITY – 2019

The dissertation is prepared at:

University of Economics Ho Chi Minh City

The thesis will be presented to the Thesis committee at at

University of Economics Ho Chi Minh City on

INTRODUCTION

1 Research ideal

Accounting information includes financial and nonfinancial information We

do not deny the significant role of financial information of companies in the investors’ decision making However, in a developing society, the intense production of enterprises leads to negative environmental impacts, labour exploitation to maximize profit, regardless of adverse effects on the development of sustainable economy Therefore, since the 1990s, organizations created the concept of sustainable development, thus the awareness of companies and stakeholders has improved in terms of not only financial information but also nonfinancial information, which includes information about environment, society, corporate governance, and other nonfinancial information, changed from encouraging voluntary disclosure to mandatory disclosure some types of nonfinancial information such as social and environmental information For example, when starting a project, besides providing

financial information like financial position, cash flow, payback period, profit, etc.,

companies must also disclose nonfinancial information of the project to stakeholders such as its negative impacts on the environment, solutions for the pollution, remuneration policy and unemployment resolutions for the local workforce Only this way, companies will provide overall and sufficient information to investors so that they can make economic decisions

Investors, especially international ones, are paying much attention to nonfinancial information to have an insight in the value, prestige, and sustainability of businesses If companies do not attempt to lessen their negative impacts on the environment and society, they will not be possible to get and retain professional

investors Besides analyzing traditional financial indicators to make business

decisions, investors also analyze nonfinancial factors including environment, society and corporate governance information for the decision making of investors

Nonfinancial information disclosure has been applied for a long time in developed nations worldwide in several forms with the guidelines like the Global Reporting Initiative (GRI), a framework of the Carbon Disclosure Project, or other guidelines Nonfinancial information, which plays an important role in accounting information system, has the potential to add significant value (Fraser, 2012), the nonfinancial information disclosure makes companies develop more sustainably, enable the value of enterprises to be recognized by the society and enhance the competitiveness of companies worldwide

In Vietnam, companies mostly pay attention to financial information, and some types of nonfinancial information which present in the notes of financial statements are used to explain and support for financial information, not the nonfinancial information about the environment, society, etc However, some companies listed on the stock exchange are aware of the important role of nonfinancial information disclosure according to international standards like the G4 guideline of Global Initiative Organization (GRI4) such as Vinamilk joint stock company, Hau Giang pharmaceutical joint stock company, Imexpharm pharmaceutical joint stock

company… As a results, these companies are greatly trusted by both national and international investors and their value is internationally recognized

Vietnam has been a member of many organizations worldwide like WTO, AFTA, AEC…, so there is a greater need for economic integration to attract foreign investors Moreover, when sustainable development are becoming more and more competitive, Vietnamese accounting reports also need to disclose mandatory nonfinancial information, especially social and environmental information, etc

Therefore, in the year 2015, the Ministry of Finance issued Circular No 155/2015/TT-BTC regarding information disclosure on securities market The circular

155 requires listed companies to report on their impacts on the environment and society After a year of the implementation, companies which disclose nonfinancial information according to the G4 guideline apply easily the circular 155/BTC While the others apply the circular 115/BTC inadequately and eliminate some indexes due to the lack of information about gathering, processing and disclosing

As a result, research on nonfinancial information disclosure are gaining more attention Around the world, there are several research on the level of nonfinancial information disclosure and factors affecting this level, like Mobus (2005), Levine and Smith (2011), Babaloo (2012), Skouloudis and et al (2013), Behbahani and et ah (2013a, 2013b), Karim and et al (2013), Ioannou và Sarefeim (2014), Khan and et al (2014), Ghasempour Grewal and et al (2015), Christensen and et al (2015), Kaya (2016), Mihajlov and Spasic (2016), Rezaee và Tuo (2017), Manes-Rossi and et al (2018), Gulin and et al (2018), Sierra-Garcia and et al (2018), Szadziewska and et al (2018)… Nonetheless, in Vietnam, the kind of the research topic only has some studies such as the research of Ta Quang Binh (2012, 2014), Pham Duc Hieu and Do Thi Huong Lan (2015) Therefore, it is necessary to choose the topic “Measuring the level of nonfinancial information disclosure and factors affecting the level of nonfinancial information of companies listed on the stock exchange in Vietnam” as the research topic for the dissertation

2 Research objectives and questions

2.1 Research objectives

The dissertation is designed to achieve the following specific objectives:

+ Firstly, measuring the level of non-financial information disclosure of companies listed on the Vietnamese stock exchange in accordance with Vietnamese regulations, and according to GRI4 regulations of the internation

+ Secondly, identifying the factors and measuring the impact of each factor on the level of non-financial information disclosure of companies listed on the Vietnamese stock exchange

2.2 Research questions

3 Research Methodology

The author uses mixture of qualitative and quantitative methods in the dissertation The research process of the dissertation as below:

Figure 1: Research framework of the dissertation

4 Research subjects and scopes

Reseach subjects: Non-financial Information

Using results

of the first research objective

Results (Answer the second research question)

Results

The level of non-financial information disclosure

in accordance with Vietnamese and GRI4

regulations (Answer the first research question)

Using results of the second research objective

Using results of the first research objective

Discussion and policy implications to enhance the level of non-financial

information disclosure of listed companies in Vietnam

Identifying the factors and measuring the impact of each factor on the level of non- financial information disclosure ( Answer the

second research question )

Regression method Descriptive statistics method

General Research Objectives

Measuring the level of non-financial information disclosure of companies listed

on the Vietnamese stock exchange in accordance with Vietnamese and international regulations And study on the factors affecting the level of non-financial information disclosure

The first specific objective: Measuring the

level of non-financial information disclosure of

companies listed on the Vietnamese stock exchange

in accordance with Vietnamese and GRI4

regulations

Qualitative research (Expert method)

Identifying factors for the research

model

The second specific objective: identifying the

factors and measuring the impact of each factor on the level of non-financial information disclosure of companies listed on the Vietnamese stock exchange.

Unweighted index method

Descriptive statistics method

Quantitative Method

Research Scopes: Companies are listed officially on the stock exchange in

Vietnam; Data of non-financial information was collected in annual report 2016 and sustainability report 2016; Studying listed companies had an accounting year from January 1st to December 31th each year

Research limitations: Do not study financial companies because they disclosed

non-financial information differently from manufacturing companies; The dissertation does not study the quality of non-financial information disclosure; The dissertation does not study companies listed after January 1st, 2016 because they disclosed non-financial information inadequately

5 New contributions:

The new academic and theoretical contributions: The dissertation has

verified and added the scoring method of non-financial information disclosure in Vietnam The dissertation has exposed a new factor which named foreigner loans impacts the level of non-financial information disclosure The dissertation measures the factors affecting the level of non-financial disclosure of the companies listed on the Stock Exchange in Vietnam

New implications from the research results:

The dissertation has measured the level of non-financial information disclosure

of the companies listed in Vietnam according to the regulations in Vietnam and according to G4 guidelines of the Global Reporting Initiative The dissertation has evaluated the level of non-financial information disclosure according to Vietnamese regulations of listed companies what extent against international standards The dissertation proposed policy implications for state management agencies and implies corporate governance from the research results of the dissertation as follow:

+ For listed companies, the dissertation proposals corporate governance policies ralated to factors affecting to the companies in order to more advantage in the information disclosure more transparent

+ For state management agencies, implies reviewing non-financial disclosure documents and policies, specifically circular 155/BTC should be adjusted to suit the reality

+ For professional organizations such as the VAA, VACPA, academic researchers specializing in accounting, the dissertation is one of an elaborate, rigorous studying materials, it is used to compare with the other teaching about non-financial information disclosure and the factors that affect the level of non-financial disclosure

6 Structure of the dissertation:

The dissertation is divided into five chapters:

Chapter 1: Literature Review

Chapter 2: Theoritical Framework

Chapter 3: Research Method, Findings and Discussion on measuring the level of non-financial information disclosure

Chapter 4: Research Method, Findings and Discussion on identifying and measuring factors impact to the level of non-financial information disclosure

Chapter 5: Conclusion and Recommendation

CHAPTER 1 LITERATURE REVIEW 1.1 Researches on the mandatory disclosure of non-financial information

The characteristics of this research line are the measurement of the level of mandatory non-financial information disclosure The researchers used the unweighted index method to measure the level of mandatory non-financial information disclosure The disclosure indices of a company were prepared base on the national regulations system In this research line, authors used statistical methods to describe the results of the forced publication of non-financial information relative to regulations, thereby assessing the compliance level of non-financial information disclosures of companies

in the research sample

1.1.1 Researches on the mandatory disclosure of non-financial information in

the world

With the research direction of mandatory disclosure of non-financial information, there have been a lot of researches, such as Mobus (2005), Levine and

Smith (2011), BaBaLoo (2012), Ioannou and Serafeim (2014), Grewal et al (2015),

Christensen et al (2015) and Kaya (2016), Manes-Rossi and et al (2018), Gulin and et

al (2018), Sierra-Garcia and et al (2018), Szadziewska and et al (2018)

1.1.2 Researches on the mandatory disclosure of non-financial information in

Vietnam

In Vietnam, the author has not found a separate study on mandatory disclosure of financial information yet

non-1.2 Researches on the voluntary disclosure of non-financial information

The characteristics of this research line are non-financial information that has been studied extensively The researchers used the unweighted or weighted index method to measure the level of voluntary disclosure of non-financial information Some researchers used the content analysis method After that, they used the descriptive statistical method to measure the level of voluntary disclosure Each author divided the degree of disclosure by intervals, without template, to evaluate the level of non-financial information disclosure of the companies in the research sample

1.2.1 Researches on the voluntary disclosure of non-financial information in the

world

With the second research line of voluntary disclosure of non-financial information, there are some authors such as Karim et al (2013), Khan et al (2014), Ghasempour and Yusof (2014), Mihajlov and Spasic (2016), Rezaee and Tuo (2017)

1.2.2 Researches on voluntary disclosure of non-financial information in

Vietnam

In Vietnam, the second line of voluntary disclosure of non-financial information is relatively modest, with some authors such as Ta Quang Binh (2012), Ta Quang Binh (2014), Pham Duc Hieu and Do Thi Huong Lan (2015)

1.3 Researches related to factors affecting the level of non-financial

information disclosure

With the third research line on factors affecting non-financial information, regardless of mandatory or voluntary disclosure, conducted by Meek et al (1995), Robb et al (2001), Skouloudis et al (2013), Karim et al (2013), Arif and Tuhin

(2013), Behbahani et al (2013a, 2013b), Zare et al (2013), Mohammed and Islam (2014), Ghasempour and Yusof (2014), Ta Quang Binh (2014), Pham Duc Hieu and

Do Thi Lan Huong (2015), Rezaee and Tuo (2017), Sierra-Garcia and et al (2018), Szadziewska and et al (2018)

1.3.1 Researches related to factors affecting the level of non-financial disclosure

in the world

Meek et al (1995), Robb et al (2001), Skouloudis et al (2013), Karim et al (2013), Arif and Tuhin (2013), Behbahani et al (2013a, 2013b), Zare et al (2013), Mohammed and Islam (2014), Ghasempour and Yusof (2014), Rezaee and Tuo (2017), Sierra-Garcia and et al (2018), Szadziewska and et al (2018)

1.3.2 Researches related to factors affecting the level of non-financial disclosure

in Vietnam

Ta Quang Binh (2014), Pham Duc Hieu and Do Thi Lan Huong (2015)

1.4 Evaluation of previous studies and Determination of the research gap 1.4.1 Evaluation of previous studies

In the world, this is a full-fledged research series, conducted by three research lines (1) research on the compulsory disclosure level of non-financial information, (2) research on the voluntary disclosure level of non-financial information, and (3) research on factors affecting the level disclosure of non-financial information In Vietnam, the first research line (1) the mandatory disclosure level of non-financial information has not been studyed, the second research line (2) the voluntary disclosure level of non-financial information has been studyed rarely and inadequately And the third research line (3) factors affecting the level disclosure of non-financial information has studyed limitedly and inadequately Most of the previous studies used the non-weighted index method to mark non-financial information disclosure and used statistical methods to measure the level disclosure of non-financial information In addition, the studies used a regression method to test the effect of factors on the level disclosure of non-financial information

1.4.2 Determination of the research gap

From the above analysis, the author will detect the research gap for author’s research on non-financial information disclosure as follows:

+ To measure the level of non-financial disclosure of companies listed on the Vietnamese stock exchange in accordance with Vietnamese regulations, and according

to GRI4 regulations of the world From that, to evaluate and compare the level of financial information disclosure of listed companies in accordance to Vietnam regulation with the world standard

non-+ To identify the factors from literature review and to explore new factors that impact on the level of non-financial information disclosure, and measure the impactation of each factor on the level of nonfinancial information disclosure of companies listed in Vietnam

CONCLUSION FOR CHAPTER 1

CHAPTER 2 LITERATURE REVIEW

2.1 Overview of Non-financial information

2.1.1 Denifition of non-financial information

Non-financial information is a broad concept that is reflected in the various definitions of researchers or professional institutions, such as Meek et al (1995), Robb et al (2001), Dominique (2009), Eccles and Krzus (2010), Fraser (2012), INTOSAI (2013) , European Commission (2013), Forser (2012 ), ICAEW (2008), Admiraal, Nivra, and Turksema Skouloudis et al (2013), Financial Times Lexicon (2015), E&Y (2015) As such, non-financial information is a broad concept, which may be qualitative or quantitative data, not measured in monetary terms, depending on the type of report that non-financial information is presented differently Therefore, in the dissertation, non-financial information is presented in the annual reports that includes the general non-financial information about the company, environment, social, corporate governance, and other non-financial information

2.1.2 The role of non-financial information

2.1.3 Users of non-financial information

2.1.4 Forms of non-financial disclosure

According to the Association of Chartered Accountants of England and Wales (ICAEW), non-financial information presented in each report is different, as follows:

Table 2.2 Types of Nonfinancial information in each report

Types of reports Types of non-financial information

Corporate responsibility

reports

Policy and performance covering the following issues:

- Environmental, for example, carbon emissions

- Social

- Economic

- Ethical

Annual reports - Development and performance of business

- Risks and uncertainties facing the company

- Environmental, employment, social and community issues

- Contractual relationship

- Corporate governance

- Internal controls

- Reserve reporting

- Research and development pipelines

Regulatory reporting Report to managers on issues: presenting risks, pricing

policies, or demonstrating compliance with legal requirements

Detailed data in support of regulatory investigations and consultations

Other reports Other operational information, for example, customer

satisfaction and quality assurance

Source: ICAEW, 2008

2.2 Guidelines of non-financial information disclosure

2.2.1 Guidelines for non-financial disclosure in the world

2.2.1.1 Under guidelines G4 of the Global Reporting Initiative (GRI4)

2.2.1.2 Under Singapore framework

2.2.2 Guidelines for non-financial disclosure in Vietnam

2.2.2.1 Under the Vietnames Accounting Standards

2.2.2.2 Under guidelines for disclosure on securities market

2.3 Non-financial Information Disclosure Measurement Method

Hassan and Marston (2010) studied the disclosure measurement methods The authors examined 40 previous studies on measuring disclosure The results of the study show that: (1) The study presented measures of disclosure provided in prior studies classified into two approaches The first approach includes proxies for disclosure, which are not directly based on examining the original disclosure vehicle(s) The second approach provides measures of disclosure obtained by inspecting the original disclosure vehicle(s) (2) Frequency of methods used to measure quantity / quality of information disclosure

The results of Hassan and Marston (2010) show that some studies can use two or more proxies for disclosure Statistical results suggest that the most used method in disclosure measurement was the disclosure index with rate 32%

financial information disclosure

2.4.5 Legitimacy theory

Content theory

Applied theories

Legitimacy theory is used to explain factor company's industry which will

affect the level of non-financial information disclosure

CONCLUSION OF CHAPTER 2

CHAPTER 3 RESEARCH METHODS, FINDINGS AND DISCUSSION ON MEASURING THE LEVEL OF NON-FINANCIAL INFORMATION DISCLOSURE 3.1 Research design

3.1.1 Appropriate research methodology

3.1.2 Research process

3.1.3 Scoring Methodology of nonfinancial information disclosure

The author has chosen the unweighted index method in order to identify the disclosure level of nonfinancial information such as prior researches of Behbahani (2013a, 2013b), Ghasempour and Yusof (2014), Ta Quang Binh (2014), Pham Duc Hieu and Do Thi Huong Lan (2015), Grewal et al (2015), Kaya (2016), The method analyses each category using a “1, 0” scoring methodology If there is information of subcategories, these subcategories will gain a score of 1, whereas a score of 0 will be awared if no information subcategory is disclosed Therefore, the non-financial information disclosure (NFID) index is calculated according to the following formula:

NFIDj =

∑𝑛𝑖=1𝑑𝑖𝑗𝑛

Where:

+ NFIDj: Total of non-financial informationa disclosure of company j in according

to Vietnamese regulations, and GRI4 regulations

+ dij = 1 if subcategory is disclosed

+ dij = 0 if no information subcategory is disclosed

+ n: The number of non-financial information items are disclosed

3.1.4 Research Conduction

3.1.4.1 Research Sample:

The study covers 577 non-financial companies listed on HOSE and HNX The sample period in this study is only for the year ending on December 31, 2016

3.1.4.2 Data Collection and Processing

3.2 Findings and discussion

3.2.1.2 Measuring the non-financial disclosure level in accordance with GRI4

From the descriptive statistics result, the mean value of non-financial information disclosure index in accordance with GRI4 is 56.51 items (total 193 items), approximately

29.3%, it belongs to below the average level (< 50%) whereas the lowest value of financial information disclosure index is 7.8%, which is low The highest value is 72.5%

3.2.2.2 Discussing the non-financial disclosure level in accordance with GRI4

Non-financial disclosures under the guidance G4 of Global Reporting Initiative are not mandatory in Vietnam, and listed companies may voluntarily disclose non-financial information such as environmental, social and corporate governance in accordance with this guideline

According to the survey results, the level of non-financial information disclosure

of GRI4 was low at 29.3%, reaching below the average level (<50%) The gap between listed company with the lowest GRI4 (15 points) and the highest (140 points) is quite far, the difference is 125 points

The survey results are the same the report of the council of Vietnam listed company awards1 in 2017: "There is a gap in the sustainability report of high-ranking businesses and the remaining businesses which show an uneven understanding between businesses on GRI's G4 guidelines and many missing reports basic parts of a GRI report"

Companies listed in the sample with non-financial information disclosure points according to G4 guidelines have a high score as those companies that publish

1http://www.aravietnam.vn/khong-phan-loai/thong-cao-bao-chi-khoi-dong-cuoc-binh-chon-bctn-2017/ Thông

cáo báo chí: Kỷ niệm 10 năm cuộc bình chọn BCTN và trao giải cuộc bình chọn năm 2017, accessed dated 30/3/2017

sustainability reports integrated in their annual reports or create their own sustainability reports such as DHG, TRA, VIC, FPT, CTD, IMP, VNM, BMP, DCN, HBC, PVD, HSG, NTP, VCS, TDH, DPM, NSC, REE, PGS,… They belong to Top 10, Top 30, Top 50 of the 2017 Vietnam listed company awards

3.2.2.3 Average test of non-financial disclosure level in accordance with Vietnam and GRI4

4.1.1 Appropriate Research Methodology

The dissertation uses the qualitative method as an in-depth interview methodology

to select the factors that lead the research paradigm from the previous studies, and explore new factors for the research model, while proposing the scale of the factors in the model

Using quantitative methods, specifically using the regression model to test hypotheses, and determining the impact of each factor on non-financial disclosure levels

of companies listed in Vietnam

4.1.2 Research process

4.1.3 Research Model and Measurement Variables

4.1.3.1 Research Model of factors influencing the level of non-financial information disclosure

REGRESSION MODEL:

General research model of factors affecting the level of non-financial information disclosure:

NFID = ß0 + ß1QMCT + ß2LNCT + ß3 ĐBTC + ß4VTĐL + ß5NNKD + ß6TKCT + ß7PTKD + ß8TUOI + ß9TGNY + ß10 VVNN + ß11SHGov + ß12SHFor + ß13SHTC +

ß14KiTNB + ß15CTKiT + ß16LĐK + ß17 CEO + ß18VHCT + Ɛ

Where:

NFID: The level of non-financial information disclosure

The regression model built with the dependent variable is the non-financial disclosure level measured in accordance with two standards, including Vietnam and guidelines G4 of the Global Reporting Initiative, so that the dependent variable (NIFD) is measured by the following two criteria:

+ NFID1: The level of non-financial information disclosure according to Vietnamese regulations (Model 1)

+ NFID2: The level of non-financial information disclosure

in accordance with GRI4 (Model 2)

ß0, ß1, … ß22: Partial regression coefficients

QMCT, LNCT, ĐBTC, VTĐL, NNKD, TKCT, PTKD, TUOI, TGNY, VVNN, SHGov, SHFor, SHTC, KiTNB, CTKiT, LĐK, CEO, VHCT: factors influencing the level

of non-financial information disclosure

Ɛ: The error of the model

MEASUREMENT VARIABLES IN THE MODEL