Financial mangement efficiency of vietnam post and telecommunications groups

xii LIST OF ABBREVIATIONS CEO Chief Executive Officer CFO Chief Financial Officer EGs Economic Groups FMS Financial Management System SEG State owed Economic Group VNPT Vietnam Posts an

in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam

EMPLOYEE TURNOVER AND RETENTION STRATEGIES OF SMALL AND

MEDIUM ENTERPRISE IN SERVICE BUSINESSES IN HANOI

Submitted in Partial Fulfilment of the Requirements for the Degree

DOCTOR OF BUSINESS ADMINISTRATION

A program offered by Southern Luzon State University,

Republic of the Philippines in collaboration with

Thai Nguyen University, Socialist Republic of Vietnam

has been approved by Oral Examination Committee

CECILIA N GASCON, PhD

Chairman Endorsed by: Recommended by:

Accepted in Partial Fulfilment of the Requirements for the Degree

Doctor of Business Administration

_ WALBERTO A MACARAAN, EdD

Date Vice President for Academic Affairs

iii

CERTIFICATE OF ORIGINALITY

iv

ACKNOWLEDGMENT

She would like to express her gratitude to Dr Joanna Paula A Ellaga,

for her being outstanding adviser and excellent professor Her constant encouragement, support, and invaluable suggestions made this work successful As an adviser, she has already everything that one could want in

an advisor She also would like to thank her for providing her ideas on the research methodology and valuable insights on financial management system

Also, she is deeply indebted to Dr Nguyen Thanh Hai and Ms Trinh Thi Hieu -International Training Center, Thai Nguyen University of the

Socialist Republic of Vietnam, for their enormous pursuit to provide the Vietnamese people an opportunity to grow through education Also, she would like to thank all the lecturers of DBA1 course which she have been there as a student for three years, for helping her to complete this dissertation

She also would like to acknowledge my best friends in the DBA 1 class for reviewing my dissertation and providing valuable feedback She is also

grateful to Mr Ngo Anh Cuong and Mr Nguyen Duy Phuong, for their help

and valuable advice, and for being great friends throughout her stay in the program

She is deeply and forever indebted to her family for their love, support, and encouragement throughout her entire life She would like to thank her

husband, Nguyen Trung Kien, who has provided a tremendous amount of

v love and support throughout this study Finally, is for her five-year old son, for being her constant instant inspiration

vi

DEDICATION

I am deeply and forever indebted to my family for their love, support, and

encouragement throughout the conduct of this study

I would like to thank my husband, Nguyen Trung Kien, who has provided a

tremendous amount of love and support throughout this study

On a final note with love is for my five-year old son!

TTNL

vii

TABLE OF CONTENTS

PAGE

TITLE PAGE ……… i

APPROVAL SHEET ……… ii

CERTIFICATE OF ORIGINALITY ……… iii

ACKNOWLEDGEMENT ……… iv

DEDICATION ……… vi

TABLE OF CONTENTS ……… vii

LIST OF TABLES ……… viii

LIST OF FIGURES ……… ix

LIST OF ABBREVIATIONS ……… xii

LIST OF APPENDICES ……… xiii

ABSTRACT ……… xiv

CHAPTER I INTRODUCTION ……… 1

Background of the Study ……… 1

Objectives of the Study ……… 2

Significance of the Study ……… 3

Scope and Limitation of the Study …… ……… 4

Definition of Terms ……… 5

II REVIEW OF LITERATURE ……… 9

Review of Literature ……….………….… 9

Conceptual Framework ……….… 25

III METHODOLOGY ……… 28

Locale of the Study ……… 28

Research Design ……….……….…… 28

Population, Sample Size, and Sampling Technique…… 28

Research Instrument ……… 29

Data Gathering Procedure ……… 29

Statistical Treatment ……… …….…… 31

viii

IV RESULTS AND DISCUSSIONS ……… 34

Profile of VNPT ……… ……… 34

Current Status of Financial Management System of VNPT from 2010 to 2012 ……… 37

Effects of Financial Management System on Financial Management Efficiency of the VNPT ……… 76

Problem Encountered by Financial Management System of VNPT ……… 78

V SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ……… 80

Summary of Findings ……… 80

Conclusions ……… 84

Recommendations ……… 86

REFERENCES …….………… …… ……… 92

APPENDICES ……… 95

CURRICULUM VITAE ……… 98

ix

LIST OF TABLES

1 Distribution of the Respondents ……… 29

2 The Autonomic Level of Capital Mobilization in VNPT …… 41

3 The Safe Level in Mobilizing Capital of VNPT …… ……… 41

4 Assets and Equity of VNPT from 2010 to 2012 ……… 42

5 The autonomic Level in Mobilizing Capital of VNPT’s

6 Clarity and Fulfillment in Harmonizing Capital Mechanism

7 Reasonable Level Regulated the Loan Limit at the Rate

Payable on Capital in not more than Three Times ………… 44

8 The Level of Autonomy and Self-Responsibility at VNPT in

Using and Managing Capital ……… 52

9 Level of Capital Preserve in VNPT ……… 53

10 The Level of Responsibility in the Management and Use of

the Owner’s Capital of VNPT ……… 54

11 The Effectiveness of Investment Outside the Sector of

12 The Transparency of Ownership and the Right of Using

13 The Level of Conservation of the Assets in VNPT ………… 68

14 The Level of Efficiency in the Use of Assets in VNPT …… 68

15 The Level of Losses and Wastage in the Use of Assets in

16 The Clarity and Transparency in Managing Revenues,

Expenses and Profits Distribution in VNPT ……… 73

17 The Level in Harmonizing between the Interests of the

State, Corporations and Employees in Managing

Revenues, Expenses and Profit Distribution in VNPT …… 74

x

18 Revenue of VNPT from 2010 to 2012 ……… 74

19 The Clarity of the Regulations on the Distribution of Profits

which Subsidiaries must Contribute to VNPT group ……… 75

20 Profits of VNPT from 2010 to 2012 ……… 76

21 The Asset Turnover Ratio of VNPT from 2010 to 2012 …… 76

22 The Debtor Day Ratio of VNPT from 2010 to 2012 ……… 77

23 The Asset Turnover Ratio of VNPT from 2010 to 2012 …… 83

24 The Debtor Day Ratio of VNPT from 2010 to 2012 ……… 83

xi

LIST OF FIGURE

xii

LIST OF ABBREVIATIONS

CEO Chief Executive Officer

CFO Chief Financial Officer

EGs Economic Groups

FMS Financial Management System

SEG State owed Economic Group

VNPT Vietnam Posts and Telecommunications Group

xiii

LIST OF APPENDICES

xiv

ABSTRACT

Title of Research : FINANCIAL MANAGEMENT EFFICIENCY OF

VIETNAM POSTS AND TELECOMMUNICATIONS GROUP

Researcher : TO THI NGOC LAN (JENNY)

Degree Conferred : DOCTOR OF BUSINESS ADMINISTRATION

Name and Address

of Institution

: Southern Luzon State University Lucban, Quezon, Philippines and Thai Nguyen University, Socialist Republic of Vietnam

Adviser : Dr Joanna Paula A Ellaga

Year Written : 2013

The main objectives of dissertation were to study the current status of system financial management of VNPT and its effect on financial management efficiency of company The specific objectives of this study were: (1) To identify the profile of the company; (2) To determine the current status of financial management system of VNPT in terms of the following: Capital mobilization, Capital management and use, Asset management, Revenue, expense and profit distribution management; (3) To assess the financial management efficiency of VNPT in terms of the following financial ratios: the asset turnover ratio and the debtor days ratio; (4) To determine the effects of the financial management system to the financial management efficiency of VNPT; (5) To identify the problems encountered in carrying out the financial management system of VNPT; (6) To propose actions that will respond to the problems encountered in carrying out the financial management system of VNPT

xv

In order to obtain objectives of study, the researcher used a descriptive type of research Then, to get primary data, the researcher collected it by sending questionnaires to 169 respondents who were working in VNPT and its subsidiaries while the secondary data was from the annual financial reports

of VNPT from 2010 to 2012 For assessing the current status of VNPT’s financial management system, the dissertation focused on VNPT’s regulations

on capital mobilization, management and use of capital and assets, management of revenues, expenses and profit distribution, thereby assessing financial management system and its effects on VNPT’s financial management efficiency from 2010 to 2012 Based from the result, the financial management of VNPT has positive effects to financial management efficiency of the Group

1

PChapter I INTRODUCTION

A number of studies about financial management system in economic groups under various theories, situation evaluation, and summary of experiences in the country and abroad were conducted Pham Quang Trung’s (2003) research shows that state owned enterprises in Vietnam reflects theoretical matters about financial management system in economic groups Today, with profound changes in economic groups, state owned enterprises under the changes of state’s policies as well as influences of economic integration on economic groups, the value of those analysis and evaluation may not keep intact and need to be updated

Background of the Study

The issue of financial management system in the economic groups gets the attention of not only scholars in the country but also many foreign economists Brigham (2009) refers to problems in the financial management of corporations in terms of general theoretical angles about concepts, characteristics, connotation and methods of management Generally, about financial management system in the economic groups in Vietnam, there were some works under the form of books which mention different angles, but all were released from 2000 onwards Nowadays, under the impact of regional and international economic integration, and the management of the state for state economic groups inevitably arises many new issues in the financial management system of economic groups in Vietnam

2

In recent years, Vietnam economy has gone through a very difficult period High inflation and interest rates coupled with global economic financial crisis and public debt crisis of the European countries have a huge impact on the business situation of economic groups in Vietnam

In this economic setting, economic groups that want a firm stand in the marketplace need to be flexible and ever-innovative Innovative financial management system is one of the issues of primary concern that directly affects the survival of many economic groups in Vietnam Thus, the researcher aims to contribute in improving the system on managing finances

of state-owned economic groups, through conducting this study

Objectives of the Study

This study was intended to analyze the financial management system

of VNPT and its effects on financial management efficiency of the group Specifically, the specific objectives were as follows:

1 To identify the profile of the company in terms of the following:

1.1 type of the company

1.2 size of the company

2 To determine the current status of financial management system of VNPT in terms of the following:

3

3 To assess the financial management efficiency of VNPT in terms of the following financial ratios in terms of:

3.1 asset turnover ratio

3.2 debtor days ratio

4 To determine the effects of the financial management system to the financial management efficiency of VNPT

5 To identify the problems encountered in carrying out the financial management system of VNPT

6 To propose actions that will respond to the problems encountered in carrying out the financial management system of VNPT

Significance of the Study

Analysis of financial management system is very important in providing information for those benefits related to business activities, in helping the readers to be able to predict its financial situation in the future as well as risk assessment and quality of business operations (from which to make financial decisions) and in deciding the most appropriate management This research would be beneficial for the following:

Investors take an interest in information about the financial

management efficiency of VNPT On the other hand, they want to obtain the adequate amount of information needed for decision-making about investments in the Group The main attention is paid to the degree of the risk and return on capital invested However, owners and investors want to make

sure that invested resources are properly evaluated and optimized

4

Managers need to know about financial management for current and

long-term decision making Continuous knowledge of VNPT performance allows managers to make right decisions in gaining financial resources, in determining the optimum financial structure, in allocating free finances, in distributing profits, and in allocating trade credits The knowledge in financial management is necessary for both the past and forecasting of future development Managers make several proposals for policy makers as well as managers of VNPT about the improvement of the financial management system to enhance the financial management efficiency in the new context

Employees are naturally interested in prosperity, economic and

financial stability of VNPT It is concerned with job security, possibilities in wage and social policy, or other benefits provided by the employer

For the researcher, the study provides a theoretical knowledge in

financial management system of economic groups in general and VNPT in particular This study has contributed to the enhancement of financial management efficiency and has given some ideas about perfecting financial management system of State owned economic groups in Vietnam in the new situation

Scope and Limitation of the Study

This study was focused on financial management system of state economic corporations It specifically concentrated on the current status of the financial management system in the state economic groups in Vietnam This research focused mainly on VNPT Moreover, the study covered the status of

5 financial management system of VNPT from 2010 to 2012 The financial management system was described in terms of capital mobilization, capital management and use, asset management, and the management of revenue, expense, and profit distribution On the other hand, the financial management efficiency was assessed in terms of the asset turnover ratio and the debtor day ratio

Definition of Terms

For better understanding, the following terms are conceptually and operationally defined:

Capital invested by the State in the Parent Company are the capital

directly taken from the state budget for the parent company in the operation (if any); capital received by the State from other resources as decisions of the competent authorities; additional capital from profit after tax; value of land using rights and other capitals considered as State capital in accordance with the State law

Capital preservation in the parent company means that capital is kept intact

and not be deficit during the operation of the parent company

Capital raised by the parent company is the capital that the parent

company raises under the forms of bonds, bills of credit, debentures; loans from organizations and individuals in the country and foreign countries; and other capital mobilizing forms that are not prohibited by law

Capital's parent company invested in other enterprises is capital of the

6 parent company invested in other businesses apart from the parent company

Dependent accounting units are units accounted dependently from the

parent company

Dividends are payments made by a corporation to its shareholder members

It is the portion of corporate profits paid out to stockholders When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be distributed to shareholders There are two ways

to distribute cash to shareholders: share repurchases or dividends Many corporations retain a portion of their earnings and pay the

remainder as a dividend

Equity is the residual claim or interest of the most junior class of investors in

assets, after all liabilities are paid If liability exceeds assets, negative equity exists In an accounting context, shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock

Financial management efficiency reflects the relationship between the

economic benefits of capital mobilization; capital management and use; asset management; revenue, expense and profit distribution management that businesses receive with a cost that businesses have

to spend to obtain economic benefits

7

Financial management system is the methodology that an organization

uses to oversee and govern its capital mobilization; Capital management and use; asset management; revenue, expense and profit distribution management with the objectives of maximizing profits and ensuring sustainability

Governing shares and contributing capital are shares or contributing

capital that company occupies over 50% of the charter capital

Non-productive units are units providing research, training, healthcare

services under the management of the parent company

Owner is the State owner of the parent company The Government unifies the

implementation of rights and obligations of the owner to the parent company The Prime Minister directly performs or authorizes Ministries, the ministerial-level agencies, the agencies attached to the Government

to implement a certain number of rights and obligations of the owner to the parent company in accordance with the law

Parent company is a company that controls other companies by owning an

influential amount of voting stock or control Parent companies will typically be larger firms that exhibit control over one or more small subsidiaries in either the same industry or other industries

Profit is the difference between the purchase and the component costs of

delivered goods and/or services and any operating or other expenses

Representative is the person who is appointed by the Board of Directors to

represent for capital or to candidate or participate in the Management Board and management in companies which have capital of the parent company

8

Revenue is income that a company receives from its normal business

activities, usually from the sale of goods and services to customers In many countries, revenue is referred to as turnover

Subsidiary is an independent accounting firm of which charter capital is held

100% by the parent company and being a company that the parent company holds dominant shares, capital or controlling shareholder through rights of directly or indirectly appointing a majority or all of the Board members, the general director or manager of that firm or deciding to modify or supplement the charter of that firm

9

Chapter II REVIEW OF LITERATURE

This chapter presents the literature related to this study It includes related studies and definition of finance, contents of financial management system, factors influencing financial management system, criteria for financial management efficiency evaluation of financial management system and definition of financial management efficiency

According to Fabozzi and Peterson (2003), financial management and analysis is presented in seven parts The first two parts (Parts One and Two) cover the basics, including the objective of financial management, valuation principles, and the relation between risk and return Financial decision-making

is covered in Parts Three, Four, and Five where the authors present long-term investment management (commonly referred to as capital budgeting), the management of long-term sources of funds, and working capital management Part Six covers financial statement analysis which includes financial ratio analysis, earnings analysis, and cash flow analysis The last part (Part Seven) covers several specialized topics: international financial management, borrowing via structured financial transactions (i.e., asset securitization), project financing, equipment leasing, and financial planning and strategy

With its exciting introduction of the Harly - Davidson focus company theme, this book continues to provide a solid, enduring foundation of the tools

of modern theory while at the same time developing the logic behind their use The "10 principles of finance" (formerly "Axioms") provide the framework, or

10

"the big picture" of the finance, which ties the major concept of the book together A six part organization covers the scope and environment of financial management, valuation of financial assets, investment in long term assets, capital structure and dividend policy, working capital management and special topics in finance It is for an enduring understanding of the basic tools and fundamental principles upon which finance is based (Keown, Martin, Petty &

Scott, 2005)

Trung’s (2003) study on “Business Groups and Financial Management System in Business Groups” shows many basic theoretical matters about financial management system in economic groups, State owned enterprises

as well as descriptions, summaries, analyses of overall picture of actual situation of applying financial management system in economic groups, State owned enterprises in Vietnam in the first period when economic groups, State owned enterprises started to go into operation Nowadays, with profound changes in economic groups, State owned enterprises under the changes of State’s policies as well as influences of economic integration on economic groups, the value of those analyses and evaluations may not keep intact and need to be updated

a textbook, so being more theoretical

11

On the other hand, Nguyen’s (2011) objectives of the research are (1)

to investigate and describe features of financial management practices and financial characteristics of SMEs in Vietnam, (2) to develop and test a model

of SME profitability, and (3) to contribute knowledge of the relationships between financial management and characteristics to improve SME profitability by using tools of efficient financial management The research provides descriptive findings of financial management practices and financial characteristics and demonstrates the simultaneous impact of financial management practices and financial characteristics on SME profitability In addition, the research study provides a model of SME profitability, in which profitability is found to be related to financial management practices and financial characteristics With the exception of debt ratios, all other variables including current ratio, total asset turnover, working capital management and short-term planning practices, fixed asset management and long-term planning practices, and financial and accounting information systems were

found to be significantly related to SME profitability

With the findings as presented above, this research study provides many implications for financial management practices and contributes knowledge of financial management of SMEs The model of SME profitability can be used as guidance for actions to improve the profitability of SMEs in Vietnam

Then, Tuan (2012) studied and suggested the criteria on analyzing and assessing the usefulness of the financial management system in the economic groups Although those criteria have not been actually

12 standardized, mentioning them in this research is a new contribution to suggest further researching and completing the criteria on assessing the usefulness of the financial management system of the economic groups

The research has further researched the nature of the financial management system as regulated by the state and the actual operations The research has made relatively comprehensive comments on the state financial management mechanism for the state economic groups, successes and limitations of this mechanism These can be regarded as new contributions of this research Because this is the first time a document assessing the state financial management mechanism for the economic groups has been offered Although there may be many issues that need to be discussed through the results on assessing the state financial management mechanism as mentioned in the research, these are suggestive assessments for further researching and completing the state financial management mechanism for the state economic groups under the condition of restructuring the state economic groups as guided by the state

Enterprise Finance

Ehrhardt and Brigham (2008) defined finance as the application of

economic principles and concepts to business decision-making and problem solving The field of finance can be considered to comprise three broad

categories: financial management, investments, and financial institutions:

Financial management is sometimes called corporate finance or business

finance, this area of finance is concerned primarily with financial decision-making within a business entity Financial management

13 decisions include maintaining cash balances, extending credit, acquiring other firms, borrowing from banks, and issuing stocks and bonds

Investments are part of finance that focuses on the behavior of financial

markets and the pricing of securities An investments manager’s tasks, for examples, may include valuing common stocks, selecting securities for pension fund, or measuring a portfolio’s performance

Financial institutions are part of finance that deals with banks and other

firms that specialize in bringing the suppliers of funds together with users of funds For example, a manager of a bank may make decisions regarding loans, managing cash balances, setting interest rates on loans, and dealing with government regulations”

Basic Concepts of Financial Management

“Finance consists of three interrelated areas: (1) money and capital markets, which deals with securities markets and financial institutions; (2) investments, which focuses on the decisions made by both individual and

institutional investors as they choose securities for their investment portfolios;

and (3) financial management, or “business finance,” which involves

decisions within firms The career opportunities within each field are many and varied, but financial managers must have knowledge of all three areas if they are to do their jobs well” (Brigham and Houston, 2009)

“Financial management is the broadest of the three areas, and the one with the most job opportunities Capital and generation of cash flow are those

14

of the prerequisites for business foundation and running, so financial management is important in all types of businesses, including banks, other financial institutions, governmental operations, or charity organizations Financial managers have the responsibility for deciding the credit terms, under which customers may buy, how much cash should be kept on hand, how much inventory the firm should carry, how much of the firm’s earnings to plow back into the business versus pay out as dividends, whether to acquire other firms (merger analysis) or how much and which types of securities to issue for capital raising, and so on” (Brigham and Houston, 2009)

“The financial staff’s task is to acquire and then help operate resources

so as to maximize the value of the firm Here are some specific activities:

Forecasting and Planning

The financial staff must coordinate the planning process This means they must interact with people from other departments as they look ahead and lay the plans that will shape the firm’s future

Major Investment and Financing Decisions

A successful firm usually has rapid growth in sales, which requires investments in plant, equipment, and inventory The financial staff must help

to determine the optimal sales growth rate, help decide what specific assets

to acquire, and then choose the best way to finance those assets For example, should the firm finance with debt, equity, or some combination of the two, and if debt is used, how much should be long term and how much short term?

15

Coordination and Control

The financial staff must interact with other personnel to ensure that the firm is operated as efficiently as possible All business decisions have financial implications, and all managers—financial and otherwise—need to take this into account For example, marketing decisions affect sales growth, which in turn influences investment requirements Thus, marketing decision makers must take account of how their actions affect and are affected by such factors as the availability of funds, inventory policies, and plant capacity utilization

Dealing with the Financial Markets

The financial staff must deal with the money and capital markets Because each firm affects and is affected by the general financial markets where funds are raised, where the firm’s securities are traded, and where investors either make or lose money

Risk Management

All businesses face risks, including natural disasters such as fires and floods, uncertainties in commodity and security markets, volatile interest rates, and fluctuating foreign exchange rates However, many of these risks can be reduced by purchasing insurance or by hedging in the derivatives markets The financial staff is responsible for the firm’s overall risk management program, including identifying the risks that should be hedged and then hedging them in the most efficient manner” (Brigham and Houston, 2009)

16

Objectives of Financial Management

Provide Support for Decision Making

Financial management provides managers with the information and knowledge they need to support operational decisions and to understand the financial implications of decisions before they are made

Ensure the availability of timely, relevant and reliable financial and

non-financial information Financial management gives managers the information

that either forms the basis for calculating financial information, or is used for management control and accountability purposes

Manage Risks

Financial management enables an organization to identify, assess and consider the financial consequences of events that could compromise its ability to achieve its goals and objectives and/or result in significant loss of resources

Use Resources Efficiently, Effectively and Economically

Financial management is necessary to ensure that an organization has enough resources to carry out its operations, and that it uses these resources with due regard to economy, efficiency and effectiveness

Comply with Authorities and Safeguard Assets

Financial management is essential to ensuring that an organization carries out its transactions in accordance with applicable legislation, regulations and executive orders; that spending limits are observed; and that transactions are authorized It also provides an organization with a system of controls for assets, liabilities, revenues and expenditures These controls help

17

to protect against fraud, financial negligence, violation of financial rules or principles and losses of assets or public money

Financial Management System

A financial management system is the methodology that an organization uses to oversee and govern its income, expenses, and assets with the objectives of maximizing profits and ensuring sustainability According to Vu Anh Tuan (2012), financial management system in the EGs is way of organizing and controlling the financial activities of EGs The specific contents of the system are as followings:

Capital Mobilization

This is a form, method and tool to mobilize capital in subsidiaries companies to maximize the mobilization of financial resources to serve the demand for production and trading

The mobilization in the EGs is an objective requirement, playing a very important role because the capital is one of the factors that set the premise for improving the financial performance of EGs As part of financial management system, capital mobilization in the EGs is influenced by economic and social factors, and financial and economic mechanism of the State in certain periods

It is mentioned to the capital mobilization in the EGs which is to determine the funding target, method of raising capital, funding channels, calculations, consideration the issues of raised interest rates Generally, the characteristics of raising capital in the EGs are marked by economic models and owning forms of EGs

18 Nowadays the popular methods of raising capital in the EGs are:

- The issuance of bonds, shares of the EGs

- Method of raising capital in internal EGs

- The mobilization through credit channels of banks

- Through joint venture, affiliate activities or through financial leasing companies

Capital, Assets, Management and Use

Management and use of capital and assets mean contents and methods of capital and assets management and use in order to achieve the desired efficiency

Management and use of capital and assets of the EGs cover many different issues with complicated content In the State owned economic groups (SEG) range, because of the characteristic of state ownership about capital and assets of SEG, capital, assets management has some features of state ownership Those features are both to ensure the management and control of the State and to promote dynamism and creativity of the SEG in the management and use of funds, assets invested by the state Handling this relationship requires handling the relationship between ownership and use rights of capital and assets in the SEG, establishing and implementing powers

of representative bodies of state ownership with rights of the EGs in the management, use of assets allocated by the State

This is a very sensitive relationship, if only in favor of the management aspect of the State mechanically, the dynamic and creativity of the SEG will

be eliminated; in contrast, if in favor of the opposite side to ensure the freedom of self-determination of the SEG, loosening the inspection and

19 supervision of the state agencies, wasting and loss of capital and assets may happen Therefore, finding solutions to handle this relationship well in the management of capital, assets in the SEG is very important The key of handing this relationship is based on the view of considering using effectiveness of capital, assets in the SEG to be an important matter The management and use of capital, assets in the SEG consist of three main issues, namely:

- Decentralization

- Inspection and supervision

- Assess the effectiveness of management and use of capital, assets

in the SEG

The essence of decentralization is the assignment of authority and responsibility of using the capital and assets of the SEG

Revenue, Expenses Management and Profit Distribution in EGs

Revenue, expenses management and profit distribution are the ways of Revenue, expenses management and profit distribution ruled by the State and EGs depending on the nature of ownership of EGs For state-owned EGs, the revenue, expenses management, and profit distribution is decided by the State Whether the state or EGs regulate, the contents of revenue, expenses management, profit distribution contain the following issues:

For the issue of revenue management, it is necessary to conduct classification of revenue It is also to determine the time of arising revenue The determination of the time of arising such revenues is not only a matter of calculation but also a matter of the implementation of obligations to the State;

20 organization of revenue accounting; organization of analysis, evaluation of revenues achieved in a business cycle

For the issue of expenses management including researching and solving problems, such as expenses classification, the establishment of economic measures and techniques to reduce expenses, lower product prices, periodic analysis and expenses evaluation

Profit distribution in EGs is the expression of settling the interest relationship among the state, EGs (parent company, subsidiary companies), employees, and between EGs and shareholders, between immediate interests and long-term benefits of EGs, between accumulation and consumption

Due to the ownership nature of EGs, profit distribution model in the EGs has different points on the delimitation of profit to portions and the determination of the rate for each portion

The problem in the profit distribution in EGs is how to ensure the harmonization of interests, ensure the transparency, and make the profit distribution to become an economy stimulating tool for EGs

Financial Control of the Parent Company to Subsidiary Companies

The establishment of financial controlling mechanisms of the parent company to its subsidiaries is generally complex, related to the degree and nature of ownership of the EGs, and related to capital contribution ratio of parent company into the subsidiaries companies Therefore, to study and establish financial controlling mechanism, it is required to study the degree and nature of ownership of EGs

21

Factors Influencing Financial Management System in Economic Groups

Financial management system in economic groups is a range of

regulations about the ways and methods of EGs to operate and manage financial management activities of EGs The establishment of financial

management system is firstly depended on many internal and external factors

of the EGs (Vu Anh Tuan, 2012)

Internal Factors of the EGs

Financial Situation of the EGs is reflected in the following aspects:

- The mobilization of financial resources to improve the financial

performance of the EGs

- The status of allocation and use of financial resources of the EGs

- The status of distribution and use of operational efficiency of EGs

External Factors of the EGs

There are many external factors influencing the forming of the financial management system of EGs which are:

- The guidelines and development policies of the State about the formation and development of the EGs If the State encourages scale expansion, multi-sectorial, multidisciplinary activities, multi-ownership, the financial management system of EGs will have to handle not only more relationships including financial relationships in main activities of the EGs but also many financial relationships in other auxiliary activities of the EGs

- Macroeconomic situation and policies of macroeconomic operation of the State

22 Current status of the financial management system of EGs is an integral part of macroeconomic situation (growth, employment, balance of payment, budget deficit, inflation ) and guidelines of operating macroeconomic of the State If the macroeconomic situation is instable, the State needs to launch measures to stabilize the macro-economy, which will inevitably have a major impact on the strategies, plans, leading to formidable changes in the financial management system of the EGs Conversely, if the macro-economic situation is stable, it is inevitable to increase the production and business activities of the EGs, make the financial activities of the EGs to

be more vibrant, expand the scale of operation, arise many new financial relationships, requiring EGs to appropriately adjust the financial management system

- Globalization, Integration, opening the economy, collaboration, competition are also factors having not small impact on the establishment, implementation of the financial management system of EGs

Globalization, integration, opening the economy, collaboration, and competition are objective trends in the course of social economic development of each country

As an economic entity, all activities of EGs are influenced by those trends Trends of integration, opening the economy, collaboration, competition put the EGs in front of not only great opportunities, but also big difficulties and challenges in the implementation of its operating strategies

Assurance of managing Financial Risks of EGs

In fact, for many objective and subjective reasons, financial performance in EGs is not always smooth but potentially risky Thus, the financial management system must make provisions for prevention and treatment of financial risks Such financial management system is considered

to be a useful and effective financial management system

Creating good conditions for EGs to effectively and actively use financial resources and assets as well as for the State to inspect and supervise financial activities of EGs

Effective use of all financial resources and assets in the EGs is a basis

to expand and scale up activities of the EGs in producing a variety of products for the society A financial management system with the effect of encouraging

24 and creating pressure for effective business activities of EGs is considered to

be a criterion of evaluating the effectiveness of the financial management system

Financial Management Efficiency

A level of performance that describes a process that uses the lowest amount of inputs to create the greatest amount of outputs Efficiency relates

to the use of all inputs in producing any given output, including personal time and energy

Efficiency is an important attribute because all inputs are scarce Time, money and raw materials are limited, so it makes sense to try to conserve them while maintaining an acceptable level of output or a general production level

Being efficient simply means reducing the amount of wasted inputs Financial management: sometimes called corporate finance or business finance, this area of finance is concerned primarily with financial decision-making within a business entity Financial management decisions include maintaining cash balances, extending credit, acquiring other firms, borrowing from banks, and issuing stocks and bonds

Financial management efficiency reflects the relationship between the economic benefits businesses receive with a cost that businesses have to spend to obtain economic benefits

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Conceptual Framework

Figure 1 The Independent and Dependent Variables of Financial

Management Efficiency of Vietnam Posts and Telecommunications Group

Independent Variables Dependent Variables VVariable

The VNPT’s background as to company’s size and capital, and its current status in terms of capital mobilization, capital management and use, asset management, and revenue, expense and profit distribution management, were the independent variables in the study Capital mobilization is the ability of the private funds to move across national

- The asset turnover ratio

- The debtor days ratio

Problems encountered