--

15(2)2025

Business group, corporate governance and business performance: A study in Vietnam


Author - Affiliation:
Thong Tien Nguyen - Ho Chi Minh City University of Foreign Languages and Information Technology, Ho Chi Minh City , Vietnam
Nhi Phuong Doan - Ho Chi Minh City University of Technology (HCMUT), Ho Chi Minh City Vietnam National University Ho Chi Minh City, Ho Chi Minh City , Vietnam
Tuong Minh Tran - Ho Chi Minh City University of Technology (HCMUT), Ho Chi Minh City Vietnam National University Ho Chi Minh City, Ho Chi Minh City , Vietnam
Corresponding author: Thong Tien Nguyen - thongnt@huflit.edu.vn
Submitted: 01-03-2024
Accepted: 26-05-2024
Published: 17-09-2024

Abstract
Corporate governance is essential for businesses, especially those with complex structures. This research examines the relationship between business group structures, corporate governance, and business performance in Vietnam, providing theoretical insights and practical management recommendations. Analyzing data from over 100 of the largest listed companies on the Vietnam Exchange AllShare, the study used the Fixed Effects Model, Random Effects Model, and Feasible Generalized Least Square estimations to assess the impact of business groups on governance and performance. The study reveals a positive but relatively weak impact of expanding the scale of business groups on the quality of corporate governance and business efficiency. Audit Committees, Independent Directors, and company size positively influence governance quality, while liquidity has a negative impact. Similarly, these factors positively affect business efficiency, whereas financial leverage has an inverse relationship. This research enhances the understanding of how business group structures influence corporate governance and business efficiency in Vietnam. It underscores the importance of good governance principles to improve accountability, transparency, and protect stakeholder interests, highlighting the positive role of certain governance structures in enhancing business efficiency.

JEL codes
H30; G32; G34

Keywords
agency problem; business group; business performance; corporate governance

Full Text:
PDF

References

Abor, J. (2007). Corporate governance and financing decisions of Ghanaian listed firms. Corporate Governance: The international journal of business in society, 7(1), 83-92.


Aggarwal, R., Erel, I., Stulz, R., & Williamson, R. (2009). Differences in governance practices between US and foreign firms: Measurement, causes, and consequences. The Review of financial studies, 22(8), 3131-3169.


Akpan, E. S., & Riman, H. B. (2012). Does corporate governance affect bank profitability? Evidence from Nigeria. American International Journal of Contemporary Research, 2(7), 135-145.


Amato, L. H., & Burson, T. E. (2007). The effects of firm size on profit rates in the financial services. Paper presented at the Allied Academies International Conference. Academy for Economics and Economic Education. Proceedings.


Anderson, R. C., Mansi, S. A., & Reeb, D. M. (2004). Board characteristics, accounting report integrity, and the cost of debt. Journal of accounting and economics, 37(3), 315-342.


Anum Mohd Ghazali, N. (2010). Ownership structure, corporate governance and corporate performance in Malaysia. International Journal of Commerce and Management, 20(2), 109-119.


Baltagi, B. H. (1981). Pooling: An experimental study of alternative testing and estimation procedures in a two-way error component model. Journal of Econometrics, 17(1), 21-49.


Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120.


Baum, C. F. (2001). Residual diagnostics for cross-section time series regression models. The Stata Journal, 1(1), 101-104.


Bhide, A. (1993). The hidden costs of stock market liquidity. Journal of Financial Economics, 34(1), 31-51.


Black, B. S., Jang, H., & Kim, W. (2006). Predicting firms' corporate governance choices: Evidence from Korea. Journal of corporate finance, 12(3), 660-691.


Bonn, I., Yoshikawa, T., & Phan, P. H. (2004). Effects of board structure on firm performance: A comparison between Japan and Australia. Asian Business & Management, 3, 105-125.


Burkart, M., Gromb, D., & Panunzi, F. (1997). Large shareholders, monitoring, and the value of the firm. The Quarterly Journal of Economics, 112(3), 693-728.


Byrnes, N., Henry, D., Thornton, E., & Dwyer, P. (2003). Reform: Who's making the grade a performance review for CEOs, boards, analysts, and others. Business Week(3850), 80-80.


Cahyo, H., KUSUMA, H., HARJITO, D. A., & ARIFIN, Z. (2021). The relationship between firm diversification and firm performance: Empirical evidence from Indonesia. The Journal of Asian Finance, Economics and Business, 8(3), 497-504.


Campbell, J. Y., Grossman, S. J., & Wang, J. (1993). Trading volume and serial correlation in stock returns. The Quarterly Journal of Economics, 108(4), 905-939.


Chang, S. J., & Hong, J. (2000). Economic performance of group-affiliated companies in Korea: Intragroup resource sharing and internal business transactions. Academy of Management journal, 43(3), 429-448.


Chhibber, P. K., & Majumdar, S. K. (1997). Foreign ownership and profitability: Property rights, strategic control and corporate performance in Indian industry.


Dalton, D. R., Daily, C. M., Certo, S. T., & Roengpitya, R. (2003). Meta-analyses of financial performance and equity: fusion or confusion? Academy of Management journal, 46(1), 13-26.


Dalton, D. R., Daily, C. M., Johnson, J. L., & Ellstrand, A. E. (1999). Number of directors and financial performance: A meta-analysis. Academy of Management journal, 42(6), 674-686.


Đào, Đ. V. (2007). Hoàn thiện cơ chế tài chính của công ty dịch vụ - Du lịch dầu khí theo mô hình công ty mẹ - công ty con. (Master). UEH,


Deloitte, D. T. T. L. (2013). Governance of Subsidiaries: A Survey of Global Companies.


Dwianika, A., & Murwaningsari, E. (2019). The Effect of Asean’s Corporate Governance Scorecard and Company Culture on Profit Management with Ultimate Ownership as A Moderating Variable. International Journal of Business, Economics and Law (IJBEL), 18(5).


Ehikioya, B. I. (2009). Corporate governance structure and firm performance in developing economies: evidence from Nigeria. Corporate Governance: The international journal of business in society, 9(3), 231-243.


Feng, Y., Yao, S., Wang, C., Liao, J., & Cheng, F. (2022). Diversification and financialization of non-financial corporations: Evidence from China. Emerging Markets Review, 50, 100834.


Forbes, D. P., & Milliken, F. J. (1999). Cognition and corporate governance: Understanding boards of directors as strategic decision-making groups. Academy of management review, 24(3), 489-505.


Frederick, W. R. (2014). Challenges in Group Governance: The Governance of Cross-Border Bank Subsidiaries. Retrieved from Washington, DC: http://hdl.handle.net/10986/26117


Ghemawat, P., & Khanna, T. (1998). The nature of diversified business groups: A research design and two case studies. The Journal of Industrial Economics, 46(1), 35-61.


Goodstein, J., Gautam, K., & Boeker, W. (1994). The effects of board size and diversity on strategic change. Strategic management journal, 15(3), 241-250.


Granovetter, M. (2010). 19 business groups and social organization. The handbook of economic sociology, 429.


Gujarati, D. (1995). Basic Econometrics. 3rd edn McGraw-Hill. Inc., New York.


Hanifa, H., Hamdan, M., & Haffar, M. (2018). Dividend policy in the banking sector in G-7 and GCC countries: A comparative study.


Hausman, J. A. (1978). Specification tests in econometrics. Econometrica: Journal of the econometric society, 1251-1271.


HUSNAINI, W., & Basuki, B. (2020). ASEAN corporate governance scorecard: sustainability reporting and firm value. The Journal of Asian Finance, Economics and Business (JAFEB), 7(11), 315-326.


Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. the Journal of Finance, 48(3), 831-880.


Jenson, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.


John, K., & Senbet, L. W. (1998). Corporate governance and board effectiveness. Journal of banking & Finance, 22(4), 371-403.


Kahn, C. M., & Winton, A. (1998). Ownership structure, liquidity demand, and shareholder monitoring. Liquidity Demand, and Shareholder Monitoring.


Keister, L. A. (2001). Exchange structures in transition: Lending and trade relations in Chinese business groups. American sociological review, 336-360.


Khanna, T., & Rivkin, J. W. (2001). Estimating the performance effects of business groups in emerging markets. Strategic management journal, 22(1), 45-74.


Le Minh, T., & Walker, G. (2008). Corporate governance of listed companies in Vietnam. Bond Law Review, 20(2), 118-197.


Leff, N. H. (1978). Industrial organization and entrepreneurship in the developing countries: The economic groups. Economic development and cultural change, 26(4), 661-675.


Li, W.-X., Chen, C. C.-S., & French, J. J. (2012). The relationship between liquidity, corporate governance, and firm valuation: Evidence from Russia. Emerging Markets Review, 13(4), 465-477.


Lipton, M., & Lorsch, J. W. (1992). A modest proposal for improved corporate governance. The business lawyer, 59-77.


Liu, Y., Miletkov, M. K., Wei, Z., & Yang, T. (2015). Board independence and firm performance in China. Journal of corporate finance, 30, 223-244.


Naveed, F., Khurshid, M. K., & Shakeel, M. (2015). Factors affecting the corporate governance disclosure: An analysis of manufacturing firms of Pakistan. European Journal of Business and Management ISSN, 2222-1905.


Nguyen, P., Rahman, N., Tong, A., & Zhao, R. (2016). Board size and firm value: Evidence from Australia. Journal of Management & Governance, 20, 851-873.


OECD. (2015). Indonesia – OECD Corporate Governance Policy Dialogue. Corporate Governance Of Financial Groups. Retrieved from Indonesia: https://www.oecd.org/daf/ca/PaperIndonesia2Dec2015.pdf


OECD. (2022). Good Policies and Practices for Corporate Governance of Company Groups in Asia. Retrieved from https://www.oecd.org/corporate/good-policies-practices-for-corporate-governance-company-groups-in-asia.htm


Pearce, J. A., & Zahra, S. A. (1992). Board composition from a strategic contingency perspective. Journal of Management Studies, 29(4), 411-438.


Peng, M. W., Lee, S.-H., & Wang, D. Y. (2005). What determines the scope of the firm over time? A focus on institutional relatedness. Academy of management review, 30(3), 622-633.


Pfeffer, J. (1983). Organizational demography. Research in organizational behavior.


Pfeffer, J. (2019). Size and composition of corporate boards of directors: The organization and its environment. In Corporate Governance (pp. 53-64): Gower.


Pfeffer, J., & Salancik, G. (2015). External control of organizations—Resource dependence perspective. In Organizational Behavior 2 (pp. 373-388): Routledge.


Phung, D. N., & Mishra, A. V. (2016). Corporation diversification and firm performance: Evidence from Vietnamese listed firms. Australian Economic Papers, 55(4), 386-408.


Sanan, N. K., Jaisinghani, D., & Yadav, S. (2021). Corporate governance, firm performance, and business group affiliation: evidence from India. Management Decision, 59(8), 1863-1876.


Simamora, A. J. (2020). ASEAN corporate governance scorecard and firm value.


Sinaga, J. G., Djajadikerta, H., & Setiawan, A. (2022). Factors Affecting Corporate Governance and Its Implication on Accounting Information Quality: Indonesia Trusted Company Awardees. International Journal of Family Business Practices, 5(1), 1-30.


Singh, H., & Harianto, F. (1989). Management-board relationships, takeover risk, and the adoption of golden parachutes. Academy of Management journal, 32(1), 7-24.


Sørensen, K. (2021). The governance of company groups. OECD Corporate Governance Working Papers, 22, 3.


Thuyết, N. N., & Túy, N. T. T. (2017). Mối quan hệ giữa tính thanh khoản cổ phiếu, quản trị công ty và giá trị doanh nghiệp: bằng chứng thực nghiệm tại Việt Nam. TẠP CHÍ KHOA HỌC ĐẠI HỌC MỞ THÀNH PHỐ HỒ CHÍ MINH-KINH TẾ VÀ QUẢN TRỊ KINH DOANH, 12(2), 100-112.


Tomar, S., & Bino, A. (2012). Corporate governance and bank performance: evidence from Jordanian banking industry. Jordan Journal of Business Administration, 8(2), 353-372.


Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A comparison of approaches. Academy of management review, 11(4), 801-814.


Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data MIT press. Cambridge, ma, 108(2), 245-254.


Young, J. (1990). Pawns or potentates: The reality of America's corporate boards. The Academy of Management Perspectives, 4(4), 85.



DOI: https://doi.org/10.46223/HCMCOUJS.econ.en.15.2.3275.2025
Creative Commons License
© The Author(s) 2025. This is an open access publication under CC BY NC licence.