Ownership structure and performance of professional service firms in a declining industry: Evidence from Vietnamese securities firms

• Authors: Nguyen Tien Hoang , Nguten Xuan Minh , Nguyen Thi Thu Ha , Tran Quoc Trung
• Languages of publication: EN

Abstracts

EN

This study posits that the declining industry is a good institutional environment to examine the relationship between ownership structure and firm performance of Vietnamese securities firms. This downturn decreases the return on investment of the industry and creates incentives for managers to expropriate shareholders more severely. In addition, different groups of shareholders recognizing the status of the industry may have their own reactions which are likely to affect firm performance. Using pooled OLS regression with a sample of 240 observations from 56 Vietnamese securities firms over the period from 2009 to 2016, we find supporting evidence of convergence-of-interest with a significantly negative relationship between insider ownership and profitability. In addition, foreign ownership is also positively related to firm performance. Firm size affects positively firm performance while number of employees has a negative impact on profitability.

Keywords

EN

Vietnam; service; service firms; securities firms; ownership structure

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Prague Development Center, Czech Republic
• Journal: Business and Economic Horizons
• Year: 2017
• Volume: Volume 13
• Issue: Issue 2
• Pages: 142-151

Dates

published

2017-07-20

Contributors

author

Nguyen Tien Hoang

• Foreign Trade University, Vietnam

author

Nguten Xuan Minh

• Foreign Trade University, Vietnam

author

Nguyen Thi Thu Ha

• Foreign Trade University, Vietnam

author

Tran Quoc Trung

• Foreign Trade University, Vietnam

References

• Bartholdy, J., & Feng, T. (2013). The quality of securities firms' earnings forecasts and stock recommendations: Do informational advantages, reputation and experience matter in China? Pacific-Basin Finance Journal, 24, 66-88.
• Benner, M. J. (2010). Securities analysts and incumbent response to radical technological change: Evidence from digital photography and internet telephony. Organization Science, 21(1), 42-62. https://doi.org/10.1287/orsc.1080.0395
• Chen, M.-H., Hou, C.-L., & Lee, S. (2012). The impact of insider managerial ownership on corporate performance of Taiwanese tourist hotels. International Journal of Hospitality Management, 31(2), 338-349.
• Chen, S. K., Chen, X., Lin, B.-X., & Zhong, R. (2005). The impact of government regulation and ownership on the performance of securities companies: Evidences from China. Global Finance Journal, 16(2), 113-124.
• Dah, M. A., Frye, M. B., & Hurst, M. (2014). Board changes and CEO turnover: The unanticipated effects of the Sarbanes–Oxley Act. Journal of Banking & Finance, 41, 97-108. https://doi.org/10.1016/j.jbankfin.2014.01.006
• Demirbag, M., McGuinness, M., Akin, A., Bayyurt, N., & Basti, E. (2016). The professional service firm (PSF) in a globalised economy: A study of the efficiency of securities firms in an emerging market. International Business Review, 25(5), 1089-1102. https://doi.org/10.1016/j.ibusrev.2016.01.001
• Firth, M., Fung, P. M. Y., & Rui, O. M. (2006). Firm performance, governance structure, and top management turnover in a transitional economy*. Journal of Management Studies, 43(6), 1289-1330. https://doi.org/10.1111/j.1467-6486.2006.00621.x
• Gaur, S. S., Bathula, H., & Singh, D. (2015). Ownership concentration, board characteristics and firm performance: a contingency framework. Management Decision, 53(5), 911-931. https://doi.org/10.1108/MD-08-2014-0519
• Goldberg, L. G., Hanweck, G. A., Keenan, M., & Young, A. (1991). Economies of scale and scope in the securities industry. Journal of Banking & Finance, 15(1), 91-107. https://doi.org/10.1016/0378-4266(91)90039-O
• Goyal, V. K., & Park, C. W. (2002). Board leadership structure and CEO turnover. Journal of Corporate Finance, 8(1), 49-66.
• Greenwood, R., & Lachman, R. (1996). Change as an underlying theme in professional service organizations: An introduction: Sage Publications Sage CA: Thousand Oaks, CA.
• Gu, Z., & Kim, Y. K. (2001). Managerial stock holdings and firm performance: empirical evidence from the restaurant industry. International journal of hospitality & tourism administration, 2(1), 49-65. https://doi.org/10.1300/J149v02n01_03
• Gugler, K. (2003). Corporate governance, dividend payout policy, and the interrelation between dividends, R&D, and capital investment. Journal of Banking and Finance, 27(7), 1297-1321. https://doi.org/10.1016/S0378-4266(02)00258-3
• Hu, F., & Leung, S. C. M. (2012). Top management turnover, firm performance and government control: Evidence from China's listed state-owned enterprises. The International Journal of Accounting, 47(2), 235-262. https://doi.org/10.1016/j.intacc.2012.03.006
• Hu, J.-L., & Fang, C.-Y. (2010). Do market share and efficiency matter for each other? An application of the zero-sum gains data envelopment analysis. Journal of the Operational Research Society, 61(4), 647-657. https://doi.org/10.1057/jors.2009.11
• Iannotta, G., Nocera, G., & Sironi, A. (2007). Ownership structure, risk and performance in the European banking industry. Journal of Banking & Finance, 31(7), 2127-2149. https://doi.org/10.1016/j.jbankfin.2006.07.013
• Im, J., & Chung, Y. (2017). The Effects of Insider Ownership and Board Composition on Firm Performance in the Restaurant Industry. The Journal of Hospitality Financial Management, 25(1), 4-16. https://doi.org/10.1080/10913211.2017.1313604
• Jensen, 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. https://doi.org/10.1016/0304-405X(76)90026-X
• Lee, D.-G., Kim, J., & Kang, H. (2014). Do Larger Brokerage Firms Enjoy Larger Economies of Scale and Scope? Liao, C.-S., Yang, C.-H., & Liu, D. (2010). Efficiency, productivity and ownership structure for securities firms in Taiwan. Journal of Money, Investment and Banking, 14, 46-58.
• Lemmon, M. L., & Lins, K. V. (2003). Ownership Structure, Corporate Governance, and Firm Value: Evidence from the East Asian Financial Crisis. The Journal of Finance, 58(4), 1445-1468. https://doi.org/10.1111/1540-6261.00573
• Lin, X., Zhang, Y., & Zhu, N. (2009). Does bank ownership increase firm value? Evidence from China. Journal of International Money and Finance, 28(4), 720-737. https://doi.org/10.1016/j.jimonfin.2008.12.015
• Liu, S. (2008). Commission deregulation and performance of securities firms: Further evidence from Japan. Journal of Economics and Business, 60(4), 355-368. https://doi.org/10.1016/j.jeconbus.2007.03.005
• Løwendahl, B. (2005). Strategic management of professional service firms: Copenhagen Business School Press DK.
• Mínguez-Vera, A., & Martín-Ugedo, J. F. (2007). Does ownership structure affect value? A panel data analysis for the Spanish market. International Review of Financial Analysis, 16(1), 81-98. https://doi.org/10.1016/j.irfa.2005.10.004
• Mitton, T. (2002). A cross-firm analysis of the impact of corporate governance on the East Asian financial crisis. Journal of Financial Economics, 64(2), 215-241. https://doi.org/10.1016/S0304-405X(02)00076-4
• Morck, R., Nakamura, M., & Shivdasani, A. (2000). Banks, ownership structure, and firm value in Japan. The Journal of Business, 73(4), 539-567. https://doi.org/10.1086/209654
• Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293-315. https://doi.org/10.1016/0304-405X(88)90048-7
• Omran, M. M., Bolbol, A., & Fatheldin, A. (2008). Corporate governance and firm performance in Arab equity markets: Does ownership concentration matter? International Review of Law and Economics, 28(1), 32-45. https://doi.org/10.1016/j.irle.2007.12.001
• Park, K., & Jang, S. (2010). Insider ownership and firm performance: An examination of restaurant firms. International Journal of Hospitality Management, 29(3), 448-458. https://doi.org/10.1016/j.ijhm.2009.10.023
• Porta, R., Lopez‐de‐Silanes, F., Shleifer, A., & Vishny, R. (2002). Investor protection and corporate valuation. The Journal of Finance, 57(3), 1147-1170. https://doi.org/10.1111/1540-6261.00457
• Radić, N., Fiordelisi, F., & Girardone, C. (2012). Efficiency and risk-taking in pre-crisis investment banks. Journal of Financial Services Research, 41(1-2), 81-101. https://doi.org/10.1007/s10693-011-0111-1
• Shleifer, A., & Vishny, R. W. (1986). Large shareholders and corporate control. Journal of Political Economy, 94(3, Part 1), 461-488. https://doi.org/10.1086/261385
• Song, K. R., Mantecon, T., & Altintig, Z. A. (2012). Chaebol-affiliated analysts: Conflicts of interest and market responses. Journal of Banking & Finance, 36(2), 584-596. https://doi.org/10.1016/j.jbankfin.2011.09.001
• Starbuck, W. H. (1992). Learning by knowledge‐intensive firms. Journal of Management Studies, 29(6), 713-740.
• Teece, D. J. (2003). Expert talent and the design of (professional services) firms. Industrial and Corporate Change, 12(4), 895-916. https://doi.org/10.1093/icc/12.4.895
• Tran, Q. T., Alphonse, P., & Nguyen, X. M. (2017). Dividend policy: Shareholder rights and creditor rights under the impact of the global financial crisis. Economic Modelling.
• Villalonga, B., & Amit, R. (2006). How do family ownership, control and management affect firm value? Journal of Financial Economics, 80(2), 385-417. https://doi.org/10.1016/j.jfineco.2004.12.005
• Von Nordenflycht, A. (2010). What is a professional service firm? Toward a theory and taxonomy of knowledge-intensive firms. Academy of management Review, 35(1), 155-174. https://doi.org/10.5465/AMR.2010.45577926
• Williams, J. W. (2009). Envisioning financial disorder: financial surveillance and the securities industry. Economy and Society, 38(3), 460-491.