Firm characteristics and corporate governance of state-owned enterprises: An analysis of an emerging market

This paper explores the relationship between firm-level factors and the quality of corporate governance of state-owned enterprises (SOEs) in an emerging economy, namely Vietnam. We employ a self-built corporate governance index (CGI) for SOEs and conduct an empirical analysis of data from 113 listed SOEs on the stock market of Vietnam from 2016-2020 using a fixed effect model (FEM) as suggested by the Hausman test. We find that firm-level characteristics such as firm age and tangibility of assets as well as macroeconomic factors such as the quality of the business climate and economic growth exhibit a statistically significant correlation with the corporate governance quality of SOEs. On the other hand, there is no established statistically significant relationship between other firm characteristics such as firm size, state ownership, financial leverage, growth opportunities and corporate governance. These results for an emerging economy like Vietnam are novel and provide implications for policymakers, regulators, shareholders and other stakeholders on the possibility of enhancing the quality of corporate governance of SOEs in an emerging market, a critical issue given the increasing role of SOEs in economies. Our research can be improved for future research in a couple of aspects. First, addressing the case of companies that do not disclose their governance practices in annual reports would help enhance the information for the corporate governance index. Second, extending the data to compare listed SOEs with other listed firms would provide a more comprehensive analysis.