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The Relationship between Foreign Ownership and Financial Performance: A Vietnam Cases Study

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  • Pham Duc Son
  • Do Xuan Truong

    (GDS - Global Data,SJC, Ho Chi Minh City, Vietnam)

Abstract

To implement the policy of attracting capital from foreign investors into the stock market, the Vietnamese government (2015) issued Decree 60 to allow joint-stock companies to attract indirect capital flows from foreign investors. Foreign ownership is said by some studies to increase the efficiency of the company's operations, however, there are also some studies that suggest that a too high foreign ownership rate will reduce the operating efficiency of enterprises. To determine the relationship between these two issues, we conducted a study with 100 companies listed on the Vietnamese stock market from 2015 to 2022. With the use of dynamic panel data model (GMM) , the analysis results show that foreign ownership has a nonlinear relationship with financial performance of the business. With a certain percentage of foreign ownership (0 to nearly 40%) will increase the financial efficiency of the enterprise, however this ratio exceeding the upper limit will have the opposite effect. From these results, we have made some recommendations in corporate governance related to ownership structure.

Suggested Citation

  • Pham Duc Son & Do Xuan Truong, 2023. "The Relationship between Foreign Ownership and Financial Performance: A Vietnam Cases Study," Post-Print hal-04105720, HAL.
    • Handle: RePEc:hal:journl:hal-04105720
    DOI: 10.9734/ajeba/2023/v23i141002
    Note: View the original document on HAL open archive server: https://hal.science/hal-04105720
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    References listed on IDEAS

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    4. Park, Kwangwoo, 2002. "Foreign Ownership and Firm Value in Japan," CEI Working Paper Series 2002-15, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
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