Financial reporting quality, ownership structure and investment efficiency: An empirical analysis of Vietnamese listed firms : A thesis submitted in partial fulfilment of the requirements for the Degree of Doctor of Philosophy at Lincoln University

Abstract

Investment efficiency (IE) is one of the most researched topics in corporate finance in the last 20 years. In an ideal world, firms invest until the marginal benefit of their investments equals the marginal cost. However, because of market imperfections such as information asymmetry, moral hazard and adverse selection, firms may deviate from the optimal level, which results in inefficient investment. Prior research suggests that inefficient investment negatively affects firm performance and leads to higher costs of equity. Given the importance of efficient investment to firm growth and performance, there has been a significant body of literature on the factors affecting IE. However, there is a limited number of studies exploring IE in newly emerging markets such as Vietnam. In order to enrich the literature on IE in emerging markets, this study examines the impacts of two firm-specific characteristics - ownership structure and financial reporting quality (FRQ) - on the IE of Vietnamese listed firms. This study uses four proxies for FRQ and three measures of ownership structure - ownership concentration, institutional ownership and managerial ownership - to test the effects of ownership structure and FRQ on IE. Using unbalanced panel data of 645 Vietnamese listed firms from 2007 to 2018, the results show that FRQ has a positive influence on IE. In addition, institutional ownership positively impacts IE but there is no significant relationship between managerial ownership and IE of Vietnamese listed firms. Ownership concentration also has a positive effect on the IE of Vietnamese listed firms but its effect disappears after we control for the effects of institutional ownership and managerial ownership. The impact of FRQ on IE is stronger in Vietnamese state-owned enterprises (SOEs). However, the impact of ownership concentration, institutional ownership and managerial ownership on IE shows no difference between SOEs and non-SOEs. Finally, ownership concentration and institutional ownership have no significant influence on the relationship between FRQ and IE. Managerial ownership, on the other hand, reduces the positive relationship of FRQ on IE. To the best of my knowledge, this is the first study that investigates the influence of ownership concentration, institutional ownership and managerial ownership on IE as well as the interaction effect of these three measures of ownership structure and FRQ on the IE of Vietnamese listed firms. The results of this study provide some managerial implications and suggestions for Vietnamese listed firms and policy-makers on how to mitigate firm-level investment inefficiency.