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"The Nexus between Corporate Performance and State Ownership in Vietnam: Evidence of State Ownership’s Inverted U-Shape and Provincial Business Environment Influences"
"The Nexus between Corporate Performance and State Ownership in Vietnam: Evidence of State Ownership’s Inverted U-Shape and Provincial Business Environment Influences"
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Date
2023
Authors
Tran Thai Ha Nguyen, Susilo Nur Aji Cokro Darsono, Gia Quyen Phan, Pham Thi Hong Van, Huyen Bach Thi, Sobar M. Johari.
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Abstract
"The level of state ownership in corporations is still a controversial topic because of its
duality: on the one hand, it brings resource advantages, and on the other hand, it causes agency
problems. Thus, our study aims to investigate the relationship between state ownership and corpo rate performance within the Vietnamese context, unraveling the impacts of state ownership’s non linear and provincial business environment. Analyzing financial data spanning over a decade from
359 listed corporations on the Vietnamese stock markets (2010–2021), our empirical findings derived
through the General Method of Moments (GMM) reveal that state ownership emerges as a potent
“strategic asset” with a positive influence on corporate performance. However, a critical point is
identified when state ownership surpasses the threshold of 32 percent and a decline in corporate
performance ensues—a confirmation of an inverted U-shaped impact. These results substantiate the
necessity of the equitization process and underscore the imperative of judiciously managing state
ownership in Vietnam. Notably, our study unveils a more critical dimension: the enhanced provin cial business environment bolsters corporate performance and amplifies the positive impact of state
ownership. Thus, a strategic dual approach is suggested to improve corporate performance: im proving the business environment and recalibrating the percentage of state shareholders. Our study
serves as empirical evidence, referencing Vietnam and other transitional economies, toward man nerly policy decision-making related to state ownership and the business environment to boost cor porate performance.
"
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Keywords
" state ownership,
business environment,
corporate performance,
generalized method of moments,
Vietnam"