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Completing the annual reporting system in joint stock companies listed on the Vietnamese stock market - 2

LIST OF ABBREVIATIONS


ASB : British Accounting Standards Board BCĐKT : Balance Sheet

BCKQKD: Business results report BCLCTT: Cash flow statement BCTC: Financial statement

BCTN: Annual Report BGĐ: Board of Directors

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BKS : Board of Control

JSC : Joint Stock Company

Completing the annual reporting system in joint stock companies listed on the Vietnamese stock market - 2

DN : Enterprise

State-owned enterprise: State-owned enterprise

FASB: American Accounting Standards Board GDCK: Securities Trading

Board of Directors: Board of Directors

HNX: Hanoi Stock Exchange

HOSE : Ho Chi Minh City Stock Exchange IASB : International Standards Board

KTV: Auditor

OTC : Over-the-counter stock market ROA : Return on assets

ROE: Return on equity SEC: US ​​Securities and Exchange Commission TMBCTC: Notes to financial statements TNDN: Corporate income

Ho Chi Minh City: Ho Chi Minh City Fixed assets: Fixed assets

TTCK : Stock Market TTGDCK : Securities Trading Center VAS : Vietnam Accounting Standards VN-Index : Vietnam Stock Index UBCKNN : State Securities Commission

UPCoM: Stock exchange of unlisted public companies


INTRODUCTION


1. Urgency of the topic

The Vietnamese stock market is still a very new and attractive environment for investors. However, to choose investment securities, investors must rely on many sources of information; in which, information from the annual reports (ANRS) of listed organizations is one of the important and reliable sources of information for investors to make decisions. Financial statements (ANRS) and ANRS reflect the financial capacity and potential, financial security and business performance of enterprises. Analyzing and evaluating financial indicators through ANRS of listed joint stock companies (JSCs) is a way for investors to "choose the right place to invest" on a basis, avoiding the situation of investing in a "psychological" or "crowd" style.

The concentrated stock market in Vietnam officially came into operation in July 2000, about 10 years ago. Compared to developed countries in the world, the Vietnamese stock market is still very young. In the first stock trading sessions, on July 28, 2000, the Vietnamese stock market had only 2 listed joint stock companies. By 2005, the number of listed joint stock companies had reached 27; of which, 20 listed companies were formed from the equitization of state-owned enterprises (SOEs) [26, p.81]. The information system of the companies during this period was still heavily influenced by the old management system, the viewpoint and ideology of relying on the state budget. From 2006 to now, the Vietnamese stock market has made strong developments in both scale and quality, with the participation of many listed organizations and investors. Commodities on the market and brokerage companies are increasing. Up to now, the number of listed enterprises on both Ho Chi Minh City (HCMC) and Hanoi Stock Exchanges is about 600 enterprises. Along with the increasingly strong development of the Vietnamese stock market, the requirement for publicity and transparency in information disclosure on a wide scale and in a timely manner has become mandatory for listed companies. However, the information disclosed by listed companies in Vietnam still lacks transparency. The Organization for Economic Cooperation and Development (OECD) in collaboration with the State Securities Commission (SSC) June


In 2006, the Vietnam Securities Law published a report assessing the governance situation of Vietnamese companies, in which the principles of information disclosure and information transparency were basically not complied with by Vietnamese companies [26, p.81]. The Law on Securities of Vietnam stipulates in Clauses 1 and 2, Article 16, within 10 days from the date of audited annual financial statements, public companies must periodically disclose information about the annual financial statements. According to the provisions on information disclosure in Clause 1, Section II of Circular No. 09/2010/TT-BTC dated January 15, 2010 of the Ministry of Finance, the deadline for completing the annual financial statements is no later than 90 days from the end of the fiscal year and the deadline for submitting the annual financial statements is no later than 20 days from the end of the deadline for completing the financial statements. However, in reality, the annual financial statements are still late for investors.

Financial statements play a very important role, it is the language of business activities of listed joint stock companies, thanks to which investors have the basis to make correct and timely decisions. In Vietnam, the regulation on financial statement disclosure for listed organizations has only appeared since 2007 in Circular 38/TT-BTC dated April 18, 2007 and then amended by Circular 09/TT-BTC dated January 15, 2010 of the Ministry of Finance. However, over the time of information disclosure, financial statements of listed joint stock companies have revealed many limitations, inconsistencies and incompleteness, causing many difficulties for investors and information users. In addition, the information on current financial statements is not suitable for analyzing and evaluating business performance but still tends to serve the control needs of the State. This is partly due to the fact that the financial statements system is not really scientific, reasonable and unified, and partly due to the fact that listed companies themselves do not have a correct understanding of the role of financial statements. Therefore, the construction and completion of the financial statements system of listed joint stock companies on the stock market is an urgent and necessary issue to serve the decision-making of securities investors, contributing to the stability, right direction and integration of the Vietnamese stock market.

Based on the important role of the annual report system in listed joint stock companies, after a period of research, the author chose the topic: "Improving the annual report system in listed joint stock companies on the Vietnamese stock market" to do his doctoral thesis.


2. Research object and scope

The research object of the thesis is the financial statement system of listed joint stock companies on the stock exchange.

The scope of the thesis is limited to theoretical research, analysis of the current situation and proposal of solutions to build and perfect the financial statements system of listed joint stock companies on the Vietnamese stock market.

3. Research objectives

With the identified research object and scope, the thesis focuses on solving the following problems:

- Systematic analysis of the theory of financial statements in enterprises, clearly indicating the nature and content that financial statements need to have.

- Assessing the current status of the financial statements system of listed joint stock companies on the Vietnamese stock market: advantages, disadvantages and reasons for improving the financial statements system of listed joint stock companies.

- Proposing solutions to build and perfect the financial statements system in listed joint stock companies on the Vietnamese stock market, in order to provide reliable information for investors to make decisions and managers to correctly assess the financial status and business performance of listed joint stock companies, thereby contributing to the health and stability of the Vietnamese stock market.

4. Research methods

To achieve the set objectives, based on the dialectical materialism and historical materialism methodology, the thesis has flexibly applied methods such as investigation, survey, grouping, consulting investors and experts... From there, the thesis has synthesized, analyzed, evaluated, pointed out the existence and success of the current BCTN system and proposed solutions along with conditions for implementing solutions to perfect the BCTN system. The research methods are specified in the following work steps:

Step 1/ Collect information about the BCTN system:

40 financial statements of listed joint stock companies on the Vietnam stock market from 2007 to 2010 were selected to assess the current information disclosure status of enterprises compared to regulations on information disclosure. The basis for sample selection is based on the following criteria:


- BCTNs won prizes in the annual BCTN voting contest.

- Charter capital size of listed companies according to levels: large, medium and small.

Based on the comparison between the regulations on information disclosure and the actual financial statements of these listed companies, the thesis draws conclusions on the actual financial statements of listed joint stock companies.

Step 2/ Consult with experts, investors and businesses:

Create a survey to evaluate the opinions of the subjects: investors, analysts and enterprises (listed joint stock companies) on the annual reports of listed joint stock companies in terms of content, form, time and method of information disclosure.

Step 3/ Processing survey results:

Using SPSS 18 statistical software to analyze and evaluate the annual reports of listed companies from the perspective of information users, information needs of the main information users (investors, analysts) as well as the ability to respond to information disclosure from listed companies.

Step 4/ Propose solutions to improve the BCTN system:

Based on the survey results of the current status of financial statements of listed joint stock companies in Vietnam, assessment of information expectations of users, assessment of feedback from reporting entities, and learning from the experiences of some countries in the world, we propose solutions to improve the current financial statements system.

5. Main contributions of the thesis

Academically, theoretically

Financial statements are an official and effective tool for users to evaluate the financial situation and detailed information of the enterprise, thereby making appropriate decisions. In Vietnam, financial statements are a mandatory report for listed joint stock companies, first appearing officially in the regulations on information disclosure in Circular 38/TT-BTC dated April 18, 2007 of the Ministry of Finance. However, in terms of theory, there has not been any research work related to financial statements published in Vietnam up to now.


Based on the theory of accounting reporting system and referring to the experience of financial statements of some countries in the world, the thesis focuses on clarifying the theoretical basis of financial statements to perfect the financial statements system in current listed joint stock companies on the Vietnamese stock market. Specifically:

- Position of financial statements: Financial statements are an official and effective tool for users to evaluate the financial situation and detailed explanatory information of the enterprise, thereby making appropriate decisions.

- Nature of financial statements: Financial statements are reports that reflect, evaluate, and analyze the financial situation and business results of an enterprise after a period of operation, especially the reporting year. Although financial statements have some similarities to financial statements, financial statements are not financial statements.

- Purpose of BCTN: Providing financial and non-financial information mainly for external users, is an effective tool in promoting and strengthening the image of the enterprise, creating trust for investors, partners and the public...

- Information nature of the annual report: Along with quantitative information reflecting the financial situation and business results, the annual report also includes a lot of non-quantifiable information such as the company's mission statement, development strategy, information about the company's products and services, explanations from managers, audit reports, etc., making it easier for users to understand the company's operations as well as business strategies and information on the company's development orientation in a reliable manner.

In addition, the thesis has pointed out the basic factors affecting the financial statements of each country and Vietnam, including economic development; legal system; financial supply; cultural and educational characteristics; integration trends with international accounting.

In practice

The thesis argues that: BCTN is an official and public information channel of enterprises. However, the current BCTN system has not yet provided all the necessary information to users. Therefore, to ensure the publicity, transparency, clarity, ease of understanding, completeness and accuracy of information, it is necessary to complete the BCTN system based on the following principles: (1) In accordance with international standards and practices; (2) In accordance with trends


development status of listed joint stock companies; (3) Suitable for the actual needs of information users; (4) Suitable for the country's socio-economic development guidelines.

Based on the survey of the current status of the financial statements of selected joint stock companies, along with assessments from the main users (investors, experts) and from the preparers (listed joint stock companies), the thesis has identified the limitations in providing information of the current financial statements system. The thesis proposes solutions to improve the financial statements such as: (1) Improve the reporting format; (2) Improve the number of departmental reports;

(3) Complete the report content; (4) Complete the disclosure criteria; (5) Complete the time and method of information disclosure. From there, the thesis proposes a BCTN model in the proposed direction to better meet the information needs of users.

In order to implement solutions to improve the BCTN system, the thesis also makes recommendations to the State and listed joint stock companies in Vietnam. The recommendations made by the thesis not only help policy-making agencies (Ministry of Finance, State Securities Commission) but also help listed joint stock companies, researchers, managers, and investors have a reliable basis to evaluate and review the business performance of the company and are a useful reference source for other users.

6. Structure of the thesis

In addition to the introduction, conclusion, list of author's published works, list of references and appendices, the thesis consists of 3 chapters:

Chapter 1: Theoretical basis of annual reporting system in joint stock companies listed on the stock market.

Chapter 2: Current status of annual reporting system of joint stock companies listed on Vietnam stock market.

Chapter 3: Viewpoints and solutions to improve the annual reporting system of joint stock companies listed on the Vietnamese stock market.


RESEARCH OVERVIEW

1. Overview of research on annual reports in the world

Financial statements play a very important role in providing information about the financial situation, business performance and cash flow of an enterprise. However, a lot of information that those interested in the situation of an enterprise need to find, such as additional explanatory information from the reports of the Board of Directors (BOD), Chairman of the Board of Directors (BOD) and auditing experts, is not reflected in the financial statements. These will become important factors for users of information of enterprises through the annual report.

In the world, the stock market has developed for a long time in many countries. Therefore, the issue of information disclosure through annual reports has attracted the attention of many authors. Some authors focus on the role of annual reports, others are interested in annual reports as a basic information tool while some consider annual reports as a financial accounting document of enterprises with two types of information disclosure mentioned, which are descriptive information (annual reports reflect past information) and forecasting information (annual reports give forecasts about future trends).

Most academic studies have examined financial statements from the perspective of accounting information disclosure with a tendency to emphasize the usefulness of information disclosure such as Tennyson et al. (1990) [61, pp.391-410]; Frazier et al. (1984) [48, pp.318-331]. Besides that point of view, some other studies by Meek and Gray (1989);

Meek et al. (1995); Zarzeski (1996) again focused on highlighting other unexpected factors related to the internationality of companies in comparative studies, such as international sales, country of origin and the role of culture among multinational companies that influence information in annual reports [55], [56], [69] .

In addition to the above viewpoints, many other studies emphasize how shareholders read annual reports. According to Scholes and Clutterbuck (1998), Mitchell et al. (1997), each subject uses annual reports for its own purpose [54]. In theory, information disclosure must be different and consistent with shareholders' expectations, national and international. Through information disclosure, managers want to send signals to shareholders to prioritize the necessary messages to help managers get closer to powerful shareholders.

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