The impact of internal control on business performance of non-institutional enterprises listed on the Vietnamese stock market

After completing the interview, the author synthesized and analyzed more clearly the results and researched the relationship between K SNB and HQ H DKD in listed companies on the Vietnam Stock Exchange. Specifically:

Discussion part 1: Discuss the impact of K SNB on the business performance of non-listed enterprises on the Vietnamese stock market.

In this section, the author discusses with experts the impact of SNB on business performance. The author conducts in-depth interviews to determine the level of impact of factors at each level: 1- No impact; 2- Little impact; 3- Impact; 4- Strong impact; 5- Very strong impact. Evaluation results of the impact of SNB on business performance: 100% of experts believe that SNB has an impact on business performance.

Discussion part 2: Discussion on the level of influence of K SNB on the financial performance and financial position of listed companies on the Vietnamese stock market

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The author also applied the in-depth interview method to assess the impact of factors at each level: 1- No impact; 2- Little impact; 3- Impact; 4- Strong impact; 5- Very strong impact. Evaluation results of the impact of SNB on financial performance and non-financial performance: 100% of experts said that SNB has an impact on financial and non-financial performance.

Discussion part 3: Discuss the level of influence of 5 factors: MTKS, DGRR, HĐKS, TTTT, GS on the business performance of listed companies on the Vietnamese stock market.

In this section, the author discusses with experts the suitability of 5 K SNB factors: MTKS, DGRR, HDKS, TTTT, GS to the HQHD factor. The author conducts in-depth interviews on the impact of the factors according to the following levels: 1- No impact; 2- Little impact; 3- Impact; 4- Strong impact; 5- Very strong impact.

The results of the evaluation of the cooperation of K SNB with HQ HDKD according to experts are summarized and presented in Appendix 3.3.

The K SNB factors included in the proposed NC model by the author are all assessed by experts to have an impact on business performance. However, the DGRR and GS factors are both assessed by one expert to have a small impact on business performance (10%).

Discussion part 4: Discuss the hypotheses of the relationships in the proposed NC model.

After discussing with experts about the suitability of the factors in the proposed model, the author discussed with the experts about the hypotheses of the NC model (13 hypotheses). All 10 experts agreed on the hypotheses of this model. However, there were also some additional comments on the relationships between the factors, specifically:

(i) The relationship between RR assessment and business performance.

“ Risk assessment has a great impact on business performance. When assessing risks, enterprises often make decisions based on the assessment of related risks and the costs incurred to pay for the assurance of those risks. Some units and enterprises apply a simple risk assessment process, making quick decisions to protect or limit risks. Some other enterprises apply a more complex risk management process in using quantitative risk tools to assess risks. However, risks and assurances always change over time, so risk management needs to be carried out continuously ” ( Lecturer of TC Academy ).

“ When my company conducts internal audits at the company, we will first base on the approved internal audit plan or the request of the senior leaders in the company to determine the subjects that will be included in the audit program. Therefore, we identify the subjects that need to be studied, consider the factors that can increase the risk for the company. During that process, we often ask questions and find the most reasonable solutions to minimize the risk for the company and increase the business performance, for example: What risks often appear in the company's operations? What policies do leaders at all levels of the company have in the management and operation of the unit's operations? In the current period, does the company prioritize maximizing profits? Especially in the difficult period of society in 2020, what is the mechanism for calculating salaries and bonuses for managers and civil servants in the unit? Is it appropriate? .... after a period of applying that method, I found that my company's RR assessment procedure is very good, employees feel secure in working and contributing, high labor productivity and good business performance bring my company" ( Dam Phu My Packaging Joint Stock Company - Internal auditor )

(1) The relationship between information & communication and business management

“ The information technology has a relationship with the business operation, when the information technology of the enterprise is good, it will promote the production and business of the enterprise. However, in the era of technology 4.0, the strong development of information technology, the impact of communication on people's consumption helps people consume

more, helping the economy develop. On the other hand, the media also affects people to consume more than necessary. People work more to serve their consumption needs. Material values are increasingly valued by society more than spiritual values. Excessive production and consumption will destroy the environment and negatively affect people's lives " - Vietnam Auditing and Finance Company Limited - Director.

“Our business philosophy is to consider customers as the focus of the entire company's operations. Therefore, we always seek to understand the latent and expressed needs of customers and develop superior solutions for those needs. It is a TC culture that creates outstanding value for the enterprise. On the other hand, we realize that employee satisfaction is also very important to achieve quality and business HQ. We always care about the company's policies and benefits for employees. Because when employees are satisfied, they will feel more secure in their work, contribute more, and bring us more products, services and added value... From there, customers will also be satisfied with the products and services we bring" - Phu My Fertilizer Packaging Joint Stock Company - Internal KTV.

Discussion results part 5: Discussion on scales to measure factors in the proposed NC model

Nowadays, with the development of science and technology, the way businesses operate can change a lot (for example: in terms of management, types of risks, controls and types of supervision...).

For different industries, there will be options for K SNB according to different industry groups. For example: The banking sector has had quite complete and detailed research on K SNB. The Basel Report (1998) of the Basel Committee on Banking Supervision (BCBS) has announced the K SNB framework in banking (Framework for Internal Control System in Banking Organizations) . K SNB according to COSO focuses on risk management in enterprises. As for COSO, it has also issued the Guideline on monitoring the K SNB system (Internal Control - Integrated Framework, 2013) based on the COSO 2013 model to help organizations self-monitor the quality of the K SNB system. The author chooses the indicators according to

COSO 2013 framework for listed companies on the Vietnamese stock market towards risk management in enterprises.

Through expert interviews, the author has compiled and revised a number of scales according to the consensus of experts as follows:

KS Environment (MTKS):

According to COSO (2013), it has been pointed out that MTKS is a set of standards, processes and structures that form the basis for the implementation of K SNB of an enterprise. MTKS is the foundation of consciousness, the culture of the enterprise, it has an impact on the KS consciousness of all members of that enterprise. Through document research and interviews with experts, the author has synthesized the factors of MTKS that affect the business results of listed enterprises on the Vietnamese stock market, in which there have been some adjustments compared to the evaluation framework according to COSO (2013) to suit the characteristics of listed companies on the Vietnamese stock market.

Most experts agree with the MTKS scale, however, some experts suggest that the following MTKS scales should be added:

“I think it is appropriate to inherit the COSO (2013) MTKS scales, but you should add some MTKS-related scales, such as:

- Commitment to corporate integrity and ethics:

+ Enterprises resolve problems arising with suppliers, customers and other parties fairly and honestly.

+ Through daily meetings and gatherings, the Board of Directors regularly disseminates knowledge about integrity and ethical values to employees.

- TC structure and management style of the board of directors : All arising transactions are approved by appropriate management staff" - ( Dam Phu My Packaging Joint Stock Company - Internal auditor ) (see Appendix 3.1).

RR

Risk assessment is understood as the identification, analysis and assessment of risks that occur, affecting the achievement of the Company's target, thereby building measures to prevent risks and overcome consequences if risks arise. Combining document research with expert interviews, the author synthesizes the factors of risk assessment affecting the business performance of listed companies on the Vietnamese stock market as follows:

Most experts agree with the legacy scales of COSO (2013). However, experts add the following scales:

“In my opinion, the scales for assessing risks are suitable for reality, however, some scales should be added as follows: Regarding determining risks: The company's board of directors encourages reporting of events to determine risks” - (Lecturer of TC Academy) (Appendix 3.1).

Contract

The control activity is a set of policies and control procedures to ensure that the instructions of managers are implemented to achieve the objectives of the enterprise. Combining document research with expert interviews, the author has proposed the factors of control activities affecting the business performance of listed enterprises on the Vietnamese stock market as follows:

Expert opinions, 100% of experts agree with the COSO (2013) scales of KS activities. Some experts added additional scales:

“In my opinion, the target of Auditing Activities is established on a selective basis to suitably minimize RR and achieve MT, so a scale should be added to measure: Does the company have a revenue and expenditure process and corresponding TC regulations? The purpose is to check whether the company is implementing the prescribed procedures and processes correctly or not”. - Vietnam Auditing and Control Company Limited (Appendix 3.1).

TTVTT

According to experts, the following information technology factors affect the business performance of listed companies on the Vietnamese stock market:

Experts suggest adding more factors:

“ In my opinion, in addition to using the evaluation factors according to COSO (2013), we should add more factors to suit the reality, specifically: Internal communication adds 02 factors: Information on production and business is suitable for the decision-making requirements of the Board of Directors; Information on production and business of the enterprise is easy to access and search when necessary ” – Hoa Phat Group (Appendix 3.1).

 Monitoring: 100% of experts agreed with the Coso (2013) monitoring scales

The author synthesizes the monitoring factors affecting the business performance of listed enterprises on the Vietnamese stock market (Table 3.6).

From the results presented above, it can be seen that there are 05 factors identified with 74 variables that are factors that influence K SNB. To evaluate the influence of each factor, the thesis will use these factors as the basis for building survey questions in the quantitative research step.

With the HQ H DKD at DNPTC NY on the Vietnam Stock Exchange, the dependent variable. The thesis will measure the levels of this influence through previous studies, regulations and in-depth interview results. Specifically:

When considering the factors for measuring business performance, in addition to the experts suggesting using the factors proposed by the author, some experts add the factor: Customers are satisfied with the company's products and services . Specifically:

“In my opinion, we should add a scale for business performance: customers are satisfied with the company's products and services. Because the purpose of business performance is to maximize profits, business performance. An important part of that is the customer factor. Customers are invaluable assets of every business, so customer satisfaction is an extremely important factor. Once customer satisfaction is achieved, the business will create a brand as well as a large source of loyal customers who are willing to accompany the business in the future. In today's market economy, competition between businesses is increasingly fierce, not only in product quality but also in pre-, during- and post-sale care services. Therefore, any business must pay attention to customer satisfaction ”. - Hoa Phat Group

3.2. NC model and NC variables

3.2.1. Theoretical NC model

The theoretical research model is formed based on the results and theories of previous researches mentioned in chapters 1 and 2 on the impact of SNB on business performance. On the basis of selective inheritance, the author proposes the research model in Diagram 3.1, which considers the components of SNB that impact business performance of enterprises.

Figure 3.2: Theoretical model

Source: author compiled from previous studies

Regression models:

- Relationship between K SNB and HQ H DKD:

PF = β 10 + β 11 .IC+ β 12. SIZE+ β 13. Time (1)

- Relationship between K SNB and HQTC:

FP= β 20 + β 21 .IC+ β 22. SIZE+ β 23. Time (2)

- Relationship between K SNB and HQPTC:

NFP= β 30 + β 31 .IC+ β 32. SIZE+ β 33. Time (3)

- Relationship between K SNB components with HQTC and HQPTC FP= β 40 + β 41 .CE+ β 42. RA+ β 43. IAC + β 44. CA + β 45. MA (4) NFP= β 50 + β 51 .CE+ β 52. RA+ β 53. IAC + β 54. CA + β 55. MA (5) In which:

Dependent variable: Business performance of enterprises is measured through the following indicators:

(i) TC indicators include: return on total assets (ROA), return on sales (ROS), return on equity (ROE), ROI - Return on invested capital, ROS - Return on sales, GOS - Gross profit margin, EPS

– Earnings per share.

(ii) Non-TC indicators include: Achieving the Company's contractual objectives and complying with regulations; Labor productivity of the Company; indicators on employee satisfaction; indicators on customer satisfaction with the Company's products and services.

In there:

PF= (ROA+ROE+ROI+ROS+GOS+EPS+ NFP1+NFP2+NFP3)/9

PF is the dependent variable, when testing the relationship between K SNB and PF, the relationship between each factor constituting K SNB with PF. The basis for including the PF variable is based on the research on the relationship between K SNB and PF, the factors affecting PF include: Tseng (2007); Berrone (2005); Mawanda (2008); Yousef (2015); Kinyua (2016),

Adagye (2015), Saeed et al. (2013); (Muogbo (2013); Arindam (2016); Ewa

& Udoayang (2012); Boakye, 2016; Taradipa (2017); Syafii et al. (2015); Anggraini & Setiawan (2011); Wang (2015); Srisawangwong & Ussahawanitchakit (2015); Cheng et al. (2015); Saat et al. (2013); Brown (2018); Berrone (2005); Porter (1976)…

Independent variable:

 K SNB (IC): Previous studies related to K SNB such as: Morris (2011), Karagiorgos, Drogalas, & Giovanis (2011), COSO (2013), .... according to these studies, K SNB is measured by the elements that make up K SNB including: MTKS (CE), HĐKS (CA), TTTT (IAC), GS (MA), DGTT (RA) are all used to evaluate K SNB and have the same role in evaluating K SNB, so the author determines K SNB (IC) as follows:

IC= (CE+CA+IAC+MA+RA)/5

In the components of K SNB, each component of K SNB is measured by sub-factors, each sub-factor in the components of K SNB is measured on a 5-level Liker scale from strongly disagree to strongly agree.

+ KS environment (CE) according to COSO (2013)

CE1: Commitment to corporate integrity and ethics. This observation variable has 5 sub-observations numbered from CE 1.1, CE 1.2, CE 1.3, CE 1.4, CE 1.5. All are used to evaluate the commitment to corporate integrity and ethics and have the same role, so the author determines CE 1 as follows:

CE 1= (CE 1.1 + CE 1.2 + CE 1.3 + CE 1.4 + CE 1.5)/5

The impact of internal control on business performance of non-institutional enterprises listed on the Vietnamese stock market - 9

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