Independent variable | REM | FEM | 2SLS | GMM |
Coefficient a | 20.31 *** | 25.35 | 14.01 *** | 15.38 *** |
(7.49) | (1.06) | (3.35) | (3.77) | |
Information disclosure t-1 | 0.548 *** | -0.337 *** | 0.586 *** | 0.602 *** |
(20.13) | (-7.57) | (18.39) | (19.44) | |
Board of Directors | 0.125 | 0.116 | 0.0599 | 0.0441 |
(1.20) | (0.67) | (0.64) | (0.47) | |
Concurrently Chairman | -0.499 | -2,149 *** | -0.417 | -0.489 |
Board of Directors | (-1.43) | (-2.69) | (-1.23) | (-1.45) |
Independent Member | 0.358 ** | -0.0992 | 0.287 * | 0.365 ** |
(2.43) | (-0.26) | (1.77) | (2.28) | |
Company size | 0.268 *** | 2,147 ** | 0.426 *** | 0.344 ** |
(2.78) | (2.44) | (2.48) | (2.06) | |
Return on assets | 6,686 *** | 0.603 | 6,599 *** | 6,752 *** |
(4.06) | (0.27) | (3.93) | (4.16) | |
TOBIN_Q | 0.140 | -0.358 | 0.138 * | 0.135 * |
(1.00) | (-0.88) | (1.78) | (1.79) | |
Number of observations | 968 | 968 | 968 | 968 |
Wald/F test 564.8 *** 9.6 *** 548.5 *** | 42.42 599.2 *** | |||
Hausman test (FEM//REM) Wu-Hausman test | 669.6 *** | 1.85 ns | 0.95 ns | |
Sagan/Hansen's J test | 7.54 * | 7.54 * | ||
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Table 4.16: Impact of corporate governance and corporate finance factors on the level of transparency and information disclosure analyzed by REM, FEM, 2SLS, GMM estimation methods in model 4
R 2 (%) 71.07 1.7 42.27
Source: Results of author's synthesis of survey data processing
Note: ***, **,* : Statistical significance at 1%, 5% and 10% levels respectively, t, z statistics values are in parentheses for the estimated model, Hausman test to choose REM/FEM estimation model, Sagan test, Hansen's J test to identify excessive instrumental variables in GMM model; Wu-Hausman test to identify endogeneity in the model,
With the conclusion accepting hypothesis H 2 : the number of independent members in the Board of Directors has a positive influence on the level of transparency and information disclosure; when increasing the independence of the Board of Directors - increasing the number of independent members will make information about the company disclosed fully, promptly and accurately, which will reduce information asymmetry between managers and shareholders. This result is also consistent with the studies of Amar and Zeghal (2011), Htay (2013), Andrade et al,, (2014), Bui
Thi Thuy (2014), Pham Ngoc Toan and Hoang Thi Thu Hoai (2015), Pham Ngoc Toan and Nguyen Thanh Long (2017), Pham Hoai Huong and Tran Thuy Uyen (2018), Tran Thi Kim Anh and Hoang Ha Anh (2019); and consistent with the thesis's expectations.
With the conclusion accepting hypothesis H 4 : company size has a positive impact on the level of transparency and information disclosure, large-scale companies with a complete corporate governance system tend to disclose more information than small companies that have just entered the listed market. The analysis results are also consistent with previous studies by authors Nguyen Thi Thu Hao (2015), Nguyen Thanh Bich Ngoc et al. (2016), Nguyen Thi Phuong Hong and Le Hoang Trung (2016); Pham Ngoc Toan and Nguyen Van Bao (2017); Pham Ngoc Toan and Le Thi Thu Hong (2017); Pham Hoai Huong and Tran Thuy Uyen (2018), Tran Thi Kim Anh and Hoang Ha Anh (2019); and consistent with the thesis's expectations.
With the conclusion accepting hypothesis H 5 : financial performance measured by ROA ratio has a positive impact on the level of transparency and information disclosure, this result proves that agency theory has an important impact on the disclosure of information of the company. Companies with high profit margins will disclose more information and the representative will use this issue for better contract signing. The analysis results are consistent with previous studies of the authors (Aksu and Kosedag, 2006; Alkhatib, 2014; Ngo Thu Giang and Dang Anh Tuan, 2013; Nguyen Thi Thu Hao, 2015; Dang Ngoc Hung, 2016; Pham Ngoc Toan and Le Thi Thu Hong, 2017); but contrary to the conclusion of Pham Hoai Huong and Tran Thuy Uyen (2018).
With the conclusion accepting hypothesis H 6 : the value of the company measured by TobinQ has a positive effect on the level of transparency and information disclosure, this result indicates that when the value of the company on the listed market increases, the company tends to disclose more information. The result is consistent with the study of Aksu and Kosedag (2006) on the Turkish stock market. This result is consistent with the signaling theory in corporate governance and has an impact on the disclosure of information of the company.
The thesis rejects hypothesis H 1a : Board size has a positive impact on transparency and information disclosure. The thesis results are contrary to the conclusions of the authors Htay et al., (2013); Dang Ngoc Hung (2016), Nguyen Thi Phuong Hong and Le Hoang Trung (2016); but are consistent with the results of Tran Thi
Kim Anh and Hoang Ha Anh (2019). In the Vietnamese stock market, the average number of Board members is 6 and has little change due to corporate governance regulations and minimum capital ratio constraints on the Board of Directors; in addition, concerns about agency costs when increasing the size of Board members have affected the Board of Directors size factor in some small-sized companies. Some studies have shown that the size of the Board of Directors has no effect on information disclosure and is similar to the results of the thesis research (Hau and Danh, 2017; Tran Thi Kim Anh and Hoang Ha Anh, 2019).
The thesis rejects hypothesis H 1b : the concurrent position of the Chairman of the Board of Directors has a positive impact on the level of transparency and information disclosure. The thesis results show that the manager-relationship theory does not appear in the thesis results. The thesis's conclusion is consistent with the results of Nguyen Chi Duc and Hoang Trong (2012); Dang Ngoc Hung (2016); Tran Thi Kim Anh and Hoang Ha Anh (2019). From the control perspective, when the Chairman of the Board of Directors concurrently holds the position of General Director, the company's executive board is susceptible to manipulation and has the ability to conceal information (especially bad information) on the Vietnamese stock market.
And the thesis found that the level of transparency and information disclosure in the previous period have a positive influence on information disclosure in the current period. The level of information disclosure of the company increases over time in response to the regulations of the stock market and the pressure of information demand from investors. Previous research results in Vietnam have not shown this; however, the results of the thesis are consistent with the research of Rajab and Handley-Schachler (2009) in the UK stock market.
Transparency and information disclosure play a very important role in the operations of listed companies, individual investors and the development of the stock market. The main content of section 4.2 is to determine the impact of corporate governance and corporate finance factors on the level of transparency and information disclosure of listed companies on the Vietnamese stock market. Using the two-step least squares estimation method and the Generalized Moment, the thesis found evidence to conclude that transparency and information disclosure are positively correlated with the independence of the Board of Directors, company size, and return on assets. Information disclosure in the past has a positive impact on the level of information disclosure in the current period. The research results are consistent with the theory of asymmetric information, agency theory and previous empirical studies. Thus, it can be seen that transparency and information disclosure are not only the meaning of information disclosure, but also the meaning of information disclosure.
Improving the level of transparency and information disclosure will help companies access regional and global stock markets, establish their reputation in stock markets, and make it easier to mobilize development capital when needed.
4.4 IMPACT OF TRANSPARENCY AND INFORMATION DISCLOSURE LEVEL ON COST OF EQUITY OF LISTED COMPANIES ON THE VIETNAMESE STOCK MARKET
* Results of FEM and REM regression models
As presented in the method section, to measure the impact of transparency and disclosure levels, governance factors, and finance on the cost of equity capital of listed companies, the thesis uses static estimation methods (REM and FEM) and instrumental variable estimation methods (2SLS and GMM). The estimation results from the models are presented in detail in Table 4.17.
The analysis results of the random effects and fixed effects estimation methods are presented in Table 6.3_pl and Table 6.4_pl (Appendix) showing that the FEM estimation method is more suitable than the REM estimation method. The results of the FEM estimation method show that the level of transparency and information disclosure has a negative correlation with the cost of equity but is not statistically significant; the size of the company and the number of years of listing have a positive effect on the cost of equity. The estimated model is statistically significant but the estimated results are not meaningful because the model's explanation coefficient is very low. The estimated model results show that there is an endogenous variable in the estimated model. Testing the heteroscedasticity by Wald test, the results of the FEM estimation method show that there is heteroscedasticity in the regression model. To overcome the endogeneity phenomenon, the error variance appears in the regression model by FEM estimation method, two-step least squares estimation method and Moment are used in estimation models (1), (2), (3), (4), (5) (6).
* Results of two-step least squares (2SLS) and GIVE (IV- 2SLS) regression models
The results of the 2SLS estimation method (Table 4.19) show that the level of transparency and disclosure has a statistically significant negative correlation with the cost of equity. Company size has a positive correlation with the cost of equity; financial leverage has a negative correlation with the cost of equity.
However, the 2SLS estimation method does not completely overcome the endogeneity phenomenon in the estimation model. The study applies the GIVE method to eliminate the endogeneity phenomenon in the estimation model. When analyzing the impact of an independent variable on a dependent variable, which also affects another independent variable, applying the GIVE estimation method (IV-2SLS) gives more effective results than 2SLS and OLS (Baum et al, 2003). The analysis results using the IV-2SLS estimation method when the F value > 10 consider the impact of independent variables on the dependent variable, and the IV-2SLS estimation is more reliable than OLS. The IV-2SLS test with the addition of the heteroscedasticity reduction effect will reduce the impact of weak instrumental variables in the estimation model (Pflueger and Wang, 2015; Tchatoka, 2019). The results of the GIVE estimation method analysis are in Table 4.17.
Table 4.17: Impact of transparency and information disclosure on cost of equity of listed companies analyzed in model 3
REM | FEM | 2SLS | IV-2SLS | |
Coefficient a | -0.0603 *** | -0.788 *** | 0.0146 | 0.0146 |
(-3.30) | (-5.30) | (0.35) | (0.35) | |
Transparency and information disclosure | 0.00008 | 0.00049 | -0.00194 ** | -0.00194 ** |
(0.46) | (1.42) | (-1.98) | (-1.98) | |
Company size | 0.00520 *** | 0.0312 *** | 0.00720 *** | 0.00720 *** |
(7.80) | (5.63) | (5.62) | (5.62) | |
Financial leverage | -0.00926 ** | -0.0320 * | -0.0163 *** | -0.0163 *** |
(-1.98) | (-1.77) | (-2.74) | (-2.74) | |
Management ownership | -0.00004 | -0.000001 | -0.00002 | -0.00002 |
(-0.67) | (-0.01) | (-0.39) | (-0.39) | |
Number of observations | 1452 | 1452 | 1452 | 1452 |
Wald/F test | 73.84 | 9.5 | 49.93 *** | 12.44 *** |
R 2 (%) | 3.47 | 3.79 | - | -3.56 |
R 2 - (%) uncentered | 80.92 | |||
Hausman (FEM//REM) Wu-Hausman | 27.54 *** | 5.27 ** | 2.89 * | |
Sagan/Hansen's J | 19.3 *** | 19.31 *** |
Source: Results of author's synthesis of survey data processing
Note: ***, **,* : Statistical significance at 1%, 5% and 10% levels respectively, t, z statistics values are in parentheses for the estimated model, Hausman test to choose REM/FEM estimation model, Hansen's J test to identify excessive instrumental variables in GMM model; Wu-Hausman test to identify endogeneity in the model,
Model 3 : The Sagan test results indicate that there is a weak endogeneity phenomenon (at the 10% level) in the model estimating the impact of transparency and disclosure on the cost of equity; the Hansen's J test indicates that there is an overfitting of the instrumental variable phenomenon. The value of the F test in the estimated models (3) and (4) is greater than 10 and is consistent with the explanation in the GIVE estimation method. Model (3) is chosen to explain the impact of transparency and disclosure on the cost of equity because it has a larger F value than model (4).
The results of the estimated model (3) are consistent with the conditions of large sample size analysis and IV-2SLS estimation method. Weak instrumental variable testing by Anderson and Rubin test (AR test) after analyzing the estimated model shows that the instrumental variables are effective in the estimated model (P AR value = 0.000). The analysis results according to the estimated model (3) show that the level of transparency and information disclosure is negatively correlated with the cost of equity; corporate financial characteristics including company size are positively correlated with the cost of equity; financial leverage is negatively correlated with the cost of equity.
Discuss the results of model 3 using the GIVE estimation method in Table 4.17:
The regression model results from the IV-2SLS estimation method show that the cost of equity of listed companies is affected by factors such as the level of information disclosure, company size, financial leverage, and has the same impact direction as the estimation results in the basic estimation model (FEM model). Company size is positively correlated with the cost of equity; and the level of transparency and information disclosure, financial leverage are negatively correlated with the cost of equity of listed companies.
The thesis accepts hypothesis H 11 : The level of transparency and information disclosure is negatively correlated with the cost of equity. The results of the thesis are consistent with the theory of information disclosure and the cost of equity (Botosan, 1997; Cheney, 2013). Specifically, the information disclosure environment in the Vietnamese stock market is low, the rate of companies fully disclosing information in 2014 was 6.6%; in 2015 it was 9.7% and in 2016 it was 18.5% (Vietnam Finance Association, 2016). When the pressure to disclose information in the market is low, the cost of equity may be low, companies that do not fully disclose information have high beta coefficients and are not funded, but this issue does not affect the economic efficiency of listed companies in the equilibrium state below the company's investment level.
The results of the thesis are consistent with some previous empirical research results. Specifically, listed companies increase the level of transparency and information disclosure - information disclosed fully, promptly and accurately will reduce information asymmetry between managers and shareholders; and reduce the cost of capital of the company. The results of the thesis are also consistent with previous studies by the authors: Botosan and Plumlee (2002); Ashbaugh et al., (2004); Chen et al., (2004 ); Lambert et al., (2007); Francis et al., (2007); Shah and Butt (2009); Guest (2009); Lopes and Alencar (2010); Apergis et al., (2011); Gruning (2011); Yang and Li (2013); Sieber et al., (2014); Khemakhem (2015); Khlif et al., (2015); Nguyen Viet Dung and Nguyen Thi Thu Huyen (2016); Ying, (2016); Yu and Wang, (2016); Beigi et al., (2016); Dung and Lan, (2017); Girao and Paulo (2018); He et al., (2019).
The thesis also found a negative correlation between financial leverage and cost of equity of listed companies. Many research results presented different effects of financial leverage on cost of equity. According to financial theory (Modigliani and Miller, 1958), financial leverage is positively correlated with cost of equity; however, many studies concluded that the effects of financial leverage on cost of equity are contradictory. Huang et al., (2008), Lopes and Alencar (2010); Beigi et al., (2016); Aubert et al., (2017) concluded that financial leverage is positively correlated with cost of equity. Sieber et al., (2014); He et al., (2019) concluded that financial leverage does not affect cost of equity. Khlif et al. , (2015) concluded that financial leverage is negatively correlated with the cost of equity when the company announces information about profits lower than the average market profit. The results of the thesis are consistent with the above conclusion of Khlif et al. , (2015) and contrary to the conclusion of Huang et al. , (2008), Lopes and Alencar (2010); Beigi et al. , (2016); Aubert et al. , (2017). According to the theory of corporate finance (optimal capital structure), the company reduces the cost of capital by increasing the use of debt to benefit from the tax shield, and will limit the use of equity, causing the cost of equity to decrease.
The thesis found a positive correlation between company size and cost of equity of listed companies. According to financial theory, company size has a positive effect on cost of equity; however, the effect of company size on cost of equity is unclear. Many research results have different conclusions about the effect of company size on cost of equity. Botosan (1997); Nguyen Viet Dung and Nguyen Thi Thu Huyen (2016); Beigi et
al. , (2016); Dung and Lan, (2017); Aubert et al. , (2017) concluded that company size is positively correlated with the cost of equity of listed companies; but the authors Ashbaugh et al. , (2004); Shah and Butt (2009); Lopes and Alencar (2010); He et al. , (2019) found that company size is negatively correlated with the cost of equity. The thesis results are consistent with the above conclusions of Botosan (1997); Nguyen Viet Dung and Nguyen Thi Thu Huyen (2016); Beigi et al. , (2016); Dung and Lan, (2017); Aubert et al. , (2017).
Transparency and information disclosure play a very important role in the operations of listed companies, improving the level of information disclosure helps reduce the cost of capital of listed companies. The main content of section 4.3 is to determine the impact of the level of transparency and information disclosure on the cost of equity of listed companies on the Vietnamese stock market. Using the two-step least squares and Moment estimation methods, the thesis research found evidence to conclude that transparency and information disclosure have a negative correlation with the cost of equity of listed companies on the Vietnamese stock market. The research results are consistent with the theory of asymmetric information, the theory of information disclosure and the cost of capital under low information disclosure conditions and previous empirical studies. Thus, it can be seen that improving the level of transparency and information disclosure increases the benefits of companies, establishes their reputation in the stock market, and makes it easier to mobilize capital for business development.
4.5 IMPACT OF TRANSPARENCY AND INFORMATION DISCLOSURE LEVEL ON FINANCIAL PERFORMANCE OF LISTED COMPANIES ON THE VIETNAMESE STOCK MARKET
4.5.1 The impact of transparency and information disclosure on return on equity of listed companies
The Hausman test results comparing the two regression models FEM and REM in Table 6.5_pl show that the FEM regression model is better than the REM regression model; however, the explanatory coefficient of the FEM model is too small and there is a change in error variance (Wald test is significant at 1%). The analysis results show that there is an endogenous variable phenomenon in the FEM regression model, the study used
using 2SLS and GMM regression models with three instrumental variables to overcome the endogenous variable phenomenon. The Wu-Hausman (0.002 ns ) and Sagan (4.14 ns ) test results show that there is no endogenous variable phenomenon in the 2SLS regression model and the Wu-Hausman (0.66 ns ) and Hansen'J (4.14 ns ) test results show that there is no endogenous variable phenomenon in the 2SLS regression model.