An empirical study on company performance: listed companies on Ho Chi Minh stock exchange

Abstract

The thesis determines which factors that affected the operations of the companies listed on Ho Chi Minh Stock Exchange during the period 2007-2011 and measures the level of the variables such as growth, leverage, leverage^2, risk, CEO duality and size that impacted on performance of listed companies. It utilizes a panel data of 93 Vietnamese listed companies and two methods accounting (ROA) and market (Tobin’s Q) to estimate the performance of firms. It employs many models in panel data such as Pool regression, Random Effects Model (REM) and Fixed Effects Models (FEM) to control unobserved effects. Three kinds of models are applied to find the most appropriate model and Fixed Effects Model is considered the most suitable model for further discussions and recommendations. The findings of this thesis show the support for not only the results of empirical studies but also the trade off theory and stewardship theory. Size factor is the most significant support for two metrics of firm performance ROA and Tobin’s Q at 1% level. The thesis also finds that there is existence of the optimal capital structure because of a non linear relationship between leverage and firm performance. In particular, at 22.77% value of the optimal capital structure, the performance of firm (measured by ROA) will get maximum value, or at 72.30% value of the optimal capital structure, the performance of firm (measured by Tobin’s Q) will get maximum value. Besides that, Growth and Risk are found to have effect at 1% significant level to ROA only. Moreover, CEO duality just has effect to Tobin’s Q at 1% level of significance. It is suitable in Vietnam condition because most of firms in Vietnam are family firms, therefore, there always has a phenomenon one person wears two hats. It leads the firm operate more efficiently and effectively when the chairman serves as the CEO