The government's transparency in governance performance, quality of public administration, and empirical relationship with bankruptcy risk in Vietnam

Abstract

The research article investigates the relationship between government transparency and bankruptcy risk of listed firms operating in Vietnam. The study utilizes financial data from 555 firms nationwide over a 5-year period from 2018 to 2022. It employs panel data and Ordinary Least Squares (OLS) regression models with fixed effects for each year and industry group. Additionally, the study examines the relationship between government transparency and firm bankruptcy risk during the period of high uncertainty, notably the COVID-19 pandemic, to provide a comprehensive overview and derive necessary policy implications for minimizing bankruptcy risk and enhancing firm efficiency. As expected, the results indicate that higher levels of government transparency and administrative efficiency at the local level directly contribute to a healthier business environment with lower bankruptcy risk, and vice versa. Furthermore, the empirical findings demonstrate that five out of eight components constituting the Provincial Governance and Public Administration Performance Index (PAPI) show statistically significant relationships with the Altman's Z-score of firms. Among these factors, public accountability and environmental management quality have a high level of influence on bankruptcy risk, especially during the economic uncertainty period from 2020 to 2022. Therefore, it is imperative to implement measures to ensure government transparency and establish effective control and monitoring mechanisms to ensure the efficacy of policies and mitigate potential risks.