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Date Published:
31/07/2024
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Nguyen, T. M., Tran, Q. T., Nguyen, T. S., Dao, T. H., & Nguyen, Q. T. (2024). State ownership and SMEs’ performance in Vietnam. Journal of International Economics and Management, 24(2), 41-53. https://doi.org/10.38203/jiem.024.2.0085
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State ownership and SMEs’ performance in Vietnam
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Abstract
The debate on the impact of state ownership on firm performance has drawn considerable interest from both scholars and professionals in the field of corporate finance. However, prior research has primarily focused on listed firms, whose characteristics differ from those of small- and medium-sized enterprises (SMEs). Hence, this paper investigates how state ownership influences SMEs’ performance. The sample includes 5,092 firm-years from over 2,000 SMEs with state ownership in Vietnam from 2013 to 2019. The model was estimated using three regression methods, including fixed effects, random effects, and pooled ordinary least squares. The results show that state ownership is positively associated with SMEs’ performance. This finding implies that state ownership creates competitive advantages for SMEs rather than reducing their performance. Therefore, policymakers should consider the advantages and disadvantages of privatizing state-owned SMEs or reducing state ownership in these enterprises. Moreover, investors should divert their capital to state-owned SMEs and increase their value.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Keywords
State ownership, SMEs, Firm performance, Vietnam
References
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Shailer, G. and Wang, K. (2015), “Government ownership and the cost of debt for Chinese listed corporations”, Emerging Markets Review, Vol. 22, pp. 1-17.
Sun, Q., Tong, W.H.S. and Tong, J. (2002), “How does government ownership affect firm performance? Evidence from China’s privatization experience”, Journal of Business Finance & Accounting, Vol. 29 No. 1-2, pp. 1-27.
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Tran, Q.T. (2020), “Foreign ownership and investment efficiency: new evidence from an emerging market”, International Journal of Emerging Markets, Vol. 15 No. 6, pp. 1185-1199.
Tran, Q.T. (2021), “Foreign ownership and cost of debt financing: evidence from an emerging market”, International Journal of Emerging Markets, Vol. 17 No. 9, pp. 2278-2289.
Zhang, C. (2019), “How much do state-owned enterprises contribute to China’s GDP and employment?”, Available at https://elibrary.worldbank.org/doi/abs/10.1596/32306 (Accessed 06 March, 2021).
Abramov, A., Radygin, A., Entov, R. and Chernova, M. (2017), “State ownership and efficiency characteristics”, Russian Journal of Economics, Vol. 3 No. 2, pp. 129-157.
Aguilera, R., Duran, P., Heugens, P.P.M.A.R., Sauerwald, S., Turturea, R. and VanEssen, M. (2021), “State ownership, political ideology, and firm performance around the world”, Journal of World Business, Vol. 56 No. 1, 101113.
Bhutta, N.T. and Hasan, A. (2013), “Impact of firm specific factors on profitability of firms in food sector”, Open Journal of Accounting, Vol. 2 No. 2, pp. 19-25.
Billon, S. and Gillanders, R. (2016), “State ownership and corruption”, International Tax and Public Finance, Vol. 23 No. 6, pp. 1074-1092.
Chen, R., El Ghoul, S., Guedhami, O. and Wang, H. (2017), “Do state and foreign ownership affect investment efficiency? Evidence from privatizations”, Journal of Corporate Finance, Vol. 42, pp. 408-421.
Fama, E.F. and French, K.R. (2001), “Disappearing dividends: changing firm characteristics or lower propensity to pay?”, Journal of Financial Economics, Vol. 60 No. 1, pp. 3-43.
Ge, Y., Liu, Y., Qiao, Z. and Shen, Z. (2020), “State ownership and the cost of debt: evidence from corporate bond issuances in China”, Research in International Business and Finance, Vol. 52, 101164.
Gugler, K. (2003), “Corporate governance, dividend payout policy, and the interrelation between dividends, R&D, and capital investment”, Journal of Banking and Finance, Vol. 27 No. 7, pp. 1297-1321.
Gunasekarage, A., Hess, K. and Hu, A. (2007), “The influence of the degree of state ownership and the ownership concentration on the performance of listed Chinese companies”, Research in International Business and Finance, Vol. 21 No. 3, pp. 379-395.
He, W. and Kyaw, N.A. (2018), “Ownership structure and investment decisions of Chinese SOEs”, Research in International Business and Finance, Vol. 43, pp. 48-57.
Hung, T.N. (2018), State Ownership Types and Investment Efficiency: Empirical-Evidence from Vietnam, International University-HCMC, Ho Chi Minh City.
Kalotay, K. (2017), “State-owned multinationals: an emerging market phenomenon?”, The Journal of Comparative Economic Studies, Vol. 13, pp. 13-37.
Kubo, K. and Phan, H.V. (2019), “State ownership, sovereign wealth fund and their effects on firm performance: empirical evidence from Vietnam”, Pacific-Basin Finance Journal, Vol. 58, 101220.
Laffont, J.-J. and Tirole, J. (1993), A Theory of Incentives in Procurement and Regulation, MIT Press, Cambridge, Massachusetts.
Lazzarini, S.G. and Musacchio, A. (2018), “State ownership reinvented? Explaining performance differences between state-owned and private firms”, Corporate Governance: An International Review, Vol. 26 No. 4, pp. 255-272.
Le, P. (2022), “Capital misallocation and state ownership policy in Vietnam”, Economic Record, Vol. 98 No. S1, pp. 52-64.
Le, T.V. and Buck, T. (2011), “State ownership and listed firm performance: a universally negative governance relationship?”, Journal of Management & Governance, Vol. 15 No. 2, pp. 227- 248.
Le, T. and Chizema, A. (2011), “State ownership and firm performance: evidence from the Chinese listed firms”, Organizations and Markets in Emerging Economies, Vol. 2 No. 2, pp. 72-90.
Liljeblom, E., Maury, B. and Hörhammer, A. (2020), “Complex state ownership, competition, and firm performance – Russian evidence”, International Journal of Emerging Markets, Vol. 15 No. 2, pp. 189-221.
Modigliani, F. and Miller, M.H. (1958), “The cost of capital, corporation finance and the theory of investment”, The American Economic Review, Vol. 48 No. 3, pp. 261-297.
O’Toole, C.M., Morgenroth, E.L.W. and Ha, T.T. (2016), “Investment efficiency, state-owned enterprises and privatisation: evidence from Viet Nam in transition”, Journal of Corporate Finance, Vol. 37, pp. 93-108.
Ramasamy, B., Ong, D. and Yeung, M.C. (2005), “Firm size, ownership and performance in the Malaysian palm oil industry”, Asian Academy of Management Journal of Accounting and Finance, Vol. 1, pp. 181-104.
Shailer, G. and Wang, K. (2015), “Government ownership and the cost of debt for Chinese listed corporations”, Emerging Markets Review, Vol. 22, pp. 1-17.
Sun, Q., Tong, W.H.S. and Tong, J. (2002), “How does government ownership affect firm performance? Evidence from China’s privatization experience”, Journal of Business Finance & Accounting, Vol. 29 No. 1-2, pp. 1-27.
Tihanyi, L., Aguilera, R.V., Heugens, P., van Essen, M., Sauerwald, S., Duran, P. and Turturea, R. (2019), “State ownership and political connections”, Journal of Management, Vol. 45 No. 6, pp. 2293-2321.
Tran, Q.T. (2020), “Foreign ownership and investment efficiency: new evidence from an emerging market”, International Journal of Emerging Markets, Vol. 15 No. 6, pp. 1185-1199.
Tran, Q.T. (2021), “Foreign ownership and cost of debt financing: evidence from an emerging market”, International Journal of Emerging Markets, Vol. 17 No. 9, pp. 2278-2289.
Zhang, C. (2019), “How much do state-owned enterprises contribute to China’s GDP and employment?”, Available at https://elibrary.worldbank.org/doi/abs/10.1596/32306 (Accessed 06 March, 2021).