Tài liệu Impact of listed companies’ attributes on information disclosure level and its consequences

MINISTRY OF EDUCATION AND TRAINING NATIONAL ECONOMICS UNIVERSITY ‹ NgO thu giang IMPACT OF LISTED COMPANIES’ ATTRIBUTES ON INFORMATION DISCLOSURE AND ITS CONSEQUENCES SPECIALTY: FINANCE - BANKING CODE: 62340201 HANOI, 2014 THE DISSERTATION IS IMPLEMENTED IN NATIONAL ECONOMICS UNIVERSITY Advisor: pROF. DR. cao cU bOi Appraiser 1: Appraiser 2: Appraiser 3: The dissertation is defended in Examination Committee in National Economics University, Hanoi at on 2014. Be referred in: National Library of Vietnam Library of National Economics University 1 INTRODUCTION Research idea For efficient operation of a stock market, the investors need adequate information for their investment decision making. Unsystematic information (market’s parties are not provided information inadequately) has negative impact on operation of the financial market. Vietnam stock exchange (VSE) has been operated since the year 2000 in a developing economy. With more than ten years of development, Vietnam stock exchange is under stable operation with participation of organizations and basic financial instruments as stocks and bonds. However, in recent years, there are several constraints which prevent efficient operation of VSE such as: “following behavior”, “internal trading”, “rumor – based trading”, etc. Facing with above constraints, the dissertation is focusing on studding “impact of the listed company’s attributes to its information disclosure (ID) in Vietnam Stock Exchange and consequences to Vietnam Stock Exchange and the listed company”. Research objective Managerial questions of VSE’s governmental organization and managers of listed companies is how to improve efficiency of market operation through transference of disclosed information and its benefit to listed companies and trading transactions in the VSE. To answer the question, VSE’s governor and listed companies’ managers need to understand comprehensively ID, measurements of ID level, factors impacting on ID and trading results of listed companies in VSE. Research subject and scope Research Subject of the dissertation is ID of listed companies in Vietnam Stock Exchange. The research period is from the year 2011 up to present. Research Sample is a group of listed companies which have been selected by random method in order to ensure representativeness of the sample in VSE. Research Questions Particular research questions are presented as follows: • Which factors/ measurements can be used to evaluate ID level of listed companies in VSE? 2 • How do attributes of listed companies in VSE impact on ID level in general or ID level of each type of disclosed information in VSE? • What are variables and measurements to be used for measuring consequences of ID level on listed companies and trading transactions of their listed stocks in VSE? Research Contributions * Theoretical contributions: The dissertation has generalized a complete theory about ID of listed companies in stock exchange. The dissertation also developed measurement criteria of ID; generalized, modified and supplemented listed companies’ attributes; and studied impact of the attributes to ID; and its consequences on the stock exchange and listed companies. The dissertation has developed a research model with research hypotheses with application of quantitative research methodology to test relations among variables of the model. Particularly, ID has been measured in three (3) aspects: informativeness; precision and understandability; and update of listed information while the previous researches have focused mainly on informativeness of disclosed information. Regarding to listed companies’ attributes impacting on ID, the dissertation has evaluated five categories of attributes: (1) Industry; (2) Ownership: except “foreign ownership”; the dissertation supplemented “state ownership”; and “relationship between state ownership and institutional ownership”; (3) Corporate governance: the dissertation modified concept of “independence” by defining another measurement for the factor as “Management board’s member cum Director board’s member”; (4) business performance: the dissertation consider money flow as supplemental measurement; (5) listing status: the dissertation modified measurement of the company scale to capitalized value and supplemented “listing organization” variable. Regarding to consequences of ID, the dissertation has not only considered impact of ID to cost of owner equity but also evaluated consequences of general ID and ID of each information group to oscillation of stock price. At present, there is no research considering macro and micro impact of ID on the stock price as proposed in the dissertation. * Empirical contributions 3 The previous researches implemented mainly in developed countries or/and in stock exchanges which are developed and have large scale. Implementing research in VSE is an empirical contribution of the dissertation. The achieved results have reflected new findings of ID of listed companies in VSE, as details: (1) Actual performance of ID by listed companies (2) Constructive impacts and destructive impacts of listed companies’ attributes on ID of listed companies (3) Constructive consequences of ID on the cost of owner equity and oscillation of stock price in VSE Coping with above actual conditions, the dissertation has developed recommendations to (1) State managerial organizations to improve contents, procedures regulated in managerial regulation on ID of listed companies; (2) Listed companies to improve perception and define key information to investors; and (3) research direction to be implemented in the future about ID of listed companies in VSE. CHAPTER 1 LITERATURE REVIEW AND THEORETICAL FRAMEWORK 1.1 Literature review 1.1.1 Foreign researches ID of listed companies has been researched more than 10 years in countries over the world. Foreign researches have focused on three main issues of ID as following: • Disclosure of Information: regulated ID and voluntary ID • Explanation of factors impacting on ID of listed companies • Impact of ID: direct impact of ID on information users and, indirect impact on ID on SE. 1.1.1.1 Disclosed information Information index in initial researches has been constructed for information disclosed as regulated. Coping with development of SE, researchers also have found out disclosure tendency of listed companies who disclosed not only mandatory information but also disclosed voluntarily other information due to the listed companies have been willing to get attention of stakeholders. 4 Following the demand of information users, researches have stated to build up a new information index which includes mandatory information and voluntary information needed by users and financial analyzers. 1.1.1.2 Factors impacting on ID Evaluating factors impacting on ID, many researches have implemented to evaluate impact of listed companies’ attributes on ID such as ownership structure, international listing, chartered capital, business field, company scale, capital structure, and business performance, independence between management board and director’s board; characteristics of members in director’s board. The researches have applied multi variables regression and liner regression to illustrate relationship between the factors and ID level. 1.1.1.3 Consequences of ID The third aspect considered in the research on ID is consequences of ID to investors in term of transaction performance in SE and to the listed companies. The researches have measured impact of ID on price oscillation in SE, to cost of capital, liquidity and value of listed companies. The result shows that there is a significant relation between ID and cost of capital, and with liquidity of listed stocks. 1.1.2 Domestic researches Most of the researches which have been implemented in Vietnam, study indirectly about ID, including research on corporate governance by World Bank in 2006, supervision of trading transaction by Le Trung Thanh in 2010; State governance with listed companies in Vietnam Stock Exchange by Vu Thi Thu Nga. 2011. The researches have concluded that Vietnam lacks a efficient management mechanism on quality of disclosed information or the SE responded very slowly with information disclosure, information is disclosed delayed and inadequately than as regulated. Researches focus directly on ID is research of Kelly Anh Vu,2011; and Ta Quang Binh in 2012 who has studied about impact of independent Director Board, ownership structure on voluntary ID, gap between information demand of financial analysts and viewpoints of financial manager of listed companies about voluntary ID in the annual reports, factors creating the gap and its consequences on stock price in the market and cost of capital of listed companies in the year 2009 and 2010. 5 1.2 Information Disclosure and its roles in listed companies 1.2.1 Information Disclosure In the stock exchange market (SE), information disclosure (ID) is considered as information transmission between listed companies and their stakeholders in the SE 1.2.2 Roles of ID in listed companies ID is considered as an efficient method to minimize and solve unsystematic information issue and agent problem. 1.3 Government policy in ID management 1.3.1 ID management following listing registration mechanism (1) Mandatory ID policy Purpose of the policy is focusing on solving information unsystematics. Following the policy, the listed companies should disclose information which is regulated in the regulation. (2) Voluntary ID policy The policy has been applied popularly in the early development stage of financial market of which scale and development level are very small and low. The purpose of the policy is focusing on solving agency problem, coping with exposure demand and prestige development of listed companies in stock market; and creating competitiveness in the stock market. (3) Mixing ID policy To overcome disadvantage of mandatory ID policy and voluntary ID policy, and cope with high development of perception and scale of the stock market, mixing ID policy is formed with participation and mutually supporting from above policies. 1.3.2 ID management following voluntary listing with full disclosure When the joint stock companies disclose fully information, the companies will be listed in the stock market. The purpose of the policy is constructing transparency environment of ID. 1.4 ID Strategy ID strategies applied in the listed companies are categorized as active strategy and passive strategy. Active strategy satisfies information demand of user unlimitedly and timely while passive strategy just discloses mandatory information limitedly. 6 1.5 ID components ID components are information to be disclosed, information disclosure channel and disclosure time. 1.5.1 Disclosed information Making decision relating to ID, listed companies have to consider and select information which will be disclosure. There are two information group under consideration: (1) mandatory disclosure (periodical disclosure; unusual disclosure, disclosure under request), and (2) voluntary disclosure. 1.5.2 Disclosure time Disclosure time is transmission time and appearance time of information the SE. 1.5.3 Disclosure channel Disclosure channels which are apply to transmits information are direct communication between the management board and investors; road show, press conference, telecom conference, newspaper, internet and brochure, flyer. 1.6 ID level To evaluating ID, previous researches developed different viewpoints and criteria’s for measuring ID. 1.6.1 “Transparency” viewpoint Transparency is evaluated basing on information items disclosed by listed company in comparison with information needed by investor. The measurement only ensures disclosure of information items, not meaning adequateness of information disclosed. 1.6.2 “Quality” viewpoint Information quality is evaluated with six aspects as informativeness, relevance, precision, rarity, frequency, and unexpectedness; or briefly evaluated with three aspects as: relevance, reliability, and understandability. A disadvantage of the method is feasibility of measuring reliability aspect. 1.6.3 “Efficiency” viewpoint Information disclosure is evaluated as efficient if the information is disclosed adequately, accurately and updated. The viewpoint considered “update” aspect as a supplement aspect for evaluating ID which is not reflected in the previous viewpoints. 7 1.6.4 Conclusion It is necessary to evaluate ID level basing on typical characteristics of information, including adequateness, precisiveness and update. Hence, the dissertation evaluates ID level with three aspects (1) informativeness, (2) precision and understandability; and (3) update. 1.7 Factors impacting on ID Considering factors impacting on ID, the dissertation has focused on impact of industrial environment and internal environment of listed companies. 1.7.1 Business industry Factor considered in industrial environment of the listed company is business industry. Relation between the business industry and ID is not consistent in various stock exchanges. 1.7.2 Ownership Structure of ownership is considered as ownership of managers, management board, foreign investors, local investor, family members and government. 1.7.3 Corporate Governance Considering corporate governance, the researches considered agency problem between management board and director board which are measured by circumstance of management board’s member cum CEO and percentage of Management board’s members participating in Director Board. 1.7.4 Business scale There is a relationship between business scale and ID. The business scale is measured by capitalized value of listed companies in the stock market. 1.7.5 Business performance Profitable ratios (ROA, ROE and ROS) are used popularly. However, ROS is only suitably using for evaluating companies which are in same industry. 1.7.6 Listing status Listing status includes listing market; listing time and listing value. 1.7.7 Quality of independent auditor Role of independent auditor is checking reliability of ID. However, impact of independent auditor’s quality on ID is not remarkable. 8 1.7.8 Conclusion After evaluating feasibility of applying above attributes of listed company in the research, the dissertation has selected following attribute categories: (1) Industry: Industry registered in business license of listed companies (2) Ownership: structure of liability and owner equity, state ownership; foreign ownership, and institutional ownership (3) Corporate governance: Management board’s member cum CEO; percentage of Management board’s members in director board. (4) Business performance: general business efficiency: ROA and net cash flow to revenue ratio; and owner equity efficiency: ROE, net cash flow to net income; and growth rate of net income (5) Listing status: listing year; listing market; and capitalized value per share 1.8 Consequences of ID Market operation is evaluated as perfect when (1) price and trading volume changes in coping with information disclosed in the market; (2) high liquidity; (3) minimizing transaction cost. In the viewpoint of listed companies, market operation is evaluated as good when it can minimize cost of owner equity; improve market value of the firm. However, strength of impact of ID is relating to the market development level. CHAPTER 2 ID IN VIETNAM STOCK EXCHANGE 2.1. Viet Nam stock exchange Development history of Vietnam stock exchange (VSE) is divided into two stages. Stage 1: preparation for opening official stock exchange (1990s). Stage 2: operation stage of VSE, starting from the year 2000. With more than 10 years of improvement, starting with 5 stocks, up to the end of 2013, the number of listed stocks is up to 983 stocks. 2.2. Government management in ID of listed companies in VSE 2.2.1.Government policy in managing ID of listed companies in VSE Market managerial organization decided to select full disclosure policy in replacement of mandatory ID policy. Purpose of government management is not only improving transparency of market, but also building up concrete base 9 for VSE to apply full disclosure – listing mechanism in replacing the present listing registration mechanism. 2.2.2. Legal documents on ID of listed companies in VSE 2.3. Particular regulations on ID of listed companies in VSE 2.3.1. Information disclosed According to circular 09/2010/TT-BTC relating to ID in VSE, listed companies are regulated to disclose following information: Periodical disclosure: Financial statements, annual report (26 information items) Unusual and/or requested disclosure: 7 information items After one year of applying circular 09/2010, circular 52/2012/TT-BTC is issued to regulate an adequate information index with 21 information items following full disclosure policy. Periodical disclosure: Financial statements, annual report (26 information items) and managerial reports Unusual and/or requested disclosure: 19 information items 2.3.2. Disclosure time Regarding to periodical reports, disclosure time regulated in circular 51/2012 is shorten about 10 days in comparison with time mentioned in circular 09/2010. Regarding to unusual and/or requested disclosure such as listing information, trading, supervising; resolution of shareholder meeting; resolution of management board, etc; disclosure time is within 24 hours. 2.3.3. Disclosure channel Information is disclosed through 4 channels: (1) annual report, website and other reports of listed companies; (2) ID instruments of State Security Commission (SSC), and (3) ID instruments of Stock exchanges and (4) other mass Medias. 2.4. ID violation of listed companies in VSE Violation in ID is the most popular violation in security field. The following violation items are in order of popular status: ID: violation is occurred due to submission delay or misleading in disclosing of financial reports; annual reports, managerial reports, resolutions of shareholders’ meeting and management board; change of personnel; trading of 10 stock treasury; capital using report; CV of key persons and unusual activities inside the listed companies. Disclosure channel: website of listed companies has not adequate information and not updated. 2.5. Comparison of ID of listed companies in Vietnam and foreign countries Depending on scale and development of stock market, market managerial organization has to define a suitable ID management of the market. 2.5.1.ID of foreign listed companies in S&P researches According to researches done by Standards & Poor’s; transparency of ID is evaluated basing on detail level of three information categories: (1) Owner equity’s structure and investors’ right; (2) financial statements and business information; (3) ownership structure and benefits of managers. The achieved results show that transparency of ID in financial market of developed countries such as Latin-American countries; and Asia developed countries are very low; disclosed information is mainly are “financial statements and business information” 2.5.2.ID of listed companies in Vietnam following S&P research methodology Transparency of ID by listed companies in VSE is as good as ID of listed companies in developed countries such as Europe, Japan, etc. However, quality and adequacy of information items in each information category are very low. CHAPTER 3 RESEARCH METHODOLOGY 3.1. Model and research hypotheses Basing on literature review and “undiscovered field” in the ID researches; the dissertation has built up a research model as reflected in following figure. 11 ATTRIBUTES OF LISTED COMPANY STOCK EXCHANGE Industry Equity ownership INFORMATION DISCLOSURE INFORMATIVENESS Oscillation of stock price CÔNG T LISTED COMPANY Business performance Corporate governance UPDATE PRECISION AND Cost of UNDERSTANDABILITY Owner equity Listing status Figure 3-1 Research model Hypotheses on relationship between listed companies’ attributes and ID; and impact of ID on trading result of stock and listed companies as developed as follows: (1) Testing suitability of proposed model H1. Listed companies’ attributes have significant impact on ID level of listed companies in stock exchange (2) Testing impact of each attribute category on ID level H2. Listed companies in different industries have different impact on ID level H3. The higher percentage of foreign ownership and institutional ownership, the higher ID level H4. Management board’s member cum CEO; the higher percentage of management board’s members in director board; the higher ID level H5. The better business performance, the higher ID level H6. Listed companies in different stock exchanges have different impact on ID level. The longer listing time, larger capitalized value, the higher ID level (3) Testing consequences of ID level on stock exchange and listed companies H7. The higher ID level, the lower cost of equity H8. The higher ID level, the lower stock price oscillates 12 3.3. Research sample Research subject of the dissertation is ID of listed companies in VSE. Research sample includes 30 listed companies which have been listed before 1st January 2010; and selected randomly. The research period is 3 years starting from 2011 to the end of 2013? 3.4. Factors, variables and measurements As presented in the above contents, the research model of the dissertation considered 3 factor categories. Variables and their measurements are shown in following table. Table 3-2 Factors, variables and measurements Variable Data sources Factors Variables Measurements concepts Listed companies’ attributes Industry Industry group Industry classification Information of 1.1 criteria VSI 2007 is applied listed companies for both listed companies in which are HSX and HNX disclosed in website of the stock exchanges Ownership Owner equity to total capital Ownership structure of ratio structure (in Equity equity owners State ownership website of listed 1.2 ownership Institutional ownership companies and in Foreign ownership website stox.vn) 1.3 Independence and number of management board’s Corporate member governance participating director board (cum status) “Independence”: scoring 1 or 0 with listed companies which have management board’s member cum CEO; or non, respectively “cum- status”: number of management board’s member participating director board Key personnel (in website of listed companies and in website stox.vn) 13 1.4 1.5 Revenue, net income, asset, liability and Business owner equity performance and cash flow Listing status Business performance in previous year and present year - ROA, ROE, cash flow to net income ratio; cash flow to revenue ratio and growth rate of net income. Listing time, - Listing time stock exchange - stock exchange (HNX or to be listed and HSX) capitalized - growth rate of capitalized value value Annual reports and financial statements Listing information in stock exchanges 14 Information disclosure Informativenesss: Disclosed information information items are disclosed items During periodically and research unusually period: 3 requested. years starting from 2011 to the end of 2013 Scoring: 1 or 0 respectively with appearance or nonappearance of information as regulated. - Scoring of annual report: checking information items disclosed actually in the checklist of regulated information items - Scoring of other periodical reports (managerial reports and financial reports): checking reports disclosed actually in the checklist of regulated reports - Scoring of unusual information and disclosure requested information. Precision and Percentage of understandability: presentation by figures presentation of and presentation by disclosed wording in annual reports information (figures and explanation) Periodical reports and Information items disclosed in Stock exchanges’ website Annual reports disclosed in the website of stock exchanges 15 Update Scoring: 1 if the information item is disclosed before or right at regulated time; or right after its generating time. Other cases will be scored as 0. Actual disclosure time, regulated disclosure time; information generating time Stock price oscillation during research period. Stock price oscillation when ID occurs. CAR (cumulative abnormal returns) for the 3 day period starting from disclosure date. Actual stock price before, during and after disclosing information which can be collected in stock exchanges Consequences Beta of stock during Beta is defined by on cost of research period regression method owner equity applied for stock rate of return and market rate of return. The defined betas will be rechecked with betas defined by other sources (stox.vn; vietstocks.vn) Daily trading data of stocks disclosed in stock exchanges and securities companies (fpts.vn) Consequences of ID 3.1 Consequences Oscillation of stock on oscillation price during and of stock price after information disclosure 3.2 CHAPTER 4 THE MODEL TESTING 16 4.1. Variables’ measurement 4.1.1. Listed companies attribute 4.1.1.1. Industry Industry classification criteria VSIC 2007 are approved by SSC for applying in HSX. In order to standardize sample, the dissertation also applied the criteria for industry classifying in HNX. Following the criteria, the result shows that industry distribution is not equally among industries. The industry including largest number of listed companies is class C. “Manufacture and processing” with percentage of 34.6% and 41.8%; and class F. “Construction” with percentage of 34.6% and 41.8% respectively in HNX and HSX. 4.1.1.2. Ownership Attributes of ownership of listed companies are as follows: averaged percentage of owner equity in total capital is about 47.57%. State ownership is accounted averagely is 27.80%. Much lower than state ownership, foreign ownership is only accounted for 12.40% in average. The largest institutional investor is state. 4.1.1.3. Corporate governance Statistic results show that, more than 75% of listed companies in the sample have the management board’s member as CEO. When calculating percentage of management board’s members participating on director board, average figure is 52.37% and increased continuously from the year 2011 as 41.47%. 4.1.1.4. Business performance In research period, return on asset of previous year and present year are respectively as 6.68% and 5.66%. Remarkably, percentage of net cash flow to revenue of listed companies in research period is quite low. Return on equity of previous year and present year are respectively as 15.8% and 12.5%. During the period, listed companies faced decrease of profitability. 4.1.1.5. Listing status List companies in the sample have relatively long listing period. Listing period is 3.76 years in average. Most of companies in the sample are listed in HSX. Researched companies have positive growth rate of capitalized value as 2.45 in average. 17 4.1.2 ID level 4.1.2.1. Informativeness Regarding disclosed information in annual reports, information disclosed in the year 2010 -2011; and 2012 are accounted respectively for 62.88%; 83.59% of regulated information volume. Among information items from A to G group, information in group A “history of listed company” and group D “financial statements” are disclosed as the most adequately. However, information relating to prosperity and future plan; benefits of director board; chief accountant and labor are rarely or not disclosed. Disclosure of unusual or requested information Unusual or requested information are disclosed more abundantly. In the year 2011, volume of unusual or requested information is not large, only 3 information categories have been usually disclosed as unusual events; public trading offers and large shareholders’ trading. From the end of 2012 to 2013, the unusual or requested information is disclosed abundantly with information related to explanation, resolution of management board, changes on corporate governance. Total volume of disclosed information Total volume of disclosed information among observations is quite different. Total volume in average is about 30 information items; however, standard deviation is about 17 information items. In the sample, more than 50% listed companies has information volume is smaller than average information volume of the sample. Comparison of informativeness in different stock exchanges Testing results show that ID in two stock exchanges is significantly different with approximately confident interval of 100%. The result also shows that informativeness of listed companies in HSX is higher, and more homogenous than in HNX. 4.1.2.2. Update In general, listed companies complied seriously regulation on disclosure time. The most updated submit ion time is for periodic reports. Disclosure time of unusual or requested information is also complied seriously. Disclosure of periodical information, statistic results show that annual reports are the most updated reports, and next updated reports are managerial reports. Disclosure of financial statement is normally delayed. Regarding 18 disclosure of unusual or requested information, information items which are always disclosure on time are listing information, trading information, public offers and unusual information. Sensitive information relating to managerial issues, explanation of difference in business performance in different period; business activities are usually disclosed lately. Comparison of time compliance in different stock exchanges: regarding update of all disclosed information and periodical information, there is not concrete base to confirm that existing difference in ID update of listed companies in two stock exchanges. However, with unusual and requested information, listed companies in HSX complied disclosure time much better than in HNX. 4.1.2.3. Precision and understandability Precision and understandability of annual reports in 2010 and 2011 is not good with low rate of 17.13% in average of figure and tables shown on the reports. Annual reports in 2012 has presented much better. Among information items presented in the reports, the part which has many tables and figures are ownership part while the business information part relating to business performance in last year and plan in the next year has a small percentage of figure and tables presented. 4.1.2.4. Relationship between measurements of ID level Statistic data shows significantly positive relationship between informativeness and update of ID which means that the more information the company disclosure, the more update information they provide. 4.1.3. Consequences of ID 4.1.3.1. Oscillation of stock trading Average of stock rate of return in the sample is about 3%, with standard deviation of 0.875%. Hence, listed companies in the sample have relatively homogenous oscillation of stock rate of return. 4.1.3.2. Cost of owner equity The average beta of listed companies in the sample is 0.8346. It means that oscillation of stock prices is lower than oscillation of market index. 4.2. Hypotheses’ testing 4.2.1. Correlation matrix of independent variables in the model Correlation matrix of variables’ measurements shows that most of independent variables are independent mutually. Dependent measurements are