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Open Access
Article
Publication date: 16 August 2019

Quoc Trung Tran

The purpose of this paper is to examine whether independent directors reduce corporate overinvestment and improve investment efficiency in an emerging market.

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Abstract

Purpose

The purpose of this paper is to examine whether independent directors reduce corporate overinvestment and improve investment efficiency in an emerging market.

Design/methodology/approach

First, the author developed a research model in which corporate investment is a function of Tobin’s Q, the proportion of independent directors in the board and an interaction between them. Second, the author divided the full sample into groups of firms with a low- and high-financial constraint to compare the effects of independent directors between financially unconstrained and constrained firms.

Findings

With a full sample of 1,281 observations collected from 193 firms listed in Ho Chi Minh Stock Exchange during the period from 2009 to 2017, the author find that the proportion of independent directors is negatively related to firm investment but its interactive term with Tobin’s Q is positively related to corporate investment. These findings imply that independent directors can help firms reduce overinvestment and improve investment efficiency. Moreover, the research findings indicate that these effects of independent directors are stronger for financially constrained firms.

Originality/value

The extant literature shows that independent directors are an effective mechanism to reduce agency problems in firm decisions and operating performance. However, there has been no research on the role of independent directors in corporate investment policy.

Details

Journal of Economics and Development, vol. 21 no. 1
Type: Research Article
ISSN: 2632-5330

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Article
Publication date: 12 July 2021

Quynh Nga Nguyen Thi, Quoc Trung Tran and Hong Phat Doan

This paper investigates how the global financial crisis changes the effects of state ownership and foreign ownership on corporate cash holdings in an emerging market.

Abstract

Purpose

This paper investigates how the global financial crisis changes the effects of state ownership and foreign ownership on corporate cash holdings in an emerging market.

Design/methodology/approach

We employ an interactive term between state ownership (foreign ownership) and a crisis dummy to analyze how the global financial crisis determines the effect of state ownership (foreign ownership) on corporate cash holdings.

Findings

With a research sample including 5,493 observations from 621 listed firms over the period 2007–2017, we find that state ownership (foreign ownership) is negatively (positively) related to corporate cash holdings and the effect of state ownership (foreign ownership) is stronger (weaker) during the crisis period. Moreover, the increase in the effect of state ownership is larger in financially unconstrained firms.

Originality/value

Prior research shows that the effects of state ownership and foreign ownership on corporate cash holdings in emerging markets are still debatable. This paper extends this line of research by investigating how the global financial crisis – an exogenous shock – changes these effects.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Open Access
Article
Publication date: 27 July 2021

Quoc Trung Tran

This paper investigates the effect of economic policy uncertainty on value of cash before and after the global financial crisis.

Abstract

Purpose

This paper investigates the effect of economic policy uncertainty on value of cash before and after the global financial crisis.

Design/methodology/approach

We investigate the relationship between economic policy uncertainty and value of excess cash based on the valuation model of Fama and French (1998). Baker et al. (2016) news-based index (BBD index) is employed to calculate measures of economic policy uncertainty. Our research sample includes 103,474 observations from 11,000 firms across 19 countries over the period 2004–2016.

Findings

We find that economic policy uncertainty is negatively “positively” related to value of cash in the pre-crisis “post-crisis” period. Moreover, we also document that the positive effect of economic policy uncertainty in the post-crisis period is stronger in financially constrained firms.

Originality/value

While prior studies find a relationship between economic policy uncertainty and cash levels or the effect of firm-level uncertainty on value of cash, this paper shows how economic policy uncertainty as an institutional environment factor affects value of cash. Moreover, it documents that economic policy uncertainty has opposite effects on value of cash before and after the global financial crisis.

研究目的

本研究旨在探討經濟政策不確定性在全球金融危機之前及之後對現金價值的影響。

研究設計/方法/理念

我們基於法馬及佛倫奇(1998) (Fama and French (1998)) 的估值模型,來探討經濟政策不確定性與過剩現金價值的關係。我們採用了貝克等人(2016) (Baker et al. (2016)) 以新聞訊息為基礎的指數 (BBD指數) 、來計算經濟政策不確定性的程度。我們的研究樣本包括橫跨19個國家、涵蓋期為2004年至2016年、取自11,000間公司之103,474個觀察。

研究結果

我們發現經濟政策不確定性與現金價值在危機前時期成負相關,在危機後時期則成正相關。而且,我們也記錄了在危機後時期經濟政策不確定性的正面影響於財務受限的公司會較大的情況。

原創性/價值

過去的研究發現了經濟政策不確定性與現金水平之間存有關係、及企業層面的不確定性對現金價值的影響。唯本研究顯示了經濟政策不確定性作為一機構環境因素,如何影響現金價值;同時,亦記錄了經濟政策不確定性在全球金融危機之前及之後對現金價值會有相反影響的情況。

Details

European Journal of Management and Business Economics, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2444-8451

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Article
Publication date: 17 December 2020

Quoc Trung Tran

The purpose of this paper is to investigate the effect of monetary loosening on corporate investment in an emerging market.

Abstract

Purpose

The purpose of this paper is to investigate the effect of monetary loosening on corporate investment in an emerging market.

Design/methodology/approach

The paper begins this study by using a dynamic model to investigate the effect of monetary loosening on corporate investment. This paper uses money supply growth as a proxy for monetary loosening, as the State Bank of Vietnam relies mainly on a quantity-based policy. Next, this paper continues to analyze whether cash holdings are able to mitigate this effect. Finally, this paper examines the effect of monetary loosening on investment smoothing and the mitigating role of cash holding. The research sample includes 4,868 from 617 firms. This paper uses different regression techniques (i.e. pooled ordinary least squares clustered by firm, fixed effects, random effects and system generalized method of moments).

Findings

The research findings show that money supply growth is positively related to both corporate investment and investment smoothing. The effect of monetary loosening on corporate investment is mitigated by corporate cash holding. Moreover, this paper finds that the mitigating effect of cash holdings is stronger for financially constrained firms and non-state-owned enterprises.

Originality/value

Prior studies only focus on corporate investment under-tightening monetary policy; however, there is no research on firm investment under monetary loosening in an emerging market.

Details

Journal of Financial Economic Policy, vol. 13 no. 2
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 13 July 2021

Quoc Trung Tran

The purpose of this paper is to examine how state ownership influences value of cash in an institutional environment supporting soft-budget constraint.

Abstract

Purpose

The purpose of this paper is to examine how state ownership influences value of cash in an institutional environment supporting soft-budget constraint.

Design/methodology/approach

This study employs an interaction between state ownership and excess cash to examine how state ownership affects value of cash holdings based on Fama and French’s (1998) valuation model.

Findings

With a research data of 3,294 observations from 548 firms over the period 2009–2016, the authors find that state ownership is positively related to market value of cash. Moreover, this relationship is weaker in financially constrained firms.

Originality/value

Although prior studies document a consistently negative effect of state ownership on market value of cash holdings, the authors argue that this effect may still be opposite. When managers of high state ownership firms rely on soft-budget constraint and save less cash, outside investors with this information disadvantage may focus more on precautionary motive and transaction motive than agency costs of cash holdings. As a result, value of cash holdings in high state ownership firms is higher. This paper contributes to the literature on corporate liquidity policy in emerging markets with new evidence on the role of state ownership in market value of cash holdings.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 19 February 2021

Quoc Trung Tran

This paper aims to investigate the effect of foreign ownership on cost of debt financing in an emerging stock market.

Abstract

Purpose

This paper aims to investigate the effect of foreign ownership on cost of debt financing in an emerging stock market.

Design/methodology/approach

Cost of debt is a function of foreign ownership. Control variables include state ownership, firm profitability, financial leverage, Tobin's Q, asset growth, firm size and asset tangibility. The research sample includes 3,263 observations from 405 firms listed in Vietnamese stock market during the period 2009–2017.

Findings

The authors find that foreign ownership negatively affects cost of debt and this effect is stronger in non-state-owned enterprises and financially constrained firms.

Originality/value

Prior research shows that ownership structure is a key determinant of debt financing cost in many developed markets. This paper contributes to the literature of emerging market finance by showing that foreign ownership reduces cost of debt financing.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 15 June 2020

Quoc Trung Tran

This paper aims to investigate how the global financial crisis affects the relationship between uncertainty avoidance culture and corporate cash holdings.

Abstract

Purpose

This paper aims to investigate how the global financial crisis affects the relationship between uncertainty avoidance culture and corporate cash holdings.

Design/methodology/approach

This study develops a research model in which cash holdings ratio is a function of post-crisis period dummy, Hofstede’s cultural dimension of uncertainty avoidance, their interactive term and control variables. The research sample includes 188,264 observations from 26,509 firms incorporated in 44 countries between 2003 and 2016.

Findings

This study finds that the effect of uncertainty avoidance culture on firm cash holdings is stronger in the post-crisis period from 2008 to 2016. This effect is stronger for financially constrained firms. In addition, the research findings show that uncertainty avoidance culture is more effective in cash–cash flow sensitivity over the post-crisis period.

Originality/value

Prior studies show that uncertainty avoidance culture positively affects corporate cash reserves. However, the authors only examine the effect of uncertainty avoidance culture on cash holdings in a static environment. This paper investigates this effect under the impact of the global financial crisis – an exogenous shock.

Details

Multinational Business Review, vol. 28 no. 4
Type: Research Article
ISSN: 1525-383X

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Article
Publication date: 15 December 2020

Quoc Trung Tran

This paper investigates the relationship between corruption and corporate risk-taking in emerging markets where corruption is considered as “public enemy number one.”

Abstract

Purpose

This paper investigates the relationship between corruption and corporate risk-taking in emerging markets where corruption is considered as “public enemy number one.”

Design/methodology/approach

The study measures corruption based on Corruption Control Index annually published by World Bank and examines how corruption affects corporate risk-taking in emerging markets covered in MSCI Emerging Market Index.

Findings

With a sample of 75,338 observations from 8,326 firms across 20 emerging stock markets during the period 2005–2016, the author finds that corruption negatively affects corporate risk-taking. Robustness checks with a reduced sample without China and India, alternatives of corruption measures, various measures of risk-taking and Generalized method of moments (GMM) estimator also show consistent results. Moreover, additional analysis shows that information disclosure mitigates the effect of corruption on risk-taking.

Originality/value

The extant literature implies that corruption may decrease corporate risk-taking behavior through two channels including operational cost and debt financing cost.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Open Access
Article
Publication date: 13 May 2020

Quoc Trung Tran

In this study, we examine how ownership structure affects the use of independent directors in Vietnam – an emerging stock market.

Downloads
789

Abstract

Purpose

In this study, we examine how ownership structure affects the use of independent directors in Vietnam – an emerging stock market.

Design/methodology/approach

We develop logit and tobit regression models to investigate the effects of ownership structure on the propensity to use independent directors and the number of independent directors on the board, respectively. Insider ownership and the use of independent directors are proposed to have a non-linear relationship.

Findings

With a sample of 1,318 observations collected from 192 listed firms over the period from 2008 to 2017, we find that insider ownership and independent director appointment have a U-shaped relationship. It is positive when insiders hold a small proportion of shares, and turns out to be negative when insiders hold a large percentage of shares. In addition, both state ownership and foreign ownership are negatively related to firm decisions of appointing independent directors.

Practical implications

Our findings imply that minority shareholders should have appropriate actions to reduce agency costs and protect their own interests. In addition, policymakers should improve the effectiveness of corporate governance legislation to increase the presence of independent directors in order to protect minority shareholders. Moreover, government agencies also need to increase the number of independent directors in state-controlled firms as a means to improve their corporate governance. Foreign investors may be a substitute for independent directors; therefore, firms without independent directors are able to improve their corporate governance by attracting foreign investors.

Originality/value

While the extant literature shows that independent directors can help firms decrease agency costs of equity in financial decisions and performance, there are relatively few studies investigating corporate decisions to use independent directors. This paper contributes to the literature of corporate governance mechanisms through independent directors in emerging markets.

Details

Journal of Economics and Development, vol. 22 no. 2
Type: Research Article
ISSN: 1859-0020

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Article
Publication date: 16 March 2020

Quoc Trung Tran

This paper investigates the effect of foreign ownership on corporate investment efficiency in an emerging market.

Abstract

Purpose

This paper investigates the effect of foreign ownership on corporate investment efficiency in an emerging market.

Design/methodology/approach

This paper employs the investment-investment opportunities sensitivity to proxy for investment efficiency. Corporate investment and investment opportunities are measured by capital expenditure and Tobin's Q respectively. Control variables include state ownership, firm profitability, cash flow, financial leverage, firm size, bank debt, asset tangibility and financial distress. The research sample includes 5,502 firm-years from 621 firms listed in Vietnamese stock market from 2007 to 2017.

Findings

We find that foreign ownership negatively affects corporate investment efficiency. Furthermore, we continue to examine the effects of foreign ownership with financially unconstrained and constrained firms that are classified based on the annual medians of Kaplan and Zingales (1997) score, firm size and dividend payout ratio. We find that the negative relationship between foreign ownership and investment efficiency is stronger in financially unconstrained.

Originality/value

Prior research shows that foreign ownership is positively related to corporate investment efficiency. However, in Vietnamese stock market, foreign investors may prefer safe business activities as a response to uncertainty in the business environment, ineffective legislations on corporate governance and their informational disadvantage. Therefore, in this paper, we argue that foreign ownership negatively affects Vietnamese firms' investment efficiency. Risk-adverse foreign investors make firms lose some profitable investment opportunities and thus decrease their investment efficiency.

Details

International Journal of Emerging Markets, vol. 15 no. 6
Type: Research Article
ISSN: 1746-8809

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