Title: Government Ownership and Firm Performance: The Case of Vietnam(*)
1Government Ownership and Firm Performance The
Case of Vietnam()
- Ngo My Tran
- Walter Nonneman
- Ann Jorissen
()Ngo, M.T, Nonneman, W., Jorissen, A. (2014)
Government ownership and firm performance The
case of Vietnam, International Journal of
Economics and Financial Issues, 4(3) 628-650
March 2015
2Outline
- Context and rationale
- Contribution
- Theoretical model and propositions
- Data and methodology
- Empirical results
- Conclusion
3Context and rationale
- The Vietnamese Government keeps a substantial
stake - Policy and scholarly debate on the effect of
partial state ownership on firm performance - The extensive empirical literature is
inconclusive - Few theoretical modelling efforts on the effect
of partial government ownership on firm
performance - No research for Vietnam on the effect of partial
state ownership on firm performance
4Research question
- Does the degree of government ownership matter
for firm performance?
5 Two ways of analyses
- Theoretical by extending a game theoretic model
of government versus management of Huang and
Xiao (2012) to derive propositions on effects of
partial government ownership on firm performance. - Empirical by estimating a dynamic econometric
model (using system GMM) based on a panel of
partially privatized Vietnamese firms (2004-2012)
to determine the effect of the degree of
government ownership on firm performance.
6Contribution
- Expand the theoretical predictions of Huang and
Xiao (2012) and provide empirical evidence for
these propositions. - Shedding more light on the effect of government
ownership on firm performance in transition
economies. - Being valuable to evaluate the effects of the
privatization policies of the Vietnamese
government
7Theoretical model Huang and Xiao (2012)
- Main reasoning the net effect of the helping
hand and the grabbing hand of government
ownership in the firms - Helping hand more government ownership
brings, higher capital subsidy for the firm (i.e.
debt guarantee, business connection...). - Grabbing hand the firms profit will be
extracted by the government, proportional to its
shareholding (i.e. excessive employment (Shleifer
and Vishny, 1994) excessive production (Bai et
al., 1997) or resource tunneling (Johnson et al.,
2000) -
-
-
-
8Theoretical model
- A two-period Stackelberg game between the
government and the firm - The governments maximization problem
- Assumption wr1, t0, 0ltaßlt1, cgt0 and g(a)
ar -
- The managers maximization problem
- Assumption wr1, t0, 0ltaßlt1, cgt0 and b(a)
na, ngt0
(1)
(2)
(3)
(4)
9Propositions of Huang and Xiao (2012)
- Sales per employee
- Profits per employee
- Return on sales
10Further develop some propositions
- Proposition 1 The efficient use of labor of the
firm, as measured by value added per employee, is
negatively affected by government ownership - Proposition 2 The efficient use of capital of
the firm, as measured by turnaround indicator or
sales over assets, is negatively affected by
government ownership
11Further develop some propositions (tt)
- Proposition 3 The profitability of the firm, as
measured by return over assets, is negatively
affected by government ownership - Proposition 4 The profitability of the firm, as
measured by return on equity, is negatively
affected by government ownership
12Data for empirical test of the model
- Panel data extracted from the annual business
surveys of the Vietnamese General Statistics
Office for the period 2004-2012 - Extracting those firms having some degree of
state ownership (0ltalt1) - Firms with values deviating more than three
standard deviations from the mean were removed.
13(No Transcript)
14Econometric models
- Pooled OLS model
- Random effects model
- Dynamic panel data model
15State ownership and the percentage of government
control by year
16State ownership and the percentage of government
control by industry and size
17The estimates of pooled models
18The estimates of pooled models
19Graph of firm performance indicators for large-,
medium- and small-size firms (pooled models)
20The estimates of pooled models
21Graph of firm performance indicators for large-,
medium- and small-size firms (pooled models)
22The estimates of dynamic panel data models
23The estimates of dynamic panel data models
24Graphical presentation (dynamic models)
25The estimates of dynamic panel data models
26Graphical presentation (dynamic models)
27Key findings
- Theoretical analysis based on the modified
HX-model predicts negative effects of the extent
of government ownership on profitability and on
efficient use of capital and labor - Empirical analysis (dynamic panel estimates)
- Profitability and labor productivity suffers
with more extensive government ownership (concurs
with the theoretical predictions from the
modified H-X model). - Yet, an extensive stake of government in large
sized firms might positively affect firm
performance.
28- Thank you very much for your listening!
- Welcome all your comments!