MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HO CHI MINH CITY

--------------

HO XUAN TIEN

FACTORS AFFECTING PERFORMANCE
OF EQUITIZED ENTERPRISES: A CASE OF
RESEARCH IN VIETNAM
Major: Commercial Business
Code: 9.34.01.21

SUMMARY OF ECONOMIC DISSERTATION

Ho Chi Minh City – 2019


MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HO CHI MINH CITY

--------------

HO XUAN TIEN

FACTORS AFFECTING PERFORMANCE OF
EQUITIZED ENTERPRISES: A CASE OF
RESEARCH IN VIETNAM

Major: Commercial Business
Code: 9.34.01.21

ISSN 0866-7756, 49-53, No. 9, Ha Noi.
Ho Xuan Tien, 2016. Relationship between of type of managerial
ownership and corporate performance of state-owned enterprises
after privatization that were listed in Vietnam securities. Journal of
Vietnam Trade and Industry Review, ISSN 0866-7756, 79-83, No.
10, Ha Noi.
Bui Thanh Trang & Ho Xuan Tien, 2018. The Corporate
entreprneurship theory in the context of the equitization of
companies in Vietnam. Journal of VN Trade and Industry Review,
ISSN 0866-7756, 214-219, No. 11, Ha Noi.


1

CHAPTER 1: RESEARCH OVERVIEW
1.1. The important of the research
The transfer of ownership and control of SOEs from the state to the private
sector is a privatization concept under the World Bank's widely accepted
viewpoint (Shirley, 1992). However, in Vietnam, using the phrase ‘equitization’
is more appropriate, the privatization is a global term while the equitization is
used more in Vietnam and it is understood as the transfer of SOEs to operate in
the form of joint stock enterprises. The agency theory, the property rights
theory, the public choice theory all agree that the private ownership is inherently
more effective than the state ownership in terms of economic benefits (Zhibin,
2004) so the transfer of the ownership and the control of SOEs from the state to
the private sector is the best way to improve the economic landscape.
The equitization is the main point of the restructuring program within SOEs
during Vietnam’s restructuring process, from the SOE system of about 12,000
enterprises (Vu Thanh Tu Anh, 2005), after 25 years since 1992, the
government has managed to reorganize many SOEs and successfully equitized

objective performance method that uses traditional financial indicators which
are based on secondary financial data sources, hence this is often limited to the
effect of different types of owners and performance, therefore it is impossible to
explain the difference between the theory and the practice with the
characteristics of equitization process in Vietnam. By evaluating the
performance from subjective performance measure which is based on the
primary data source which is considered as opposite to the objective
performance method, this research has expanded the scope of assessment of
performance along with characteristics relating to the changes in ownership
structure, corporate entrepreneurship and equitized enterprises’ expectations in
the context of economic integration. Thereby, the research is able to explain the
cause of the differences between the theory and the practice of equitization in
Vietnam and comes up with management implications for policy makers and
leaders of equitized enterprises. Moreover, the research theoretically contributes


3

to the corporate entrepreneurship that acts as a mediator variable with three
alternatives as strategic renewal, venturing and innovativeness, at the same time,
reinforcing the theory of privatization with the distinctiveness of equitization in
Vietnam compared to other countries.
On that basis, the topic "Factors affecting the performance of equitized
enterprises: A case of research in Vietnam" is selected for this research.
1.2. Goals


Building a relationship model between the factors of the changes in
ownership structure, corporate entrepreneurship, the expectations in
economic integration and the performance of equitized enterprises.


1.2. Object and scope of the research
Research Objects: According to the research objectives above, the research
objects are the factors affecting the performance of equitized enterprises,
including changes ownership structure, corporate entrepreneurship, expected
integration, equitized enterprises’s performace of and the relationship among
these factors together.
Scope of research: Equitized enterprises are Vietnamese SOEs which have
been transformed and operated in the form of joint stock companies.


4

Survey Objects: Survey objects in this qualitative research are experienced
experts who have been working in the field of equitization for many years.
Survey objects in this quantitative research are key members in equitized SOEs
such as heads of departments, team leaders, board of directors or other
management positions in equitized enterprises.
1. 4. Research methods
This research uses both qualitative and quantitative methods. It is divided
into two phases: preliminary research and official research.
The preliminary research includes the preliminary qualitative research and
the preliminary quantitative research. The preliminary qualitative research used
focused discussion techniques to explore, adjust and complement the scale of
the research model. The preliminary quantitative research was carried out by
direct interviews with research objects to assess the reliability of the scale
before conducting the official research.
The official research used quantitative methods with the following
conventions: Scale reliability test, factor analysis EFA, CFA. Testing the
theoretical model of this research by SEM structure model. The data analysis

difference between the practice and the theory when it comes to evaluate the
performance of Vietnamese equitized enterprises in the past. By using the
subjective performance method based on the perceived level, the research
results explain the cause of these differences. Based on the research results,
some policy implications are proposed to help the authorities improve the
equitization process in the next phases.
1.6. Research Structure
The research includes five chapters:
Chapter 1: Research Overview
Chapter 2: Theoretical basis and Research model
Chapter 3: Research methods
Chapter 4: Analysis of results and verification of research model
Chapter 5: Conclusion and implications for management


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CHAPTER 2: THEORETICAL BASIS AND RESEARCH MODEL
2.1. Definition of privatization and equitization
2.1.1. The concept of privatization
The term “Privatization” has many interpretations (Farazmand, 2001) in the
broadest sense of transferring activities or functions from the State to the private
sector, especially in the field of production and services (Starr, 1988), the
simplest and concise interpretation is the concept of Hashemi & Abolghassem
(1993), the market orientation is the most comprehensive definition to describe
the nature of privatization. However, the definition that is accessible, popular
and widely accepted belong to the World Bank and IMF (Zhibin, 2004), the
privatization is the transfer of ownership or control of SOEs from the
government to the private sector.
2.1.2. The concept of equitization

(1993); Gubin et al., (1999), the public choice theory argues that public owners'
business results would not be good due to the political objectives and personal
political interests of politicians. Gubin et al., (1999) argues that this theory also
applies to economic transition in various countries.
2.3. Measuring performance
According to Dawes (1999), measuring performance using secondary
financial data based on financial indicators known as objective performance
measure. Contrary to this method is the method of measuring performance by
using primary data based on the perceived level of the respondents about
performance with scales indicating the level from very bad to very good or very
little, this is known as the subjective performance measure. The equivalence and
relevance of using perceived level of perception is viewed as the opposite of the
measure based on objective data discussed by many researchers (Murphy &
Callaway, 2004). Two studies by Dess & Robinson (1984); Gupta &
Govindarajan (1984) are considered as the most strongly supporters of the use
of perceived measure to replace objective measurement methods (Murphy &
Callaway, 2004). Although there are potential drawbacks in measurement (Keh


8

et al., 2007), Dess & Robinson (1984); Gupta & Govindarajan (1984) argued
that with the absence of secondary data, it is possible to assess business
performance of enterprises by other approaches through primary data collection,
by asking directly about business situation according to the perceived level.
2.4. Research model and hypotheses
2.4.1. Research concepts
2.4.1.1. Change of Ownership Structure
The change of Ownership Structure in the research is understood as the state
ownership transfer from SOEs to other forms of ownership when equitizing or

the trend towards entrepreneurship as the measurement of the concept of EO.
Zahra (1991, 1993) argued that CE is a multidirectional concept consisting of
three adventurous components venturing; innovativeness and strategic renewal
and building measurement scale with 14 observed variables.
2.4.2. Research hypotheses
2.4.2.1 Corporate entrepreneurship and performance
The corporate entrepreneurship theory to understand enterprises explains the
advantages of pioneering, temporary monopoly of the company, competing with
competitors in the industry, always looking for ways to compete, creating new
fluctuations and destroy the old ones (Nguyen Thanh Long, 2012), innovating
the existing strategies to boost the ability to meet the market demands (Antocic
& Hisrish, 2003). The enterprises that have the corporate entrepreneurship are
always proactive and pioneering in proposing, implementing new ideas and
production processes to meet the internal and external environment to create
pioneering advantages (Keh et al., 2007). The corporate entrepreneurship is seen
as an important factor of the organization, bringing a new revitalization to the
future of enterprises (Schollorhhammer, 1982), not only important for large
enterprises but also necessary for medium and small enterprises (Covin &
Slevin, 1991), for developed countries and economic transition countries
(Antoncic & Hisrich, 2003). The corporate entrepreneurship is related to the
process of implementing the strategy, in which the core point is to maintain the


10

vision in the future (Lumpkin & Dess, 1996). In a dynamic and competitive
business environment, the profits earned in the future are uncertain, so
businesses need to constantly seek new opportunities to exploit these
opportunities effectively (Zhou et al., 2007).
Many previous researchers also agreed that the corporate entrepreneurship is

dominant political factors (Ana et al., 2010). Moreover, SOEs have a role to
control the commodity market and are often protected when bankrupt (Pryke,
1971), so this results in company value being not in the top target of these
enterprises and also does not give these enterprises the pressure to create
corporate entrepreneurship (Lioukas et al., 1993).
Privatization is the beginning of a process of change in businesses (Cuervo
& Villalonga, 2000), enterprises are seen as being untied, released from
management decisions, leading to a dramatic change, the initiative of business
leaders with reshaping the strategic structure, business goals, development
strategies and work motivation to support activities that increase shareholder
value (Zahra et al., 2006), originally creating corporate entrepreneurship (Ana et
al., 2010). Privatization has become a very important tool in economic policy
(Uhlenbruck & De Castro, 1998) and helps to improve business results
compared to previously being as an SOE (Cuervo & Villalonga, 2000). One of
the reasons for privatization is to allow enterprises to form a corporate
entrepreneurship through increasing initiatives, creativity and risk-taking in
businesses (Ana et al., 2010).
The agency theory shows that management style affects the level of
ownership of enterprises (Ana et al., 2010), many studies show that there is a
positive relationship between different types of owners such as department
organizational

ownership,

management

ownership,

and


administrative ownership can lead to entrenchment, a subjective phenomenon of
managers when they take control of the company.
For state ownership, the agency theory, the property rights theory, the public
choice theory say that state ownership is less effective than other forms of
ownership because of differences in items goals, motivation and work of human
self-interest (Sun & Tong, 2003; Gupta, 2005). Many studies prove that state
ownership is less effective than private ownership due to the lack of work
motivation (Megginson & Netter, 2001; Shirley & Walsh, 2000; Xu & Wang


13

(1999), Qi et al. (2000), Sun & Tong (2003) and political intervention in
economics (Faccio, 2006), the state is not a shareholder who only wants to
maximize profits but also has to carry out many different objectives
simultaneously (Aharoni, 1986). However, there is evidence that the high level
of state ownership in enterprises and political intervention have a negative
relationship (Fan et al., 2006; Yuan, 2008) as well as positive relationship
(Berkman et al., 2009; Francis et al., 2009; Li et al., 2008) with performance.
With state-owned characteristics in developing countries, there is often a
large state intervention in economic activities, state ownership has a negative
impact on the performance of a company since the representatives from the state
are not really shareholders of the company, so the high level of state ownership
in equitized enterprises can negatively affect the business performance. Based
on the above analysis, H3 research hypothesis is stated as follows:
H3: Change in ownership structure has a positive impact on the performance of
equitized enterprises.
2.4.2.4 Corporate entrepreneurship and Expected integration
The corporate entrepreneurship demonstrates the ability of enterprises to
take the initiatives and determinations to pursue their goals and they are willing

trade barriers, the formation of markets and the influence of the two economic
and political aspects of integration have created opportunities for economic
growth, positively impacting members’ economic growth (Rose, 2000; Rose &
Eric, 2001).
Although the phenomenon Britain referendum in 2016 that resulted in the
decision to leave the EU (Brexit) has affected the integration trend of the world,
the economic integration is still a popular trend for countries which are pursuing
prosperity and maintaining bilateral and multilateral cooperation (Danson &
Deogratias, 2016). Studies of Baldwin & Seghezza (1996); Baldwin et al.,
(1996), found a positive correlation between investment provisions in FTAs
with an increase in trade and investment flows, the formation of FTAs with
strong stimulating effects. With foreign and domestic investment, the rate of


15

return on investment of all members in a regional integration agreement may
increase even if the capital market is abundant.
The impact of the economic integration process associated with the change
in ownership structure in enterprises is the cause of the improvement of business
performance of enterprises in developing countries, the economic integration
facilitates equitized enterprises to internationalize enterprises, approaching
modern enterprise management methods, advanced technology and investment
capital to equitize enterprises to integrate into the global economy (Bachiller,
2016). On that basis, the H5 hypothesis is stated as follows:
H5: The expected integration has a positive impact on the performance of
equitized enterprises.
2.5.3. Research models
On the basis of these hypotheses, the proposed theoretical model is:
Change of Ownership Structure

in the field of equitization (Appendix 2). After the scale is added and adjusted, a
preliminary quantitative research develops a survey questionnaire for official
research. Subjects of the survey are the heads of departments, team leaders,
board of directors and other management positions in equitized enterprises.
Sample size is n = 120 conducted from December 1, 2016 to March 1, 2017.
3.1.1.2. Official research
The official research used quantitative method with similar survey objects as
preliminary quantitative research but with a large sample of n = 320. Convenient
sampling methods and direct investigation and e-mail methods are carried out
from August 20, 2017 to December 31, 2017.
3.1.2. Research process

Theoretical
basis
Cronbach ‘s
alpha
Analysis of
discovery
factors

Factors
and

Qualitative
research
(discover, adjust

Consider the correlation of the total variable and
Cronbach’s alpha


used to measure research concepts. The scales are measured as Likert scales
with 7 levels, of which 1: completely opposed and 7: completely agree.
Methods of data analysis in official research
Data collected from quantitative survey questionnaires were processed by
SPSS software to evaluate Cronbach's alpha coefficients and EFA analysis.
Then, CFA analysis and SEM linear structure model through AMOS software
with ML estimation method were used to test theoretical models and
hypotheses. Bootstrap method was used to re-estimate the parameters of the
theoretical model compared to the ML method to reaffirm the confidence level
of the estimates in the theoretical model. Multi-group structural analysis was
carried out to re-examine the relationship between the changes in ownership
structure and the business results of equitized enterprises, according to the ratio
of State ownership held at enterprises <= 49% and > = 51%. Finally, the
corporate entrepreneurship variable is tested in the relationship between the
changes in ownership structure and the business results of equitized enterprises.


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Table 3.13 Contents of scale used for official research
STT

Code

Strategic
Renewal

Survey
EXPECTED INTEGRATION
The policy of economic integration in recent years has helped

ENP8 Sponsoring start-up projects (Startup)
ENP9 Spending a lot of money on research and development (R&D).
ENP10
Introducing new products / services to the market.
ENP11
Using superior technical solutions.
ENP12
Pioneering in developing new products / services in the global market
and in Vietnam.
PERFORMANCE
When converted into a joint stock company, our company:
18
P1
Achieving the desired profit (ROS).
19
P2
Achieving good growth rate.
10
P3
Opening new markets.
21
P4
Developing new products.
22
P5
Increasing employee salary.
Venturing

Innovativeness


Thus, it can be concluded that this model is suitable for data collected.


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4.3.2. Testing hypotheses of the research model
5 research hypotheses are tested and shown in Table 4.10, this result shows
that three relationships are statistically significant, two relationships are not
statistically significant. The relationship between expected integration and
performance of equitized enterprises (hypothesis H5); The relationship between
the change of ownership structure and performance of equitized enterprises
(hypothesis H3) are not statistically significant (Sig.> 0.05), (details of other
estimates can be seen in Appendix 8.4).
Table 4.10: Regression coefficients of the proposed theoretical model
Estimate
Non-standardized
Standardized

Relationship
Corporate entrepreneurship
Eexpected integration
Performance
Performance
Performance

←
←
←
←
←

1,319
-0,220

0,121
0,402
0,225

10,360
3,285
-0,975

0,000
0,001
0,330

-0,065

-0,065

0,125

-0,520

0,603

4.3.3. Verification of adjustment theory model
After the hypothesis H3 and H5 are out of the proposed theoretical model,
the estimation results of the official theoretical model are presented in Figure
4.4 (Appendix 8.4), this theoretical model has 205 degrees of freedom.
Although the Chi-square value = 492.278 with P = 0.000 but all other criteria

Corporate entrepreneurship
Performance
Expected integration

←
←
←

Change of ownership structure
Corporate entrepreneurship
Corporate entrepreneurship

Estimate
Nonstandardiz
ed
0,791
0,645
0,767
0,944
0,875
1,221

Standar
dized

SE

CR

P

4.6. Verification of mediator variable of corporate entrepreneurship
The results show that when there is no corporate entrepreneurship variable,
the regression weight between the change of ownership structure and
performance is 0.613 and statistically significant (Sig = 0.000), when there is
corporate entrepreneurship variable, the regression weight between the change
of ownership structure and performance is -0,424 and not statistically significant
(Sig. = 0.162), (Appendix 8.7). This verification result shows that when there is