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					Center for Economic Institutions
       Working Paper Series



                                               No. 2010-15

 “Fundraising Behaviors of Listed Companies in
  Vietnam: An Estimation of the Influence of
           Government Ownership”
              Hidenobu Okuda
            Lai Thi Phuong Nhung
                     March 2011




               Center for Economic
                   Institutions




              Working Paper Series


            Institute of Economic Research
                 Hitotsubashi University
    2-1 Naka, Kunitachi, Tokyo, 186-8603 JAPAN
      http://cei.ier.hit-u.ac.jp/English/index.html
       Tel:+81-42-580-8405/Fax:+81-42-580-8333
                   Fundraising Behaviors of Listed Companies in Vietnam:
                   An Estimation of the Influence of Government Ownership

                Hidenobu Okuda* (Faculty of Economics, Hitotsubashi University)
          Lai Thi Phuong Nhung (Ph.D. Program in Economics, Hitotsubashi University)
                                           Abstract
    This study investigates the capital structure and investment activities of listed companies on
the Hanoi Securities Exchange and the Ho Chi Minh Securities Exchange in Vietnam. Estimation
analysis using panel data covering the four-year period 2006-2009 revealed the following results.
(1) Standard corporate financing theories such as trade-off theory and agency cost theory could
be appropriate for explaining the capital structure of listed companies in Vietnam. (2) Compared
to the fundraising activities of the companies analyzed by Nguyen (2006) and Biger et al. (2008),
the fundraising activities of the listed companies were better explained by standard agency cost
theory. (3) There are differences between the determinants of long-term fundraising and short-
term fundraising of listed companies in Vietnam. (4) The fundraising determinants of state-
controlled companies are different from those of other companies; state-controlled companies
have an advantage in tapping external debt funds, and their incentive to reduce their tax
payments by debt financing is weaker. (5) The companies listed on the Ho Chi Minh Securities
Exchange depended less on debt financing than those listed on the Hanoi Securities Exchange.
(6) Listed companies in Vietnam face weak incentives to reduce their tax payments by debt
financing because the effective corporate tax rate is low. These results imply that the economic
reforms (“Doi Moi”) implemented by the Vietnamese government, which aims to create an
economic system based on market mechanisms, have achieved some of their goals in terms of
fund mobilization and corporate financing. However, our estimation study illustrates several
limitations of economic reforms, such as the opaque relationship between state-controlled
companies and government banks, financial restrictions on investment activities, and inactive
investment of companies that are state-controlled or listed on the Ho Chi Minh Securities
Exchange.


Keywords: Corporate Finance, Capital Structure, Transition Economy, Vietnam
JEL Categories: G32, G34, G38

*
 Corresponding author. Email: hokuda@econ.hit-u.ac.jp. This study was financially supported by the
Research Project of Policies for East Asia.
1. Introduction
    After implementing the “Doi Moi” (economic reforms) policy, Vietnam applied market
principles, and the structure of its economy has changed greatly. In order to multiply forms of
property, apply market principles, and open the economy, the legal system has rapidly produced
many new laws such as the Private Company Law (1990), the State-owned Company
Privatization Law (1990), the Company Law (2000), the Foreign Investment Law (2001), the
Interest Rate Liberalization Law (2002), the Competition Law (2005), and others.
    Along with the “Doi Moi,” equitization of state-owned companies has been implemented.1
With the exception of special industries that need to remain government-controlled, the
privatization of state-owned companies has been carried out beginning with comparatively
small-scale companies that have good chances of achieving business efficiency, and the number
of industries that need to remain government-control has gradually decreased. In addition, many
private companies have been equitized, and many joint stock companies have been newly
established. By the end of 2008, about 3,000 of the 5,000 state-owned companies had been
equitized, and there are about 30,000 joint stock companies that do not have state-owned
capital.2
    Listing on a stock exchange is the final stage of the equitization process in Vietnam. In 1998,
it was decided to establish securities exchanges in Hanoi City and Ho Chi Minh City as stock
markets that would enable joint stock companies to raise mid- and long-term funds. The Ho Chi
Minh Securities Exchange (HOSE) and the Hanoi Securities Exchange (HASE) were established
in 2000 and 2005, respectively. The listing conditions of the HOSE are stricter than those of the
HASE. In order to be listed on the HOSE, companies need to meet a higher minimum capital
requirement, show better business performance, and have a more differentiated stock holding
structure (Table 1-1). The number of listed companies, the amount of buying and selling, the
trading value, and the aggregate market value of the HOSE and the HASE have increased in
recent years (Table 1-2). 3


         (Table 1-1) Listing conditions for the Hanoi and Ho Chi Minh Securities Exchanges

1
  This is described in Table A-1 in the Appendixes.

2
  These facts were obtained from the statistical data of the General Statistics Office (http://www.gso.gov.vn/)

3
  As is shown in Table A-3 in the Appendixes, upon the establishment of stock markets, preferential corporate

tax systems for listed companies were established in order to promote listing. 

                                                      1

              (Table 1-2) The Major Indices of Stock Exchange Markets in Vietnam

  In the period of transition, understanding whether companies that played a major role in
domestic investment could raise funds effectively is crucial for privatizing the Vietnamese
economy. However, there are very few analyses of the fundraising activity of Vietnamese
companies that show the characteristics and challenges of this activity.
  Nguyen (2006), who studied empirically the fundraising structure of small and medium-sized
Vietnamese companies, conducted the first study in this field in Vietnam. In addition, Biger et al.
(2008) studied the financial structure of Vietnamese companies by using data from the company
census conducted by the Vietnamese Statistics Bureau in 2002 and 2003. While these studies
clarified the financial structure of Vietnamese companies, they had several limitations. First,
since they focused on the financial activities of small and medium-sized companies that faced an
underdeveloped institutional infrastructure and that were in a two-year company census, the
financial activity of listed companies in Vietnam remains uninvestigated. Second, because of the
lack of available data, these studies used problematic methods in their estimation analyses.
  Our study attempts to answer the following two questions by using current standard corporate
financing theories. (1) What are the characteristics of the fundraising structure of listed
companies in a transitional economy such as Vietnam, in comparison with the fundraising
structure of listed companies in developed economies and in other transitional economies? (2)
What factors can explain the differences, if any, between listed companies in Vietnam and listed
companies in developed economies and in other transitional economies? In addition, this study
suggests policies for increasing the effectiveness of Vietnamese corporate finance.
  Through an empirical investigation, we found several interesting results about the fundraising
behaviors of listed companies in Vietnam. (1) Standard corporate financing theories such as
trade-off theory and agency cost theory could be appropriate for explaining the capital structure
of listed companies in Vietnam. (2) The capital structure of listed companies in Vietnam is better
explained by the standard corporate financing theory based on the agency cost approach in
comparison with Nguyen (2006) and Biger et al. (2008): Debt ratios have a significantly positive
relation with firms’ scale and tangibility, and they have a significantly negative relation with
firms’ growth opportunities. (3) There are differences between the determinants of long-term
fundraising and of short-term fundraising for listed companies in Vietnam: a firm’s scale and its
ability to provide collateral are important determinants of long-term fundraising but are not

                                                 2

important for short-term fundraising. (4) The fundraising determinants for state-controlled
companies are different from those for other companies: state-controlled companies have an
advantage in reducing agency costs that are accompanied by tapping external debt funds. (5)
There is a tendency for the companies listed on the Ho Chi Minh Securities Exchange to depend
less on debt financing than those listed on the Hanoi Securities Exchange. (6) Listed companies
in Vietnam have weak incentives to reduce their tax payments through debt financing because
the effective corporate tax rate is low. These observations suggest that Vietnam’s economic
reform (“Doi Moi”), whose goal was market economization, has already achieved some
successes in the corporate financing systems for listed companies. However, in order to end the
opaque collusion between government-controlled companies and banks and to protect outside
creditors, further liberalization of the banking sector and disclosure of corporate information are
urgently needed.
  This study is organized as follows. Section 2 presents the analytical framework used to explain
the capital structure of listed companies in Vietnam. Sections 3 and 4 present an empirical
examination of the capital structure of listed companies in Vietnam and discuss the empirical
estimation results. Section 5 summarizes the study’s findings and suggests policy implications.


2. Analytical Framework for Investigating the Fundraising Behaviors of Listed Companies
in Vietnam
  According to Modigliani and Miller’s (1958) theory (hereafter referred to as the “MM
theory”), corporate value does not depend on capital structure; thus, corporate financing has no
impact on corporate value when the following conditions exist together: a complete capital
market, perfect information, no corporate taxes, no transaction costs, and no economic
externalities.
  However, the full set of preconditions of the MM theory is not likely to exist in the real world;
therefore, an adjusted MM theory (also called the trade-off theory) is required. According to the
trade-off approach, companies choose the optimal capital structure, which is the structure that
minimizes the cost of capital so as to maximize the value of the company, while considering the
risk of bankruptcy and the impact of the corporate tax. The higher a company’s debt ratio, the
lower its average capital cost. However, when the debt ratio is high, the risk of bankruptcy is also




                                                 3

high, so the risk premium is higher as well. The optimal debt ratio is the one associated with
maximum corporate value.4
     In addition to corporate taxes and business risk, when there is an information asymmetry,
agency costs have an important influence on the determination of corporate value, namely the
choice of the most suitable capital structure for the company. Since the studies of Jensen and
Meckling (1976), Myers (1977), and Myers and Majluf (1984), the problem of conflicting
interests among stockholders, managers, and creditors, which are factors in agency costs, has
attracted a great deal of attention. Companies are able to reduce the agency cost of debt financing
due to the information asymmetry between the managers of a company and outside creditors by
providing collateral. Companies with low growth opportunities tend to secure more financing
through debt to reduce the agency costs that arise due to the information asymmetry between
stockholders and managers (because stockholders seek the maximization of company value
while managers pursue their own personal profit).
     Regarding the problem of fundraising structure, there are many studies on both developed
countries and developing countries; for example, Rajan and Zingales (1995), Varouj et al. (2005),
and Lee (2000) investigated the fundraising structure of companies in G7 countries, in Canada,
and in Korea, respectively. Booth (2001), Mieno (2002), and Suto (2001) investigated the
fundraising structure of companies in ten developing countries, in Thailand, and in Malaysia,
respectively. There are also many studies on the fundraising structure of companies in
transitional economies such as those of Eastern European countries and China. For example,
Delcoure (2007) analyzed the fundraising structure of listed companies in the Czech Republic,
Poland, Russia, and Slovakia; Bauer (2004), Hussain and Nivorozhkin (1997), and Colombo
(2001) analyzed the fundraising structure of listed companies in the Czech Republic, in Poland,
and in Hungary, respectively. Jean (2004) and Guihai and Frank (2006) considered the
fundraising structure of listed companies in China. However, there have been few formal
econometric investigations of corporate finance in Vietnam. Nguyen (2006) used data from 1998
to 2001 for 558 small and medium-sized companies in Vietnam with fewer than 300 employees
and less than 10,000,000,000 VND in capital. Biger et al. (2008) used a sample of 3,778
companies with more than ten employees, chosen from enterprises in the 2002-2003 census
conducted by the Vietnamese Statistics Bureau. These studies used the adjusted MM theory, the

4
    See Myers and Majluf (1984) for details.
                                                4

agency cost approach, and the pecking order approach to investigate the characteristics of the
fund mobilization of companies in Vietnam. According to these studies, the fundraising activities
of companies in Vietnam do not accord with many aspects of corporate finance theory; for
example, the debt ratios are positively correlated with growth opportunities and negatively
correlated with the fixed assets rate. These discrepancies may be due to the underdeveloped
institutional environment that the companies in their samples face.5
    Regarding the agency cost problem in transition economies, the influence of government on
corporate behaviors is an interesting research topic that has been discussed in previous studies.
Under an unlisted world analyzed by Nguyen (2006), state-owned small and medium-sized
companies are found to access bank loans more easily than companies that are not state-owned.
In fact, there are many listed companies of which the government became the controlling
stockholder and whose activities were influenced by the government after state-owned
companies were equitized. These companies are defined as state-controlled companies. Even
among listed companies on the Ho Chi Minh Securities Exchange and the Hanoi Securities
Exchange, where listing is the last process of company reform, more than 30% are state-
controlled. 6 Regarding the characteristics of the fund mobilization of state-controlled listed
companies in Vietnam, we present the following hypotheses.
    Hypothesis 1
    First, it is thought that state-controlled companies have closer relations with state-owned
banks than other companies. After the “Doi Moi” began, the functions of the state bank and of
commercial banks were separated, and the interest rate was gradually liberalized. 7 However,
Vietnam’s four major state-owned banks provide 70% of the financing of the entire economy,
and more than half of that amount is provided to state-owned companies (World Bank, 2006).
Due to these relations, in terms of raising funds, state-controlled companies are able to secure
funds under advantageous conditions. Therefore, it is expected that the debt ratio of state-
controlled companies will be higher than that of companies that are not state-controlled.

5
  Regarding the method of estimation, Nguyen (2006) used four-year average values of both explanatory
variables and explained variables. Biger et al. (2008) used simultaneous explanatory variables and explained
variables. The use of these methods may result in the loss of endogenicity of the explanatory variables.
6
  According to the latest State-owned Company Law, which was enacted on November 26, 2003, in addition to
companies in which the government invests 100%, those stock-issuing companies in which the government
invests more than 50% are classified as state-owned (state-controlled) companies. Among the 286 companies
listed on the HOSE or the HASE by the end of 2008, the number of state-controlled companies was 96.
7 See Appendix A-2 for details.


                                                     5

  Hypothesis 2
  Second, it is thought that state-controlled companies’ incentive to increase debt to reduce their
corporate tax payments is different from the incentive of companies that are not state-controlled.
From the viewpoint of the government, which is a 50% stockholder in state-controlled
companies, corporate tax payments are income for the government itself; thus, it has less
incentive to use debt to reduce corporate tax payments than other stockholders. Therefore, the
debt ratio of state-controlled companies may be lower than the debt ratio of companies that are
not state-controlled.


3. Estimation Model for Fundraising Behaviors of Listed Companies in Vietnam
3.1 Estimation Function
  Like Rajan and Zingales (1995), this paper estimates debt ratios, which are the most basic
index demonstrating the capital structure of companies. Yit is an explained variable; Xjit
represents the explanatory variables (j = 1, 2,…, k); STATE is the state-controlled company
dummy; α is the fixed effect; βj, γj are coefficients (j = 1, 2,…, k); ε is the matrix of error items;
and i and t denote the individual company and time, respectively. In order to investigate the
differences in fundraising structure between the Ho Chi Minh Securities Exchange (HOSE) and
the Hanoi Securities Exchange (HASE) caused by the differences in listing conditions between
the two exchanges, we estimate separately the samples of these two exchanges by using the same
estimation function.


       Yit = αi + Σβj Xjit-1 + Σγj STATE*Xjit-1 + ε j


(1) Explained Variables Yit
  We use four debt ratios as explained variables: Total Debt Ratio (DR), Long-term Debt Ratio
(LDR), Long-term Bank Loan Ratio (LBR), and Short-term Debt Ratio (SDR). Total Debt Ratio
(DR) expresses the proportion that fundraising by debt holds in the entire funding of a company,
and it is the most basic index of fundraising structure. Because of the effects of saving tax
payments and bankruptcy risk on finance structure relates to the whole debt; using the debt ratio
is considered to be appropriate for observing the influences of these factors on fundraising




                                                    6

structure. We calculated the Total Debt Ratio (DR) by dividing the amount of total debt by the
amount of total assets.
    Short-term debts such as accounts payable or bills used to balance short-term funds and long-
term debts used for long-term investments like equipment, have different characteristics.
Accounts payable and bills relate to clients, so the information asymmetry of fundraising by
accounts payable and bills is comparatively small. In contrast, the information asymmetry
between firms and creditors of long-term debt is larger. Thus, the influence of the agency cost of
long-term debt on capital structure is stronger than the influence of the agency cost of short-term
debt. We calculated the Long-term Debt Ratio (LDR) by dividing the total amount of long-term
debt (for which the maturity period exceeds one year) by the total amount of assets. The Short-
term Debt Ratio (SDR) was calculated by dividing the total amount of short-term debt (for which
the maturity period is less than one year) by the total amount of assets.
(2) Explanatory Variables Xjit
    We used the corporate tax rate (TAX) and business scale (SIZE) based on the adjusted MM
theory (trade-off theory). The effective tax rate (TAX) is calculated by the ratio of the amount of
corporation tax payment to the amount of operating income. 8 Because there is no term for
operating income (the total amount of profit before interest payments and tax payments) in the
financial reports of Vietnamese companies, we calculated operating income by adding interest
payments and profits before taxes. Business scale (SIZE), which is used as a proxy variable for a
company’s bankruptcy risk, is calculated as the natural logarithm of total assets.9 TAX has a
positive predicted sign because when its corporate tax is higher, a company should raise funds
through debts such as bank borrowing or bonds, rather than equities in order to reduce its
corporation tax payment and to allow it to raise its value by that amount. SIZE also has a positive
sign because the larger the company, the smaller its reductions from exogenous shocks, so its
bankruptcy risk is lower; thus, payment of the risk premium for mobilizing funds by debt is also
lower, and its debt ratio tends to be higher.
    We used the fixed assets ratio (TANG) and Tobin’s Q (Q) based on the agency cost approach.
The fixed assets ratio (TANG), which is used as a proxy variable for the ability to provide

8
  Guihai and Frank (2006) used the same variable. For information on the tax system in Vietnam, see Table A-3

in the Appendixes.

9
  Jean (2004) used the same variable. (The natural logarithm of sales is also used often as a proxy for business

scale). 

                                                       7

collateral, is defined as the ratio of the total amount of fixed assets to the total amount of assets.10
We used Tobin’s Q (the ratio of the total amount of debts and the present value of stocks to the
book value of total assets) as a proxy variable for the business growth opportunities of a
company (Q). TANG has a positive predicted sign because the more collateral a company can
offer, the lower the agency cost of debt financing due to the information asymmetry between the
managers of the company and the outside creditors, and the higher the debt ratio of the company
can rise. Q is predicted to have a negative sign because low-growth companies tend to increase
financing through debt to prevent managers from plundering company profits; this is the issue of
agency costs between stockholders (clients) and managers (agents) that arises because
stockholders expect the maximization of company value while managers pursue their own
personal profit.
     We also used the state-controlled company dummy (STATE) and industry dummies expressing
characteristics of listed companies in Vietnam as explanatory variables.11 The state-controlled
company dummy (STATE) takes a value of 1 for the companies whose government stock holding
is more than 50% and 0 for the others. In order to control for the influences of macroeconomic
circumstances, we used a year dummy variable (YD2008, YD2009) that takes a value of 1 for the
years 2008 and 2009 and 0 for the other years.


3.2 The Data Set
     The samples we used in the analysis are the non-financial companies listed on the HOSE or
the HASE before 2008 for which we could obtain the necessary data for at least two consecutive
years of the period from 2006 to 2009. Financial institutions were excluded from the sample
because the determinants of their capital structure are different from the determinants of the
capital structure of non-financial institutions. Data from 2005 and before were excluded from the
sample because they were too small in comparison with the data from 2006 onward, and thus
their inclusion biased the estimation results. The necessary data were obtained from the annual
financial reports of listed companies that were disclosed by the HOSE and the HASE.



10
   Similar to Rajan and Zingales (1995). The amount of fixed assets here includes both the amounts of tangible 

and intangible fixed assets. 

11
   The industry dummy variables include construction industry (CONS), manufacturing industry (MANU),

mining industry (MIN), electricity industry (POWE), services (SERV), communications (COMM), real estate

(REAL), and commerce (COM). See Table 4 in the Appendixes.

                                                      8

  There were 172 companies listed on the HOSE and 168 companies listed on the HASE before
2008. From these, 154 non-financial companies listed on the HOSE and 145 non-financial
companies listed on the HASE were included in the sample. The total sample was composed of
299 non-financial companies.


3.3 Estimation Method
  Nguyen (2006) and Rajan and Zingales (1995) used four-year average values of both
explained variables and explanatory variables for their estimations. Booth et al. (2001), Lee
(2000), and Suto (2001) used simultaneous explained variables and explanatory variables for
their estimations. In this study, we employ a one-period lag for the explanatory variables in
relation to the explained variables.
  Commonly used estimation methods for panel data are the Ordinary Least Squares method
(OLS), the random effect model, and the fixed effect model. However, this study examines 299
companies for four-year periods (after taking the one-year lag, the periods are three years each).
Because the time series are too short in comparison with the cross sections, estimation results of
the fixed effect model are too dependent on the fixed effect; thus, use of this method would be
improper. For this reason, we did not use the fixed effect method. In order to find out whether
use of the OLS method or the random effect method would be more proper, we performed a
Lagrange Multiplier Test (LM test) in which OLS was the null hypothesis.


3.4 Basic statistics
  Table 3-1 shows the characteristics of the main variables used in the analysis of the sample of
299 companies. Table 3-2 displays the characteristics of four groups of the companies divided by
stock market and state control of the company.


                       (Table 3-1) Basic Statistics of the Main Variables 

        (Table 3-2) Comparison of State-controlled and Non-state-controlled Companies 

               (Table 3-3) Correlation Coefficients of the Explanatory Variables


  As is shown in Table 3-1, the average debt ratio of listed companies in Vietnam is 50.4%,
which is approximately the same as that of listed companies in China (50%) as reported by
Guihai and Frank (2006). However, the standard variance of the debt ratio of the listed
companies in Vietnam is high (22.42%). Table 3-2 shows that the average debt ratio of the
                                                 9

companies listed on the HASE is about 58%, which is higher than that of the companies listed on
the HOSE (44%). There is almost no different between state-controlled companies and
companies that are not state-controlled on the HASE or the HOSE.
  The average long-term debt ratio of listed companies in Vietnam is 11%, which is higher than
that of listed companies in China (7%) as reported by Jean (2004). The standard variance of the
long-term debt ratio of listed companies in Vietnam is high (15.1%). The average long-term debt
ratio of companies listed on the HASE is 12.4%, which is higher than that of companies listed on
the HOSE (9.8%). Both on the HASE and on the HOSE, state-controlled companies have higher
long-term debt ratios than companies that are not state-controlled. State-controlled companies
listed on the HOSE have the highest average long-term debt ratio (14.4%), while companies
listed on the HOSE that are not state-controlled have the lowest average long-term debt ratio
(8.4%).
  The average long-term bank loan ratio of listed companies in Vietnam is 6.8%, which means
that about 62% of the long-term debt of listed companies in Vietnam is made up of loans from
banks. The standard variance of the long-term bank loan ratio of listed companies in Vietnam is
12%. Companies listed on the HASE have a higher average long-term bank loan ratio (7.5%)
than that of companies listed on the HOSE (6.2%). State-controlled companies have a higher
average long-term bank loan ratio than companies that are not state-controlled on both the HASE
and the HOSE, but the gap is larger on the HOSE. The average long-term bank loan ratio of
state-controlled companies listed on the HOSE is 10.7%, while that of companies listed on the
HOSE that are not state-controlled is only 4.8%.
  The average short-term debt ratio of listed companies in Vietnam is 39.3%, and the standard
variance is 20.7%. The average short-term debt ratio of companies listed on the HASE is 45.2%,
which is higher than that of companies listed on the HOSE (34.2%). There are differences
between the short-term debt ratios of state-controlled companies and companies that are not
state-controlled on the HASE and the HOSE. On the HASE, the average short-term debt ratio of
state-controlled companies is lower than that of companies that are not state-controlled, but on
the HOSE the reverse is true: state-controlled companies have a higher average short-term debt
ratio than companies that are not state-controlled. State-controlled companies listed on the HASE
have the highest average short-term debt ratio (47.1%), and state-controlled companies listed on
the HOSE have the lowest average short-term debt ratio (29.7%).

                                               10

  The average Effective Tax Rate of listed companies in Vietnam is 10.5%, which is much
lower than the official corporate tax rate according to the Corporate Tax Law (28%); this means
that most listed companies in Vietnam enjoy tax preferences. The standard variance of the
Effective Tax Rate of listed companies in Vietnam is 7.7%. The Effective Tax Rate of
companies listed on the HOSE is 10.9%, higher than that of companies listed on the HASE
(10.1%). Both on the HASE and on the HOSE, state-controlled companies have a lower
Effective Tax Rate than companies that are not state-controlled, but the difference is stronger on
the HOSE than on the HASE. State-controlled companies listed on the HOSE have the lowest
Effective Tax Rate (6.7%), and companies listed on the HOSE that are not state-controlled have
the highest Effective Tax Rate (12.1%).
  The average logarithm of total assets (SIZE) of listed companies in Vietnam is 26.34, and the
standard variance is 1.38. On both the HASE and the HOSE, state-controlled companies have
larger SIZE than companies that are not state-controlled.
  The average fixed assets rate of listed companies in Vietnam is 30.2%, which is slightly lower
than that of listed companies in China (34%) as reported by Guihai and Frank (2006). The
standard variance is 21%. There is almost no difference between the fixed assets rate of listed
companies on the HASE and on the HOSE, but the difference between state-controlled
companies and companies that are not state-controlled is smaller on the HASE (31.1% vs. 29%)
than on the HOSE (40.2% vs. 27.6%).
  The average Tobin’s Q of listed companies in Vietnam is 1.96, and the standard variance is
1.30. Listed companies on the HOSE have a higher average Tobin’s Q than listed companies on
the HASE (2.18 vs. 1.70). On the HOSE, state-controlled companies have a higher average
Tobin’s Q than companies that are not state-controlled, but on the HASE the reverse is true:
companies that are not state-controlled have a higher average Tobin’s Q than state-controlled
companies.


4. Estimation Results of Fundraising Behaviors of Listed Companies in Vietnam
  In order to investigate the differences in fundraising structure between companies on the Ho
Chi Minh Securities Exchange (HOSE) and the Hanoi Securities Exchange (HASE) caused by
differences in the listing conditions of the two securities exchanges, we conduct separate




                                               11

estimations for these two securities exchanges using the same estimation function. The
estimation results are summarized in Tables 3-4 and 3-5.12


                         (Table 4-1) Estimation Results of Debt Ratios (HOSE)
                         (Table 4-2) Estimation Results of Debt Ratios (HASE)


     In order to check the robustness of the state-controlled effect, we use the variable GOV (state
holding ratio) instead of the dummy variable STATE. The estimation results are summarized in
Tables 3-6 and 3-7.


          (Table 4-3) Estimation Results of Debt Ratios by Using the GOV Variable (HOSE)
          (Table 4-4) Estimation Results of Debt Ratios by Using the GOV Variable (HASE)


     We also conducted tests to check the significance of the differences between capital structures
of listed companies on the two exchanges.


     (Table 4-5) Testing the Differences in Capital Structure of Listed Companies on the HOSE and
                                              the HASE


     There is no robustness between the estimation results using STATE and GOV. According to
the estimation results, listed companies in Vietnam have the following characteristics. First, in
general, the estimation results of the debt ratios are consistent with the corporate financing
theory explained in Section 2: business scale (SIZE) and collateral ability (TANG) positively
relate to the debt ratios, and growth opportunities (Q) negatively relates to the debt ratios. In the
estimation of the Total Debt Ratio, Long-term Debt Ratio, and Long-term Bank Loan Ratio, we
found no explanatory variables whose coefficients had signs that were contrary to the theoretical
expectations and statistically significant. This suggests that standard corporate financing theories
could be appropriate for explaining the capital structure of listed companies in Vietnam.



12
   According to the LM tests where the Pool OLS Model is the null hypothesis and the Random Effect Model
is the opposite hypothesis, the Random Effect Model is more suitable for the estimation.
                                                  12

     Second, the capital structure of listed companies in Vietnam is better explained by the standard
corporate financing theory based on the agency cost approach, in comparison with Nguyen
(2006) and Biger et al. (2008). According to the agency cost approach, debt ratios have a positive
relation with tangibility and a negative relation with firms’ growth opportunities. The results of
our investigation support these hypotheses, while the findings of Nguyen (2006) and Biger et al.
(2008) do not.
     Third, it seems that there are differences between the determinants of long-term fundraising
and the determinants of short-term fundraising of listed companies in Vietnam. Firms’ scale
(SIZE) and ability to provide collateral (TANG) have significantly positive relations with the
Long-term Debt Ratio and the Long-term Bank Loan Ratio, while SIZE has no significant
relation and TANG has a significantly negative relation with the Short-term Debt Ratio. This
suggests that a firm’s ability to provide collateral is important for long-term borrowing decisions
but not important for short-term borrowing decisions.
     Fourth, we found differences in the fundraising activities of state-controlled companies and
companies that are not state-controlled. The fact that the cross terms STATE*TANG and
GOV*TANG are significantly positive suggests that with the same amount of collateral, state-
controlled companies can borrow more than other companies. This means that state-controlled
companies possess an advantage in reducing their agency costs that accompany the tapping of
external borrowed funds.
     Fifth, the fundraising structure of the companies listed on the Ho Chi Minh Securities
Exchange differs from the fundraising structure of the companies listed on the Hanoi Securities
Exchange. The companies listed on the Ho Chi Minh Securities Exchange were less dependent
on borrowed funds than those listed on the Hanoi Securities Exchange, which suggests that there
was a significant difference in the information asymmetry of companies listed on these two
securities exchanges for outside creditors and outside investors.13
     Lastly, listed companies in Vietnam have a weak incentive to reduce their tax payments
through debt financing because the effective corporate tax rate is low.
     These observations suggest that the economic reform of Vietnam (“Doi Moi”), whose goal was
market economization, has already achieved some successes in the corporate financing systems


13
 Recently, many companies have met the listing conditions of the HOSE but have remained listed on the
HASE. It is thought that there is almost no difference between listing on the HOSE and the HASE.
                                                  13

for listed companies. However, in order to end the opaque collusion between state-controlled
companies and banks and to protect outside creditors, further liberalization of the banking sector
and disclosure of corporate information are urgently needed.


5. Conclusion
  This study used data from 2006 to 2009 for listed companies on the Ho Chi Minh Securities
Exchange and the Hanoi Securities Exchange that are representative of companies in Vietnam in
order to investigate their fundraising determinants and investment behaviors. As was shown by
the estimation results that were presented in the previous two sections, we arrived at many
interesting findings.
  First, the capital structure of listed companies in Vietnam is consistent with standard
corporation financing theories such as trade-off theory and agency cost theory. Compared to the
capital structure of the companies facing an underdeveloped institutional environment analyzed
by Nguyen (2006) and Biger et al. (2008), the capital structure of the listed companies could be
better explained by agency cost theory. In addition, the debt ratios of the listed companies were
higher than the debt ratios of the small-to-medium companies examined by Nguyen (2006).
These observations suggest that the development of market infrastructure successfully mitigated
the agency cost problem of listed companies that accompanies the tapping of external funds and,
at the same time, made the listed companies’ capital structure more consistent with the
theoretical prediction.
  Second, we found that state-controlled companies had higher debt ratios than other companies
and that collateral assets are less important to state-controlled companies in borrowing. These
results imply that state-controlled companies hold an advantageous position for reducing the
agency costs attendant to tapping borrowed funds. This gives rise to the suspicion that state-
controlled listed companies have maintained the privilege to borrow easily from the state-
controlled banks even after being formally privatized and listed on the stock exchanges.
  Third, the companies listed on the Ho Chi Minh Securities Exchange were less dependent on
borrowed funds than those listed on the Hanoi Securities Exchange. Listing on the Ho Chi Minh
Securities Exchange, whose listing conditions were more stringent than that of the Hanoi
Securities Exchange, seemed to mitigate the information asymmetry problem between
companies and outside investors and to reduce the agency costs of equity financing. This

                                               14

suggests that the further information disclosure required by strengthening the regulations would
encourage fund mobilization through stock markets and help companies diversify their sources
of funds.
  This paper identified the key features of the fundraising structure and their effects on the
investment behaviors of listed companies in Vietnam. In terms of fund mobilization and
corporate financing, the economic reforms (“Doi Moi”) implemented by the Vietnamese
government, which are aimed at creating an economic system based on market principles, have
achieved some of their goals. However, our estimation study illustrates several limitations of the
economic reforms, such as the opaque relationship between state-controlled companies and
government banks, financial restrictions on investment activities, and the inactive investment of
companies that are state-controlled or listed on the Ho Chi Minh Securities Exchange. Solving
these problems will require further investigation of the mechanisms behind the features identified
in this paper, and this remains a task for future research.




                                                 15

                                             References
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     Czech Journal of Economics and Finance, Vol. 54, pp. 2004, 1-2.
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(3) Booth,	 L., V. Aivazian, A. Kunt-Demirguc, and V. Maksimovic. (2001) “Capital structure in
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(4) Delcoure, N. (2007) “The determinants of capital structure in transitional economies,” International
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(7) Jean, J. Chen (2004) “Determinants of capital structure of Chinese-listed companies,” Journal of
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(8) Jensen, M.C. and W.H. Meckling. (1976) “Theory of the firm: Managerial behavior, agency costs and
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(11) Modigliani, F. and M.H. Miller. (1958) “The cost of capital, corporate finance, and the theory of
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                   F
(12) Modigliani, 	 . and M.H. Miller. (1963) “Corporate income taxes and the cost of capital- A
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(13) Myers, S.C. (1977) “Determinants of corporate borrowing,” Journal of Financial Economics, Vol. 5,
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(15) Nguyen, Tran Dinh Khoi. (2006) “Capital structure in small and medium-sized enterprises: The case
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(16) Rajan, R.G. and L. Zingales. (1995) “What do we know about capital structure? Some evidence from
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(17) Suto, M. (2003) “Capital structure and investment behavior of Malaysia firms in the 1990s: A study
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(19) World Bank (2006) “Overview of the capital markets in Vietnam and directions for development.”




                                                  16

      Table 1-1 Listing Conditions for the Hanoi and Ho Chi Minh Securities Exchanges

Conditions                  Hanoi Securities Exchange            Ho Chi Minh Securities Exchange
Minimum capital      10 billion VND                          80 billion VND
Business             Must have made a profit in the year     Must have made profits in two years
performance          before listing (excluding privatized    before listing
                     state-owned companies and newly
                     established companies of the
                     infrastructure industry and the high-
                     tech industry)
Voting shares        Have to be possessed by at least 100    At least 20% of voting shares have to be
                     shareholders                            possessed by at least 100 shareholders.
Source: Vietnam Securities Law

                             Table 1-2 The Major Indices of Stock Exchanges

                                       Amount of Buying
                   Number of Listed                         Trading Value         Aggregate Market
                                           and Selling
                     Companies                             (billion VND)                Value
                                        (million shares)
                   HASE      HOSE       HASE       HOSE    HASE       HOSE      Tril. VND %GDP
          2000          0          5          0          3       0          90           na       na
          2001          0         11          0         19       0         964           na       na
          2002          0         20          0         35       0         959           na       na
          2003          0         22          0         28       0         502           na       na
          2004          0         28          0         73       0       1,971            4      0.6
          2005          6         35         20         94     260       2,784          10       1.2
          2006         81        106         95        538   3,917     35,472          221      22.7
          2007        110        141        612      1,814  63,442 217,835             491      43.7
          2008        168        172     1,531       2,977  57,122 124,576             210      17.0
          2009                           5,765     10,402  197,524 422,460             620      37.7
    Source: Homepages of Hanoi and Ho Chi Minh Securities Exchanges
    Note: All are shown in year-end values. HASE means the Hanoi Securities Exchange, and HOSE means
    the Ho Chi Minh Securities Exchange.




                                                   17

                             Table 3-1 Basic Statistics of the Main Variables

                  TDR        LDR         LBR         SDR       TAX        SIZE     TANG         Q       GOV
Mean          0.504       0.110       0.068       0.393     0.108      26.339    0.302     1.960     0.309
Median        0.526       0.042       0.007       0.394     0.102      26.328    0.258     1.555     0.310
Maximum       1.000       0.809       0.746       0.973     0.990      30.935    1.683     17.916    0.850
Minimum       0.033       0.000       0.000       -0.618    0.000      22.844    0.003     0.970     0.000
Std. Dev.     0.224       0.151       0.120       0.207     0.089      1.3809    0.210     1.304     0.221
Obs.               965        965         965         965       961        965       964       965       963


         Table 3-2 Comparison of State-controlled and Non-state-controlled Companies
                                    Hanoi Securities Exchange               Ho Chi Minh Securities
                                                                                  Exchange
                                    State-owned      Non-state-owned      State-owned      Non-state-owned
                                     companies         companies           companies         companies
    Total Debt Ratio                   0.602              0.551              0.442              0.440
    Long-term Debt Ratio               0.131              0.117              0.144              0.084
    Long-term Bank Loan
    Ratio                           0.080               0.070               0.107               0.048
    Total assets                     773                 342                1,140                911
    Fixed assets ratio              0.311               0.290               0.402               0.276
    Effective Tax Rate              0.090               0.111               0.067               0.121
    Tobin’s Q                       1.619               1.794               2.448               2.101
    Source: Homepages of Hanoi and Ho Chi Minh Securities Exchanges

    Note: Average values are from 2006 to 2009. Total assets are expressed in billion VND.



                  Table 3-3 Correlation Coefficients of the Explanatory Variables

Correlation         TDR        LDR       LBR       SDR     TAX       SIZE     TANG      PROF       Q
    TDR          1.000000
    LDR          0.445216 1.000000
    LBR          0.354455 0.771938 1.000000
    SDR          0.757496 -0.247319 -0.179254 1.000000
    TAX         -0.213798 -0.167162 -0.156914 -0.109474 1.000000
    SIZE         0.233696 0.334281 0.283929 0.009162 -0.110046 1.000000
   TANG          0.034261 0.566854 0.566769 -0.376212 -0.153392 0.066062 1.000000
   PROF         -0.529193 -0.295935 -0.253799 -0.356876 0.249214 -0.200630 -0.079640 1.000000
      Q         -0.299752 -0.141679 -0.124118 -0.221065 0.019583 0.013613 -0.042690 0.445269 1.000000




                                                      18

                         Table 4-1 Estimation Results of Debt Ratios (HOSE)

     Variable        Coefficient      Prob. Coefficient      Prob. Coefficient Prob. Coefficient   Prob.

        C                 -0.120                  -0.668*              -0.312**            0.542**
     TAX(-1)               0.021                  -0.007               -0.020              0.029
     SIZE(-1)              0.022**                 0.026*               0.012**           -0.003
    TANG(-1)               0.018                   0.138***             0.125***          -0.114**
      Q(-1)               -0.021***               -0.005***            -0.004             -0.015***

  STATE*TAX                0.019                   0.368*               0.188             -0.343
  STATE*SIZE              -0.001                  -0.006***            -0.005***           0.005***
 STATE*TANG                0.289***                0.440***             0.446***          -0.153
   STATE*Q                -0.016***               -0.000                0.000             -0.016***

      Y2008               -0.025*                 -0.007               -0.001             -0.017
      Y2009               -0.035**                -0.018**             -0.001             -0.017

      CONS                 0.105*                  0.072**              0.037              0.033
      MANU                -0.018                   0.000               -0.007             -0.019
       MIN                -0.046                   0.011               -0.012             -0.058
      POWE                -0.055                   0.074               -0.150***          -0.131
      SERV                 0.041                   0.054               -0.033             -0.014
      CARR                -0.029                   0.091**              0.076**           -0.122
       COM                 0.194                   0.100               -0.001              0.093
      REAL                 0.161*                  0.120**              0.021              0.042
      COMM                -0.013                  -0.007               -0.022             -0.005

Adjusted R-squared          0.101                    0.334                0.365            0.071
S.E. of regression          0.088                    0.052                0.049            0.080
F-statistic                 3.131      0.000        10.454 0.000        11.835 0.000       2.452   0.000
Observations                   359                     359                  359              359
Hausman test
X2(10)                     50.896      0.000        41.946 0.000        34.483 0.000      50.741
Note: ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively.




                                                     19

                        Table 4-2 Estimation Results of Debt Ratios (HASE)

      Variable        Coefficient   Prob.   Coefficient    Prob.   Coefficient   Prob.   Coefficient   Prob.

         C                -0.629    0.028       -0.750     0.001       -0.592    0.000        0.161    0.573
      TAX(-1)             -0.050    0.673        0.136     0.112        0.020    0.795       -0.203    0.075
      SIZE(-1)             0.050    0.000        0.035     0.000        0.024    0.000        0.013    0.180
     TANG(-1)              0.038    0.406        0.097     0.003        0.136    0.000       -0.072    0.104
       Q(-1)              -0.017    0.045       -0.012     0.042       -0.008    0.149       -0.000    0.927

    STATE*TAX             -0.101    0.557       -0.005     0.964       -0.113    0.328       -0.073    0.658
    STATE*SIZE             0.008     ***        -0.002     0.077       -0.000    0.490        0.010     ***
   STATE*TANG             -0.324     ***         0.161      ***         0.141     ***        -0.482     ***
     STATE*Q              -0.047     ***        -0.002     0.873       -0.014    0.233       -0.042     ***

       Y2008              -0.046    0.010       -0.009     0.460       -0.004    0.699       -0.038    0.023
       Y2009              -0.038    0.048       -0.014     0.294       -0.017    0.174       -0.022    0.228

      CONS                -0.002    0.982       -0.037     0.682        0.042    0.545        0.031    0.788

      MANU                -0.143    0.217       -0.076     0.405        0.011    0.872       -0.072    0.534

       MIN                -0.016    0.899        0.043     0.675        0.075    0.340       -0.062    0.635

      POWE                -0.108    0.437        0.062     0.576        0.049    0.557       -0.173    0.220

      SERV                -0.137    0.266       -0.054     0.577        0.047    0.527       -0.091    0.461

      CARR                -0.094    0.464       -0.034     0.734        0.078    0.310       -0.064    0.618

       COM                -0.004    0.975       -0.169     0.182       -0.014    0.879        0.162    0.311
      REAL                -0.087    0.645       -0.135     0.374        0.034    0.759        0.036    0.850
      COMM                -0.120    0.511        0.009     0.947        0.099    0.357       -0.134    0.470

Adjusted R-squared         0.243                 0.175                  0.202                 0.226
S.E. of regression         0.092                 0.066                  0.065                 0.088
F-statistic                6.089    0.000        4.372     0.000        5.016    0.000        5.640    0.000
Observations                 302                   302                    302                   302
Hausman test X2(10)       50.210    0.000       35.105     0.000       41.079    0.000       32.830    0.000

Notes: ***,**,and * indicate significance at the 1%, 5%, and 10% levels, respectively.




                                                     20

                 Table 4-3 Estimation Results of Debt Ratios by using GOV (HOSE)

      Variable        Coefficient   Prob.    Coefficient          Prob.   Coefficient    Prob.   Coefficient    Prob.

         C                -0.188    0.5193       -0.718          0.0000       -0.392    0.0049        0.521    0.0534
      TAX(-1)              0.029    0.7320       -0.011          0.8291       -0.018    0.6832        0.034    0.6674
      SIZE(-1)             0.025    0.0193        0.029          0.0000        0.016    0.0017       -0.003    0.7502
     TANG(-1)             -0.003    0.9524        0.099          0.0053        0.078    0.0117       -0.101    0.0666
       Q(-1)              -0.022    0.0000       -0.008          0.0033       -0.007    0.0047       -0.014    0.0017

     GOV*TAX              -0.352    0.2352        0.206          0.2499        0.083    0.6034       -0.581    0.0369
    GOV*SIZE               0.002    0.4775       -0.005          0.0134       -0.004    0.0406        0.008    0.0198
    GOV*TANG               0.392    0.0280        0.681          0.0000        0.720    0.0000       -0.284    0.0867
      GOV*Q               -0.050    0.0000       -0.013          0.0476       -0.009    0.1425       -0.038    0.0004

       Y2008              -0.040    0.0036       -0.016          0.0531       -0.010    0.1837       -0.023    0.0648
       Y2009              -0.052    0.0009       -0.027          0.0037       -0.010    0.2384       -0.025    0.0884

      CONS                 0.102    0.1007        0.061          0.0874        0.023    0.4005        0.041    0.4698
      MANU                -0.023    0.6731       -0.009          0.7626       -0.023    0.3628       -0.012    0.8059
       MIN                -0.020    0.8406        0.021          0.7069       -0.006    0.8787       -0.038    0.6717
      POWE                -0.043    0.6200        0.075          0.1398       -0.146    0.0004       -0.120    0.1373
      SERV                 0.062    0.4770        0.049          0.3263       -0.040    0.3082        0.013    0.8707
      CARR                -0.020    0.7628        0.083          0.0333        0.066    0.0330       -0.103    0.0949
       COM                 0.197    0.1417        0.103          0.1823    1.46E-05     0.9998        0.093    0.4429
      REAL                 0.157    0.0614        0.110          0.0231        0.012    0.7414        0.047    0.5349
      COMM                -0.017    0.8025       -0.015          0.7075       -0.033    0.2926       -0.001    0.9875

Adjusted R-squared         0.123                  0.341                        0.393                  0.090
S.E. of regression         0.086                  0.052                        0.049                  0.080
F-statistic                3.644     0.000       10.789           0.000       13.225     0.000        2.866     0.000
Observations                 359                    359                          359                    359
Hausman test X2(10)       45.155     0.000       35.386           0.000       44.432     0.000       40.780     0.000

Notes: ***,**,and * indicate significance at the 1%, 5%, and 10% levels, respectively.




                                                           21

                 Table 4-4 Estimation Results of Debt Ratios by using GOV (HASE)

      Variable        Coefficient   Prob.    Coefficient    Prob.       Coefficient   Prob.    Coefficient   Prob.

         C                -0.530    0.0722       -0.617     0.0069          -0.463    0.0069        0.114    0.6882
      TAX(-1)             -0.021    0.8566        0.156     0.0648           0.036    0.6327       -0.190    0.0858
      SIZE(-1)             0.046    0.0000        0.031     0.0001           0.020    0.0010        0.014    0.1504
     TANG(-1)              0.056    0.2453        0.051     0.1359           0.068    0.0322       -0.001    0.9748
       Q(-1)              -0.011    0.1971       -0.011     0.0633          -0.006    0.2469        0.002    0.7377

     GOV*TAX              -0.313    0.2856       -0.072     0.7293          -0.275    0.1539       -0.219    0.4252
    GOV*SIZE               0.017    0.0000       -0.004     0.1019          -0.003    0.1574        0.021    0.0000
    GOV*TANG              -0.471    0.0011        0.514     0.0000           0.532    0.0000       -0.997    0.0000
      GOV*Q               -0.116    0.0002       -0.016     0.4619          -0.030    0.1473       -0.095    0.0011

       Y2008              -0.067    0.0005       -0.011     0.4114          -0.006    0.6010       -0.057    0.0015
       Y2009              -0.061    0.0029       -0.012     0.3789          -0.015    0.2389       -0.046    0.0144

      CONS                -0.022    0.8514       -0.053     0.5688           0.026    0.7031        0.028    0.8075
      MANU                -0.160    0.1835       -0.092     0.3222          -0.003    0.9572       -0.071    0.5404
       MIN                -0.034    0.7978        0.003     0.9739           0.035    0.6445       -0.037    0.7751
      POWE                -0.163    0.2609        0.012     0.9135          -0.002    0.9762       -0.174    0.2180
      SERV                -0.147    0.2494       -0.068     0.4938           0.033    0.6529       -0.085    0.4924
      CARR                -0.119    0.3695       -0.083     0.4211           0.029    0.6980       -0.037    0.7723
       COM                -0.032    0.8447       -0.179     0.1600          -0.028    0.7636        0.146    0.3583
      REAL                -0.073    0.7081       -0.154     0.3158           0.015    0.8861        0.073    0.6999
      COMM                -0.177    0.3505        0.023     0.8739           0.112    0.2951       -0.205    0.2688

Adjusted R-squared         0.238                  0.210                      0.260                  0.249
S.E. of regression         0.090                  0.064                      0.063                  0.086
F-statistic                5.956     0.000        5.234         0.000        6.592     0.000        6.259     0.000
Observations                 302                    302                        302                    302
Hausman test X2(10)       43.528     0.000       22.089         0.014       26.592     0.003       33.215     0.000
Notes: ***,**,and * indicate significance at the 1%, 5%, and 10% levels, respectively

      (Table 4-5) Testing the Differences in the Capital Structures of the HOSE and the HASE
                           HOSE                            HASE                        Test of the difference
                                                                                             (P value)
  TDR                 0.441                                0.576                               0.000
  LDR                 0.098                                0.124                               0.008
  LBR                  0.062                                0.471                              0.089
  SDR                 0.342                                0.452                               0.000
  TAX                 0.109                                0.101                               0.098
  SIZE                26.719                               25.906                              0.000
  TANG                 0.304                               1.619                               0.773
  Q                    2.180                               1.707                               0.000
  Sample                515                                  449
Notes: Average value of 2006–2009



                                                           22
                                                   Appendixes

                     Table A-1 Privatization of State-owned Companies in Vietnam
Regulation on equitization of state-owned companies (7/5/1996)
  Object companies: State-owned companies that satisfy 3 conditions: (1) They are small-medium
    companies, (2) There is no need for the state to hold 100% ownership, (3) There is an efficient
    investment plan.
Regulation on equitization of state-owned companies (revised 29/6/1998)
  Object companies: State-owned companies for which there is no need for the state to hold 100% ownership
Regulation on equitization of foreign-owned companies (15/4/2003)
  Object companies: Foreign-owned companies that have been running at least 3 years and made a profit in
  the year before applying for equitization.
Simultaneity of equitizing and listing of state-owned companies (revised 4/8/2005)
  State-owned companies that satisfy the listing conditions of the Ho Chi Minh Securities Exchange or the
  Hanoi Securities Exchange can equitize and list at the same time.
Regulation on issuing company bonds (19/5/2006)
  Object companies: joint-stock companies, state-owned companies that have become joint-stock companies
  or limited liability companies, foreign-owned companies.
Regulation on equitization of state-owned companies (revised 26/6/2007)

   Source: Compiled by the authors from various sources.

              Table A-2 Banking Reform and Liberalization of Interest Rates in Vietnam
      Period
  Before 1988     Monobank system: There is no separation of the functions of financial institutions.
                     Regulation of the interest rate is independent of foreign interest rates. The nominal
                     interest rate is lower than the inflation rate; thus, the real interest rate is negative.
  26/3/1988       Separation of the functions of the state bank and commercial banks
                     According to 53/HDBT Order
  1989–5/1992     Fixed interest rate regime
                     The interest rate is adjusted in relation to the fluctuation of the price index.
                     Interest rates of foreign currencies are those of the world market.
  6/1992–1995     Limited interest rate regime
                     The State Bank of Vietnam fixes the lower limit of the deposit interest rate and the
                     ceiling of the lending interest rate. Commercial banks decide their interest rates based
                     on those interest rates.
  1996–7/2000     Ceiling interest rate regime
                     The deposit interest rate is liberated, and the ceiling of the lending interest rate is fixed.
  8/2000–5/2002 Basic interest rate and flexible interest rate regime
                     The basic interest rate and the allowed movement rate are announced monthly. In case
                     of necessity, the state bank will announce proper adjustments. Commercial banks
                     negotiate with borrowers and decide lending interest rates based on these rates.
  5/2001–Present Liberalization of interest rates of foreign currencies 

                     Interest rates of foreign currencies are decided on the basis of their interest rates on 

                     world markets and their demand and supply in the domestic market. 

  6/2002–Present Expansion of liberalization of the deposit interest rate and the lending interest rate
                     Liberalizing the deposit interest rate and the lending interest rate of VND
                     Setting a ceiling for the deposit interest rate of USD of companies, but liberating the
                     deposit interest rate of USD of individuals
 Source: Homepage of the State Bank of Vietnam.

                                                         23

                      Table A-3 Corporate Tax on Listed Companies in Vietnam
 Corporate Tax Law (17/6/2003)
           (1) Tax rate: 28%
           (2) Preference tax rate: (1) Applying a tax rate of 20%, 15%, or 10% for companies that are newly
                 established in preference industries or preference areas, (2) Applying a tax exemption (at most
                 4 years) and half reduction (at most next 9 years) for the companies that are moved to
                 preference areas, (3) Applying a tax exemption (at most 4 years) and half reduction (at most
                 next 7 years) for the increasing profit of the companies that apply new production lines or
                 new technology.
 Regulation of tax preferences for listed companies (20/10/2004)
           (1) Applying a tax exemption in 2 years after listing for newly listed companies, (2) If listing is not
           at the beginning of the year, the tax exemption could be calculated from the next year, (3) If
           Preferences of Corporate Tax Law are being applied, this preference could be applied after
           applying those preferences.
 Nullification of regulation on tax preferences for listed companies (8/9/2006)
           (1) For the companies listing after 1/1/2007, preferences of the above regulation are not applied,
           (2) For the companies listing before 1/1/2007, preferences of the above regulation are applied.
      Source: Homepages of the Ho Chi Minh Securities Exchange and the Hanoi Securities Exchange.


                           Table A-4 Breakdown of Listed Companies by Industry
                              Hanoi Securities            Ho Chi Minh Securities                 Total
                                Exchange                        Exchange
                           Number of   Proportion         Number of    Proportio       Number of      Proportion
                           companies        (%)           companies      n (%)         companies         (%)
Agriculture, forestry,               4         2.38                15       8.77               19           5.60
and fisheries
Construction                         67         39.88                27       15.79              94         27.73
Manufacturing                        54         32.14                68       39.77             122         35.99
Mining                                8          4.76                 4        2.34              12          3.54
Power                                 4          2.38                 5        2.92               9          2.65
Service                              11          6.55                 7        4.09              18          5.31
Carrier                               8          4.76                19       11.11              27          7.96
Finance                               6          3.57                 4        2.34              10          2.95
Communication                         3          1.79                 2        1.17               5          1.47
Real estate                           1          0.60                 6        3.51               7          2.06
Commerce                              2          1.19                14        8.19              16          4.72
Total                               168           100               172         100             340           100
Source: Homepages of the Hanoi and Ho Chi Minh Securities Exchanges




                                                        24

Center for Economic Institutions Working Paper Series

2000-1    Jean Tirole, “Corporate Governance,” January 2000.


2000-2    Kenneth A. Kim and S. Ghon Rhee, “A Note on Shareholder Oversight and the
          Regulatory Environment: The Japanese Banking Experience,”January 2000.


2000-3    S. Ghon Rhee, “Further Reforms after the “BIG BANG”: The JapaneseGovernment Bond
          Market,”June 2000.

2000-4    Stijn Claessens, Simeon Djankov , Joseph Fan , and Larry Lang, “Expropriation of Minority
          Shareholders in East Asia,”July 2000.

2000-5    Stijn Claessens, Simeon Djankov, Joseph Fan , and Larry Lang, “The Costs of Group
          Affiliation: Evidence from East Asia,” July 2000.


2001-1    Masaharu Hanazaki and Akie Takeuchi, “An International Comparison of Corporate
          Investment Behavior -Some Implications for the Governance Structure in Japan-,” February
          2001.

2001-2    Katsuyuki Kubo, “The Determinants of Executive Compensation in Japan and the UK:
          Agency Hypothesis or Joint Determination Hypothesis?” February 2001.

2001-3    Katsuyuki Kubo, “Changes in Directors’ Incentive Plans and the Performance of Firms in
          the UK,” March 2001.

2001-4    Yupana Wiwattanakantang, “Controlling Shareholders and Corporate Value: Evidence from
          Thailand,” March 2001.

2001-5    Katsuyuki Kubo, “The Effect of Managerial Ownership on Firm Performance: Case in
          Japan,” March 2001.

2001-6    Didier Guillot and James R. Lincoln, “The Permeability of Network Boundaries: Strategic
          Alliances in the Japanese Electronics Industry in the 1990s,” March 2001.

2001-7    Naohito Abe, “Ageing and its Macroeconomic Implications-A Case in Japan-,” May 2001.

2001-8    Yupana Wiwattanakantang, “The Equity Ownership Structure of Thai Firms,” July 2001.

2001-9    Megumi Suto, “Capital Structure and Investment Behaviour of Malaysian Firms in the
          1990s--A study of Corporate Governance before the Crisis--,” August 2001.

2001-10   Naohito Abe, Noel Gaston, and Katsuyuki Kubo, “Executive Pay in Japan : The Role of
          Bank-Appointed Monitors and the Main Bank Relationship,” September 2001.

2001-11   Colin Mayer, “The Financing and Governance of New Technologies,” September 2001.

2001-12   Masaharu Hanazaki and Akiyoshi Horiuchi, “Can the Financial Restraint Hypothesis
          Explain Japan’s Postwar Experience?” September 2001.

2001-13   Shin-ichi Fukuda, “The Role of Long-term Loans for Economic Development: Empirical
          Evidence in Japan, Korea, and Taiwan,” September 2001.




                                            wp-1
2001-14   S. Ghon Rhee, “Further Reforms of the JGB Market for the Promotion of Regional Bond
          Markets,” September 2001.

2001-15   Stijn Claessens, Simeon Djankov, Joseph P. H. Fan, and Larry H. P. Lang, ”The Benefits
          and Costs of Internal Markets: Evidence from Asia’s Financial Crisis,” September 2001.

2001-16   Kenneth A. Kim and John R. Nofsinger, “Institutional Herding, Business Groups, and
          Economic Regimes: Evidence from Japan,” September 2001.

2001-17   Mitsuhiro Fukao, “Financial Deregulations, Weakness of Market Discipline, and Market
          Development: Japan’s Experience and Lessons for Developing Countries,” September 2001.

2001-18   Akio Kuroda and Koichi Hamada, “Towards an Incentive Compatible Financial System:
          Accounting and Managing the Non-Performing Loans,” September 2001.

2001-19   Randall Morck and Bernard Yeung, “Japanese Economic Success and the Curious
          Characteristics of Japanese Stock Prices,” September 2001.

2001-20   Miguel A. García-Cestona, “Ownership Structure, Banks and the Role of Stakeholders: The
          Spanish Case,” September 2001.

2001-21   Joseph P. H. Fan and T. J. Wong, “Corporate Ownership Structure and the Informativeness
          of Accounting Earnings in East Asia,” September 2001.

2001-22   Heather Montgomery, “The Effect of the Basel Accord on Bank Lending in Japan,”
          September 2001.

2001-23   Naoyuki Yoshino, Sahoko Kaji, and Ayako Suzuki, “The Basket-peg, Dollar-peg and
          Floating---A Comparative Analysis of Exchange Rate Regimes,” September 2001.

2001-24   Colin Mayer, Koen Schoors, and Yishay Yafeh, “Sources of Funds and Investment
          Strategies of Venture Capital Funds: Evidence from Germany, Israel, Japan and the UK,”
          September 2001.

2001-25   Yukinobu Kitamura, Megumi Suto, and Juro Teranishi, “Towards a New Architecture for
          the Japanese Financial System: Participation Costs, Intermediated Ownership and Wealth
          Distribution,”September 2001.


2002-1    Evgeni Peev, “The Political Economy of Corporate Governance Change in Bulgaria:
          Washington Consensus, Primitive Accumulation of Capital, and Catching-Up in the 1990,”
          March 2002.

2002-2    Naohito Abe, “Saving, Capital Flows, and the Symmetric International Spillover of
          Industrial Policies,” June 2002.

2002-3    Masaharu Hanazaki and Akiyoshi Horiuchi, “A Review of Japan’s Bank Crisis from the
          Governance Perspective,” July 2002.

2002-4    Chutathong Charumirind, Raja Kali and Yupana Wiwattanakantang, “Crony Lending:
          Thailand before the Financial Crisis,” September 2002.

2002-5    Maitreesh Ghatak and Raja Kali, “Financially Interlinked Business Groups,” September
          2002.

2002-6    Tarun Khanna, Joe Kogan, and Krishna Palepu, “Globalization and Similarities in Corporate
          Governance: A Cross-Country Analysis,” September 2002.



                                            wp-2
2002-7    Chongwoo Choe, “Delegated Contracting and Corporate Hierarchies,” September 2002.

2002-8    Tarun Khanna and Yishay Yafeh, “Business Groups and Risk Sharing around the World,”
          September 2002.

2002-9    Yitae Kim, Kwangwoo Park, Ronald A. Ratti, and Hyun-Han Shin, “Do Main Banks Extract
          Rents from their Client Firms? Evidence from Korean Chaebol,” September 2002.

2002-10   Armen Hovakimian, Edward J. Kane and Luc Laeven, “How Country and Safety-Net
          Characteristics Affect Bank Risk-Shifting,” September 2002.

2002-11   Vidhan K. Goyal and Takeshi Yamada, “Asset Price Shocks, Financial Constraint, and
          Investment: Evidence from Japan,” September 2002.

2002-12   Clive S. Lennox, “Opinion Shopping and Audit Committees,” September 2002.

2002-13   Seki Obata, “Pyramid Business Groups in East Asia: Insurance or Tunneling? ,” September
          2002.

2002-14   Ishtiaq Pasha Mahmood and Will Mitchell, “Two Faces: Effects of Business Groups on
          Innovation in Emerging Economies,” September 2002.

2002-15   Kwangwoo Park, “Foreign Ownership and Firm Value in Japan,” September 2002.

2002-16   Adrian van Rixtel, Yupana Wiwattanakantang, Toshiyuki Souma, and Kazunori Suzuki,
          “ Banking in Japan: Will “To Big To Fail” Prevail?” December 2002.

2002-17   Stijn Claessens and Leora F. Klapper, “Bankruptcy around the World: Explanations of its
          Relative Use,” December 2002.


2003-1    Anya Khanthavit, Piruna Polsiri, and Yupana Wiwattanakantang, “Did Families Lose or
          Gain Control after the East Asian Financial Crisis?” February 2003.

2003-2    Hidenobu Okuda, Hidetoshi Hashimoto, and Michiko Murakami, “The Estimation of
          Stochastic Cost Functions of Malaysian Commercial Banks and Its Policy Implications to
          Bank Restructuring,” February 2003.

2003-3    Masaharu Hanazaki and Liuqun, “Asian Crisis and Corporate Governance, (in Japanese)”
          March 2003.

2003-4    Fukuju Yamazaki and Hiroyuki Seshita, ”Economic Analysis of Bankruptcy law in Japan,
          (in Japanese)” February 2003.

2003-5    Hirofumi Uchida and Hiroshi Osano, “Bank Monitoring and Corporate Governance in Japan,
          (in Japanese)” March 2003.

2003-6    Fukunari Kimura and Kozo Kiyota, “Foreign Ownership and Corporate Performance:
          Evidence from Japanese Micro Data, (in Japanese)” March 2003.

2003-7    Yukinobu Kitamura, “Corporate Profit and Debt- Panel Data Analysis of The Japanese
          Firms in the 1990s, (in Japanese)” March 2003.

2003-8    Chaiyasit Aunchitworawong, Toshiyuki Soma, and Yupana Wiwattanakantang, "Do
          Families Control Banks Prevail after the East Asia Financial Crisis? Evidence from
          Thailand" March 2003.



                                            wp-3
2003-9    Junko Maru, Yasuhiro Yonezawa and Yuki Matsumoto, "Corporate Governance by Foreign
          Investors in East Asia Corporations (in Japanese)" March 2003.

2003-10   Sui Qing-yuan, "Declining Firm's Dependence upon Bank Borrowing and Corporate
          Performance (in Japanese)" March 2003.

2003-11   Katsumi Matsuura, "Changes in Ownership Structures and Their Impacts upon Corporate
          Performance in Japan (in Japanese)" March 2003.

2003-12   Kathy S. He, Randall Morck and Bernard Yeung, “Corporate Stability and Economic
          Growth,” May 2003.

2003-13   Robert Dekle and Heajin Ryoo, “Exchange Rate Fluctuations, Financing Constraints,
          Hedging, and Exports: Evidence from Firm Level Data,” June 2003.

2003-14   Tsun-Siou Lee, Yin-Hua Yeh and Rong-Tze Liu, ”Can Corporate Governance Variables
          Enhance the Prediction Power of Accounting-Based Financial Distress Prediction Models?,”
          June 2003.

2003-15   Hideaki Miyajima and Yishay Yafeh, “Japan’s Banking Crisis: Who has the Most to
          Lose? ,” June 2003.

2003-16   Guifen Pei, “Asset Management Companies in China,” June 2003.

2003-17   Takeshi Nagase, “The Governance Structure of IPO Firm in Japan,” July 2003.

2003-18   Masaharu Hanazaki and Qun Liu, “The Asian Crisis and Corporate Governance ―
          Ownership Structure, Debt Financing, and Corporate Diversification ― ,” July 2003.

2003-19   Chutatong Charumilind, Raja Kali and Yupana Wiwattanakantang, “Connected Lending:
          Thailand before the Financial Crisis,” July 2003.

2003-20   Gilles Hilary and Tomoki Oshika, “Shareholder activism in Japan: social pressure, private
          cost and organized crime,” August 2003.

2003-21   Sanghoon Ahn, “Technology Upgrading with Learning Cost,” September 2003.

2003-22   Masaharu Hanazaki and Akiyoshi Horiuchi, “Have Banks Contributed to Efficient
          Management in Japan’s Manufacturing? ,” November 2003.

2003-23   Chongwoo Choe and In-Uck Park, “Delegated Contracting and Corporate Hierarchies,”
          November 2003.

2003-24   Bruno Dallago, ”Comparative Economic Systems and the New Comparative Economics:
          Foes, Competitors, or Complementary?,” November 2003.

2003-25   Adrian van Rixtel, Ioana Alexopoulou and Kimie Harada, “The New Basel Capital Accord
          and Its Impact on Japanese Banking: A Qualitative Analysis,” November 2003.


2004-1    Masaharu Hanazaki, Toshiyuki Souma and Yupana Wiwattanakantang, “Silent Large
          Shareholders and Entrenched Bank Management: Evidence from Banking Crisis in Japan,”
          January 2004.

2004-2    Ming Ming Chiu and Sung Wook Joh, “Bank Loans to Distressed Firms: Cronyism, bank
          governance and economic crisis,” January 2004.



                                             wp-4
2004-3    Keun Lee, Keunkwan Ryu and Jungmo Yoon, “Corporate Governance and Long Term
          Performance of the Business Groups: The Case of Chaebols in Korea,” January 2004.

2004-4    Randall Morck and Masao Nakamura, “Been There, Done That –The History of Corporate
          Ownership in Japan,” March 2004.

2004-5    Dong-Hua Chen, Joseph P. H. Fan and T. J. Wong, ”Politically-connected CEOs, Corporate
          Governance and Post-IPO Performance of China’s Partially Privatized Firms,” March 2004.

2004-6    Jae-Seung Baek, Jun-Koo Kang and Inmoo Lee, “Business Groups and Tunneling: Evidence
          from Private Securities Offerings by Korean Chaebols,” March 2004.

2004-7    E. Han Kim, “To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation,”
          March 2004.

2004-8    Yin-Hua Yeh and Tracie Woidtke, “Commitment or Entrenchment?: Controlling
          Shareholders and Board Composition,” June 2004.

2004-9    Hugh Patrick, “Thoughts on Evolving Corporate Governance in Japan,” June 2004.

2004-10   Utpal Bhattacharya and Hazem Daouk, “When No Law is Better than a Good Law”, June
          2004.

2004-11   Sanghoon Ahn, Utpal Bhattacharya, Taehun Jung and Giseok Nam, “Do Japanese CEOs
          Matter?”, June 2004.

2004-12   Megumi Suto and Masashi Toshino, “Behavioural Biases of Japanese Institutional
          Investors; Fund management and Corporate Governance”, July 2004.

2004-13   Piruna Polsiri and Yupana Wiwattanakantang, “Business Groups in Thailand: Before and
          after the East Asian Financial Crisis”, August 2004.

2004-14   Fumiharu Mieno, “Fund Mobilization and Investment Behavior in Thai Manufacturing
          Firms in the Early 1990s”, August 2004.

2004-15   Chaiyasit Anuchitworawong, “Deposit Insurance, Corporate Governance and Discretionary
          Behavior: Evidence from Thai Financial Institutions”, September 2004.

2004-16   Chaiyasit Anuchitworawong, “Financial fragility under implicit insurance scheme: Evidence
          from the collapse of Thai financial institutions”, September 2004.

2004-17   Chaiyasit Anuchitworawong, “Ownership-based Incentives, Internal Corporate Risk and
          Firm Performance”, September 2004.

2004-18   Jack Ochs and In-Uck Park, “Overcoming the Coordination Problem: Dynamic Formation
          of Networks”, September 2004.

2004-19   Hidenobu Okuda and Suvadee Rungsomboon, “Comparative Cost Study of Foreign and
          Thai Domestic Banks 1990–2002: Estimating Cost Functions of the Thai Banking
          Industry,” February 2005.

2004-20   Hidenobu Okuda and Suvadee Rungsomboon, ”The Effects of Foreign Bank Entry on the
          Thai Banking Market: Empirical Analysis from 1990 to 2002,“ March 2005.




                                            wp-5
2004-21   Juro Teranishi, “Investor Right in Historical Perspective: Globalization and the Future of the
          Japanese Firm and Financial System,” March 2005.

2004-22   Kentaro Iwatsubo, “Which Accounts for Real Exchange Rate Fluctuations, Deviations from
          the Law of One Price or Relative Price of Nontraded Goods?”, March 2005.

2004-23   Kentaro Iwatsubo and Tomoyuki Ohta, ”Causes and effects of exchange rate regimes (in
          Japanese),” March 2005.

2004-24   Kentaro Iwatsubo, “Bank Capital Shocks and Portfolio Risk: Evidence from Japan,” March
          2005.

2004-25   Kentaro Iwatsubo, “On the Bank-led Rescues Financially Distressed Firms in Japan,” March
          2005.


2005-1    Yishay P. Yafeh and Tarun Khanna, “Business Groups in Emerging Markets: Paragons or
          Parasities?,” September 2005.

2005-2    Renee B. Adams and Daniel Ferreira, “Do Directors Perform for Pay?," September 2005.

2005-3    Qun Liu, Shin-ichi Fukuda and Juro Teranishi, “What are Characteristics of Financial
          Systems in East Asia as a Region?.” September 2005.

2005-4    Juro Teranishi, “Is the Financial System of Postwar Japan Bank-dominated or Market
          Based?,” September 2005.

2005-5    Hasung Jang, Hyung-cheol Kang and Kyung Suh Park, “Determinants of Family
          Ownership: The Choice between Control and Performance,” October 2005.

2005-6    Hasung Jang, Hyung-cheol Kang and Kyung Suh Park, “The Choice of Group Structure:
          Divide and Rule,” October 2005.

2005-7    Sangwoo Lee, Kwangwoo Park and Hyun-Han Shin, “The Very Dark Side of International
          Capital Markets: Evidence from Diversified Business Groups in Korea,” October 2005.

2005-8    Allen N. Berger, Richard J. Rosen and Gregory F. Udell, “Does Market Size Structure
          Affect Competition? The Case of Small Business Lending,” November 2005.

2005-9    Aditya Kaul and Stephen Sapp, “Trading Activity and Foreign Exchange Market Quality,”
          November 2005.

2005-10   Xin Chang, Sudipto Dasgupta and Gilles Hilary, “The Effect of Auditor Choice on
          Financing Decisions,” December 2005.

2005-11   Kentaro Iwatsubo, “Adjustment Speeds of Nominal Exchange Rates and Prices toward
          Purchasing Power Parity,” January 2006.

2005-12   Giovanni Barone-Adesi, Robert Engle and Loriano Mancini, “GARCH Options in
          Incomplete Markets”, March 2006.

2005-13   Aditya Kaul, Vikas Mehrotra and Blake Phillips, “Ownership, Foreign Listings, and Market
          Valuation”, March 2006.

2005-14   Ricard Gil, “Renegotiation, Learning and Relational Contracting”, March 2006.




                                              wp-6
2005-15   Randall Morck, “How to Eliminate Pyramidal Business Groups -The Double Taxation of
          Inter-corporate Dividends and other Incisive Uses of Tax Policy-”, March 2006.

2005-16   Joseph P.H. Fan, T.J. Wong and Tianyu Zhang, “The Emergence of Corporate Pyramids in
          China”, March 2006.

2005-17   Yan Du, Qianqiu Liu and S. Ghon Rhee, “An Anatomy of the Magnet Effect: Evidence
          from the Korea Stock Exchange High-Frequency Data”, March 2006.

2005-18   Kentaro Iwatsubo and Junko Shimizu, “Signaling Effects of Foreign Exchange Interventions
          and Expectation Heterogeneity among Traders”, March 2006.

2005-19   Kentaro Iwatsubo, “Current Account Adjustment and Exchange Rate Pass-Through(in
          Japanese)”, March 2006.

2005-20   Piruna Polsiri and Yupana Wiwattanakantang, “Corporate Governance of Banks in
          Thailand”, March 2006.


2006-1    Hiroyuki Okamuro and Jian Xiong Zhang, “Ownership Structure and R&D Investment of
          Japanese Start-up Firms,” June 2006.

2006-2    Hiroyuki Okamuro, “Determinants of R&D Activities by Start-up Firms: Evidence from
          Japan,” June 2006.

2006-3    Joseph P.H. Fan, T.J. Wong and Tianyu Zhang, “The Emergence of Corporate Pyramids in
          China,” August 2006.

2006-4    Pramuan Bunkanwanicha, Jyoti Gupta and Yupana Wiwattanakantang, “Pyramiding of
          Family-owned Banks in Emerging Markets,” September 2006.

2006-5    Bernardo Bortolotti and Mara Faccio, “Reluctant privatization,” September 2006.

2006-6    Jörn Kleinert and Farid Toubal, “Distance costs and Multinationals’ foreign activities”,
          October 2006.

2006-7    Jörn Kleinert and Farid Toubal, “Dissecting FDI”, October 2006.

2006-8    Shin-ichi Fukuda and Satoshi Koibuchi, “The Impacts of “Shock Therapy” on Large and
          Small Clients: Experiences from Two Large Bank Failures in Japan”, October 2006.

2006-9    Shin-ichi Fukuda, Munehisa Kasuya and Kentaro Akashi, “The Role of Trade Credit for
          Small Firms: An Implication from Japan’s Banking Crisis”, October 2006.

2006-10   Pramuan Bunkanwanicha and Yupana Wiwattanakantang, “Big Business Owners and
          Politics: Investigating the Economic Incentives of Holding Top Office”, October 2006.

2006-11   Sang Whi Lee, Seung-Woog(Austin) Kwang, Donald J. Mullineaux and Kwangwoo Park,
          “Agency Conflicts, Financial Distress, and Syndicate Structure: Evidence from Japanese
          Borrowers”, October 2006.

2006-12   Masaharu Hanazaki and Qun Liu, “Corporate Governance and Investment in East Asian
          Firms -Empirical Analysis of Family-Controlled Firms”, October 2006.

2006-13   Kentaro Iwatsubo and Konomi Tonogi, “Foreign Ownership and Firm Value: Identification
          through Heteroskedasticity (in Japanese)”, December 2006.




                                             wp-7
2006-14   Kentaro Iwatsubo and Kazuyuki Inagaki, “Measuring Financial Market Contagion Using
          Dually-Traded Stocks of Asian Firms”, December 2006.

2006-15   Hun-Chang Lee, “When and how did Japan catch up with Korea? –A comparative study of
          the pre-industrial economies of Korea and Japan”, February 2007.

2006-16   Kyoji Fukao, Keiko Ito, Shigesaburo Kabe, Deqiang Liu and Fumihide Takeuchi, “Are
          Japanese Firms Failing to Catch up in Localization? An Empirical Analysis Based on
          Affiliate-level Data of Japanese Firms and a Case Study of the Automobile Industry in
          China”, February 2007.

2006-17   Kyoji Fukao, Young Gak Kim and Hyeog Ug Kwon, “Plant Turnover and TFP Dynamics in
          Japanese Manufacturing”, February 2007.

2006-18   Kyoji Fukao, Keiko Ito, Hyeg Ug Kwon and Miho Takizawa, “Cross-Border Acquisitons
          and Target Firms' Performance: Evidence from Japanese Firm-Level Data”, February 2007.

2006-19   Jordan Siegel and Felix Oberholzer-Gee, “Expropriators or Turnaround Artists? The Role of
          Controlling Families in South Korea (1985-2003)”, March 2007.

2006-20   Francis Kramarz and David Thesmar, “Social Networks in The Boardroom”, March 2007.

2006-21   Morten Bennedsen, Francisco Pérez-González and Daniel Wolfenzon, “Do CEOs matter?”,
          March 2007.


2007-1    Ichiro Iwasaki, “Endogenous board formation and its determinants in a transition economy:
          evidence from Russia*”, April 2007, Revised on October 2007.

2007-2    Joji Tokui, Tomohiko Inui, and Katsuaki Ochiai, “The Impact of Vintage Capital and R&D
          on Japanese Firms’ Productivity”, April 2007.

2007-3    Yasuo Nakanishi and Tomohiko Inui, “Deregulation and Productivity in Japanese
          Industries”, April 2007.

2007-4    Kyoji Fukao, “The Performance of Foreign Firms and the Macroeconomic Impact of FDI”,
          May 2007.

2007-5    Taku Suzuki, “The Role of the State in Economic Growth of Post-Communist Transitional
          Countries”, June 2007.

2007-6    Michiel van Leuvensteijn, Jacob A. Bikker, Adrian A.R.J.M. van Rixtel and Christoffer
          Kok-Sørensen*, “A new approach to measuring competition in the loan markets of the euro
          area”, June 2007.

2007-7    Sea Jin Chang, Jaiho Chung, and Dean Xu, “FDI and Technology Spillovers in China”, July
          2007.

2007-8    Fukunari Kimura, “The mechanics of production networks in Southeast Asia: the
          fragmentation theory approach”, July 2007.

2007-9    Kyoji Fukao, Tsutomu Miyagawa, Miho Takizawa, “Productivity Growth and Resource
          Reallocation in Japan”, November 2007.

2007-10   YoungGak Kim, “A Survey on Intangible Capital”, December 2007.




                                            wp-8
2007-11   Sea-Jing Chang and Jay Hyuk Rhee, “Rapid International Expansion Strategy of Emerging
          Market Enterprises: The Interplay between Speed and Competitive Risks on International
          performance”, November 2007.

2007-12   Ishtiaq Mahmood, Will Mitchell, and Chi-Nien Chung, “The Structure of Intra-Group Ties:
          Innovation in Taiwanese Business”, January 2008.

2007-13   Kyoji Fukao, Tomohiko Inui, Shigesaburo Kabe and Deqiang Liu, “ An International
          Comparison of the TFP Levels of Japanese, Korean and Chinese Listed Firms“, March
          2008.

2007-14   Pramuan Bunkanwanicha and Yupana Wiwattanakantang, “Allocating Risk Across
          Pyramidal Tiers: Evidence from Thai Business Groups”, March 2008.


2008-1    Rüdiger Fahlenbrach and René M. Stulz, "Managerial Ownership Dynamics and Firm
          Value", April 2008.

2008-2    Morten Bennedsen, Kasper Meisner Nielsen, and, Thomas Vester Nielsen, “Private
          Contracting and Corporate Governance: Evidence from the Provision of Tag-Along Rights
          in an Emerging Market”, April 2008.

2008-3    Joseph P.H. Fan, Jun Huang, Felix Oberholzer-Gee, and Mengxin Zhao, “Corporate
          Diversification in China: Causes and Consequences”, April 2008.

2008-4    Daniel Ferreira, Miguel A. Ferreira, Clara C. Raposo, “Board Structure and Price
          Informativeness”, April 2008.

2008-5    Nicola Gennaioli and Stefano Rossi, “Judicial Discretion in Corporate Bankruptcy”, April
          2008.

2008-6    Nicola Gennaioli and Stefano Rossi, “Optimal Resolutions of Financial Distress by
          Contract”, April 2008.

2008-7    Renée B. Adams and Daniel Ferreira, “Women in the Boardroom and Their Impact on
          Governance and Performance”, April 2008.

2008-8    Worawat Margsiri, Antonio S. Melloy, and Martin E. Ruckesz, “A Dynamic Analysis of
          Growth via Acquisition”, April 2008.

2008-9    Pantisa Pavabutra and Sukanya Prangwattananon, “Tick Size Change on the Stock
          Exchange of Thailand”, April 2008.

2008-10   Maria Boutchkova, Hitesh Doshi, Art Durnev, and Alexander Molchanov, “Politics and
          Volatility”, April 2008.

2008-11   Yan-Leung Cheung, P. Raghavendra Rau, and Aris Stouraitis, “The Helping Hand, the Lazy
          Hand, or the Grabbing Hand? Central vs. Local Government Shareholders in Publicly Listed
          Firms in China”, April 2008.

2008-12   Art Durnev and Larry Fauver, “Stealing from Thieves: Firm Governance and Performance
          when States are Predatory”, April 2008.

2008-13   Kenneth Lehn, Sukesh Patro, and Mengxin Zhao, “Determinants of the Size and Structure of
          Corporate Boards: 1935-2000”, April 2008.




                                             wp-9
2008-14   Ishtiaq P. Mahmood, Hong-Jin Zhu and Edward J. Zajac, “Where Can Capabilities Come
          From? How the Content of Network Ties Affects Capability Acquisition”, April 2008.

2008-15   Vladimir I. Ivanov and Ronald W. Masulis, “Corporate Venture Capital, Strategic Alliances,
          and the Governance of Newly Public Firms”, May 2008.

2008-16   Dick Beason, Ken Gordon, Vikas Mehrotra and Akiko Watanabe, “Does Restructuring Pay
          in Japan? Evidence Following the Lost Decade”, July 2008 (revision uploaded on Oct.
          2009).


2009-1    Vikas Mehrotra, Dimitri van Schaik, Jaap Spronk, and Onno Steenbeek, “Creditor-Focused
          Corporate Governance: Evidence from Mergers and Acquisitions in Japan,” August, 2009.

2009-2    Debin Ma, “Law and Economic Change in Traditional China: A Comparative Perspective,”
          September, 2009.


2009-3    Robert C. Allen, Jean-Pascal Bassino, Debin Ma, Christine Moll-Murata, and Jan Luiten van
          Zanden, “Wages, Prices, and Living Standards in China, 1738-1925: in Comparison with
          Europe, Japan, and India,” June 2009.


2009-4    Jung-Wook Shim, “The Existence of Nepotism: Evidence from Japanese Family Firms,”
          October 2009.


2009-5    Morten Bennedsen and Kasper Meisner Nielsen, “Incentive and Entrenchment Effects in
          European Ownership,” March 2009.


2009-6    Joseph P.H. Fan, TJ Wong, Tianyu Zhang, “Founder Succession and Accounting Properties,”
          April 2009.


2009-7    Hiroyuki Okamuro, Masatoshi Kato, and Yuji Honjo, “Determinants of R&D Cooperation in
          Japanese High-tech Start-ups,” November 2009.


2009-8    Bill Francis, Iftekhar Hasan, Michael Koetter, and Qiang Wu, “The Effectiveness of
          Corporate Boards: Evidence from Bank Loan Contracting,” November 2009.


2009-9    Allen N. Berger, Iftekhar Hasan and Mingming Zhou, “The Effects of Focus Versus
          Diversification on Bank Performance: Evidence from Chinese Banks,” November 2009.


2009-10   Leonardo Becchetti, Andrea Carpentieri and Iftekhar Hasan, ”The Determinants of Option
          Adjusted Delta Credit Spreads: A Comparative Analysis on US, UK and the Eurozone,”
          November 2009.


2009-11   Luciano I. de Castro and Harry J. Paarsch, “Testing Affiliation in Private-values Models of
          First-price Auctions Using Grid Distributions,” December 2009.


2009-12   Chulwoo Baek, YoungGak Kim and Heog Ug Kwon, “Market Competition and Productivity
          after the Asian Financial Crisis: Evidence from Korean Firm Level Data,” December 2009.




                                             wp-10
2009-13   Jee-Hyeong Park, Stephen J. Spurr, and Sheng-Kai Chang, “A Model of Hierarchical
          Professionals: Cooperation and Conflict between Anesthesiologists and CRNAs,” October
          2009.


2009-14   Jee-Hyeong Park, “Enforcing International Trade Agreements with Imperfect Private
          Monitoring: Private Trigger Strategies and the Possible Role of the WTO,” December 2009.


2009-15   Yuji Honjo, Masatoshi Kato and Hiroyuki Okamuro, “R&D financing of start-up firms:
          How much does founders’ human capital matter?”, March 2010.


2010-1    Sergei V. Ryazantsev, “Migrant Workers from Central Asian Russian Federation”, June
          2010.

2010-2    Tue Gørgens, Xin Meng, and Rhema Vaithianathan, “Stunting and Selection Effects of
          Famine: A Case Study of the Great Chinese Famine,” October 2010.


2010-3    Masatoshi Kato and Yuji Honjo, “Heterogeneous Exits: Evidence from New Firms,”
          November 2010.


2010-4    Sung-Jin Cho, Harry J. Paarsch, and John Rust, “Is the ’Linkage Principle’ Valid?:
          Evidence from the Field,” November 2010.


2010-5    Jean-Pascal Bassino and Noriko Kato, “Rich and slim, but relatively short   Explaining the
          halt in the secular trend in Japan,” November 2010.


2010-6    Robert G Gregory, Dark Corners in a Bright Economy; The Lack of Jobs for Unskilled
          Men,” December 2010.


2010-7    Masatoshi Kato and Hiroyuki Odagiri, “Development of University Life-Science Programs
          and University-Industry Joint Research in Japan,” December 2010.


2010-8    Han Hong, Harry J. Paarsch and Pai Xu, “On the Asymptotic Distribution of the Transaction
          Price in a Clock Model of a Multi-Unit, Oral, Ascending-Price Auction within the
          Common-Value Paradigm,” January 2011.


2010-9    Tue Gørgens and Allan W¨urtz, “Testing a Parametric Function Against a Nonparametric
          Alternative in IV and GMM Settings,” January 2011.


2010-10   Timothy P. Hubbard, Tong Li and Harry J. Paarsch, “Semiparametric Estimation in Models
          of First-Price, Sealed-Bid Auctions with Affiliation,” January 2011.


2010-11   Yutaka Arimoto, Kentaro Nakajima, and Tetsuji Okazaki, “Agglomeration or Selection? The
          Case of the Japanese Silk-Reeling Clusters, 1908–1915,” March 2011.


2010-12   Yukiko Abe, “Regional Variations in Labor Force Behavior of Women in Japan,” March
          2011.


2010-13   Takashi Kurosaki and Hidayat Ullah Khan, “Vulnerability of Microfinance to Strategic
          Default and Covariate Shocks: Evidence from Pakistan,” March 2011.




                                             wp-11
2010-14   Fumiharu Mieno, “Foreign Ownership, Listed Status and the Financial System in East Asia:
          Evidence from Thailand and Malaysia”, March 2011.


2010-15   Hidenobu Okuda and Lai Thi Phuong Nhung, "Fundraising Behaviors of Listed Companies
          in Vietnam: An Estimation of the Influence of Government Ownership", March 2011.




                                            wp-12

				
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