The Impact of Governance Characteristics on the Corporate Performance: Evidence From Vietnamese Non-financial Listed Companies

Abstract

Although corporate governance has been practised for a long time worldwide, it is only recently that businesses in developing countries have become interested in it. A dynamic model is created to capture the characteristics and efficiency of corporate governance from 350 non-financial corporations listed in Vietnam between 2008 and 2020. Unobserved heterogeneity, simultaneity, and dynamic endogeneity are controlled and embedded in the Two-Steps System Generalized Method of Moments (GMM). The study discovered that the larger the board of directors and auditors, the concentration of ownership among three major shareholders, and the powerful duality of the chief executive officer being appointed as chairman of the board of directors, the more efficient the firm's performance. Surprisingly, the higher the independence of the board of directors, the lower the firm's efficiency in the context of Vietnam, providing crucial insights for governance processes in an emerging nation. This study contributes to the idea of governance by offering new empirical evidence for governance features in the setting of a growing economy. This study also suggests that policymakers and corporate managers should reshape regulations on the corporate governance structure by taking into account the corporation's unique characteristics, particularly the number of board of directors and supervisors, as well as the role of the chief executive officer.