Nghiên cứu đặc điểm hội đồng quản trị ảnh hưởng đến kết quả tài chính của các công ty niêm yết sở hữu gia đình ở việt nam tt tiếng anh

CHAPTER 1
RESEARCH INTRODUCTION
1.1.

Reasons for choosing the topic

In the world, the family business is the type of business that exists for a long time
and accounts for the largest number. The proportion of family businesses in many
countries accounts for more than 70% of the total number of businesses and plays
an important role in promoting economic growth and creating jobs for workers
(IFC, 2008). Family businesses include all types of companies from small to
medium-sized companies to economic groups operating in different industries and
in many different countries. On average, in developed countries, there are 40% 60% of companies exist as family businesses.
In Vietnam, the family business is a part of the private economy, an important
driving force of the economy”. According to the General Statistics Office (2017),
the private economy contributed 42.9% of the country's GDP, an increase of 4%
compared to 2016, contributing to 6.81% GDP growth compared to 2016.
According to statistics of Forbes Vietnam, the 50 best listed companies in 2018
accounted for 70.8% of the market capitalization with a total profit of VND
106,949 billion, an increase of 34% compared to 2017, including the names of
family businesses in the private economic sector such as Vingroup, Hoa Phat, Kinh
Do ...
In the Corporate Governance system, the Board of Directors (BOD) is one of the
most important internal control factors. Research on the BOD in joint stock
companies often focuses on the relationship between the BOD’s characteristics and
the company's Financial Results which is an important issue in the well-studied
Corporate Governance in the world.

journals such as Family Business Review or issue evaluation reports on family
businesses in different countries, regions and countries such as in the US, Europe,
Asia ... However, in Vietnam, the number of research projects on family businesses

are still limited, focusing on issues of the relationship between ownership structure
including family ownership and operation results or succession process, transfer
generation ...
Therefore, the author chose the topic: "Research on characteristics of the Board
of Directors affecting the Financial Results of family businesses in Vietnam" not
only focused on the study of the BOD’s characteristics that affecting business
results in family businesses, but also showing differences in BOD’s characteristics
in family businesses and non-family businesses; the study concurrently has
provided an empirical evidence on the influence of the Board of Directors on the
business results of family businesses, which is a basis for managers, policymakers
to give direction to develop the type of family business.
1.2.

Research purposes

The overall objective of the research is to assess the impact of the BOD’s
characteristics on the Financial Results of family businesses listed on the stock
market. The specific objective of the research is to systematize the rationale for
family businesses to distinguish them from non-family businesses and evaluate the
impact of the BOD's characteristics on the results of family businesses. On that
basis, some effective Corporate Governance policies are recommended for family
businesses.
1.3. Objectives and scope of research
1.3.1. Objectives of research

However, for the research about family business, the research focuses on
researching the definition of family business and comparing the difference between
factors affecting the Financial Results or operation results between the two groups:
family businesses and non-family businesses. Most studies have shown that family
businesses have better results and better performance than non-family businesses

(McConaughy, 2000; Anderson and Reeb, 2003, Villalonga and Amit, 2006) ...

The objective of the research is family businesses and the characteristics of the
Board of Directors affect the company's Financial Results. The research studies the
basic theories about family businesses, the Board of Directors in family businesses
and especially the approaches to defining family businesses in accordance with the
practical oriented research in the context of family planning stock market
landscape and real conditions in Vietnam. Accordingly, family business is defined
based on two criteria: (i) Relationship between BOD’s members and related
persons; (ii) Ownership ratio of the BOD’s members and related persons.

In the world, the topic of family business is a topic that academic researchers as
well as practical researchers spend great interest to form separate family business

Besides, the thesis also delves into the factors that belong to the characteristics of
the Board of Directors that affecting the business results of special companies, the


thesis adds two specific factors of the family business: the number of family
members in the Board of Directors and Family ownership ratio means family
members of the Board of Directors and related persons. For the company's
Financial Results, the thesis uses two groups of indicators reflecting accounting
values (ROA, ROE) and indicators reflecting market value (TOBIN’Q) to measure
and evaluate the Financial Results.
1.3.2. Scope of research
- Scope of space: family-owned business have all conditions to list on the
stock exchange according to the provisions of Circular No. 29/2017/TTBTC. At the same time, the disclosed information of these listed companies
must ensure transparency and publicity on the financial statements, annual
reports and the Corporate Governance reports.
- Scope of time: the thesis selects to study the characteristics of the Board of

Directors and the Financial Results of family businesses in the period of
2012 - 2017 because from 2012 and earlier most companies without
Corporate Governance reports. On the other hand, after the economic crisis
in 2008 to 2011 was a period of economic crisis with inflation issues, family
businesses, mainly small and medium-sized companies, were in a very
difficult situation. From 2012 to the present, the macro economy has only
had steady growth and development, the stock market has had positive
developments and especially from 2017 - 2018 was the period when
Vietnam's stock market reached have considerable development.
1.4. New contributions of research
1.4.1. Theoretical contributions
Firstly, the thesis provides a system of criteria for family business, in the
context that the definition is still controversy. Furthermore, it helps to identify the
differences between family businesses and non-family businesses.
Secondly, the thesis asserted that family businesses should pursue agency
theory about composition and structure of the BOD to achieve the better financial
performance, like listed non-family businesses. These are: (i) Ensure the separation
between the position of the Chairman of the Board of Directors and the General
Manager; (ii) Ensure diversity in the Board of Directors.
1.4.2. Practical contributions
The research results provide practical evidence on the relationship between the
characteristics of the Board of Directors and the Financial Results in family

businesses in Vietnam, especially showing the different characteristics of the
Board of Directors in family businesses.
Firstly, financial results expressed through ROA, ROE, TOBIN'S ratios of
family companies are higher than those listed on the market, especially
profitability ratio for shareholders, return on equity (ROE) of listed family business
is much higher than those of listed non-family business in the sample;
Secondly, the duality, means chairman is also CEO, is up to 37.42%

percentage of for family firms, higher than that of listed businesses in the whole
market;
Thirdly, the higher the percentage of ownership of family members on the
board and related persons is, the better the financial results are. This shows the
difference compared to non-family companies, in family-owned businesses
focusing on business ownership, focus on decision-making, positively affecting the
company's financial results.
The research results are also the basis for the thesis in order to make
recommendations and measures to improve the operational efficiency of family
businesses in Vietnam.
1.5.

Research structure

In addition to the introduction, conclusion, references and appendix, the structure
of the research consists of 5 chapters:
Chapter 1: Introduction of research topics
Chapter 2: Theoretical basis and overview of BOD’s characteristics that affect the
Financial Results of family businesses.
Chapter 3: Hypotheses and research methods
Chapter 4: Research results
Chapter 5: Discussion of research results and recommendations

CHAPTER 2: THEORETICAL BASIS AND OVERVIEW
2.1. Definition and approaches of family business
Based on the overview of the definition of family business in the world and the
summary of researchers' approaches, it is necessary to establish a family business
definition that appropriate to the practical conditions in Vietnam in practical

studies on financial topics. A summary of the definition approaches showing the
tendency of the third group approach suitable for the purpose of the thesis.
It is a practical approach, setting family business criteria through family ownership
structure and the presence of family members in the Board of Directors or the
executive board combined with minimum limits on ownership and control.
Summarizing the above studies, in order to give a full definition of family
businesses from the subjective point of view of the author, it is necessary to
understand the family businesses on two sides:
- In qualitative terms: It is the relationship between family members that is
governed by the family's strategic direction as well as the factors of authority culture - experience. (The "soft" element).
- In quantitative terms: Including the number of founding family members and
participating in Corporate Governance activities and the percentage of ownership
control of family members. (The "hard" element).
In terms of the number of family members, most definitions determine that more
than one family member is involved in the business, on the company's BOD, and is
usually the founding member of the company. (Villalonga and Amit (2006),
Rutherford et al. (2008)
The important question is to determine what ownership percentage of family
members is? There is no unified definition to give a general family ownership rate.
However, there are also many studies on the relationship between family
ownership and Financial Results of family businesses such as those of La Porta
(1999), Shyu (2011), Anderson Reeb (2003), Gonzalez and et al (2011) ... Studies
often use family ownership ratios ranging from 10% to 20% or 25%.
In Vietnam, there are similarities with Southeast Asian and Asian countries,
according to the study of the companies listed in our country, it is possible to set
the family ownership rate of 5% or more. An important characteristic of family
businesses, however, is the dominant nature expressed in the number of members
and the proportion of family ownership. When this ratio is low, the presence of
family members will hold an important dominant position (as CEO or Chairman of
the Board of Directors) or the presence of the majority of family members.

In contrast, when the family ownership ratio is large, the dominant nature still
ensures even when the number of family members is less and does not hold

important positions in the Board of Directors. Family ownership ratio refers to the
ownership ratio of a family member who is on the BOD or the executive board and
related persons (parents, spouses, children and siblings).
Therefore, summarizing the research results, a listed company is considered a
family business when it satisfies one of the following characteristics:
- A family member is the CEO or Chairman of the BOD and the family ownership
rate accounts for at least 5%. (Marleen Dieleman et al., 2013).
- At least 2 members participate in the BOD or the executive board (this family is
the largest shareholder in the company) and the family ownership rate is at least
5%. (Marleen Dieleman et al, 2013)
- More than ½ positions in the BOD are held by family members (Shyu, 2011).
- At least 1 family member is involved in the BOD and the total ownership of the
family (parents, spouses, children, siblings) exceeds 10% (Shyu, 2011)
- Family members hold at least 20% of the company's shares or more. This number
includes shares of family members and subsidiaries / affiliates. (La Porta et al.,
1999).
In order to clarify the characteristics of family businesses furtherly, the author also
synthesized research to compare the differences between family businesses and
non-family businesses in the following table.
Table 2.2: Differences between family business and non-family business
Criteria

Family business
1.
- In the long term
Orientation
- Interested in the long term profit

and vision
than in the short term
2.
Target - Prioritize social and community
priority
goals with non-financial goals
such
as
family
stability,
continuation of family ownership,
recruitment of family members,
etc.
3. Value and - Mission statement is regarding
mission
the reputation, traditions of the

Non-family business
- Appreciate results in the short
term
- The main objectives are
business and finance such as
profit maximization, equity
efficiency, asset efficiency.

Depending
on
the
characteristics of each company

Criteria

Family business
family, having respect for the
original mission and values
created by the founders
4. Longevity - Long time
5.
- Appreciate the succession of
Development generations in the family
perspective

Non-family business
and depending on the views of
the owner and the executive
board.
- Short time
- Interested in raising stock
prices, profits for investors, and
maximizing profits in the short
term.
6. Trust
- Sustainable and deep trust - Less sustainable than family
among family members of the business
same bloodline
7. Altruist
- Emphasizing altruist, long-term - Clear relationship at work for
collective goals can be more the purpose of maximizing profit
valuable than profits.

in the business.
8. Business - Most are small, medium-sized - Including small and medium
scale
and small businesses
businesses,
large-scale
businesses
Source: Author synthesis
2.2. The study theories about Corporate Governance and family business
2.2.1. Agency Theory
This theory is often applied in companies that have a clear separation between
management and owners and are used to explore the relationship between
ownership structure and management. In family businesses, the management of the
company is mainly a family member, so the cost of representation will be minimal
when decisions do not really affect the performance of company.
The positive side of agency theory is that it deals with the separation of ownership
and control. The limitation of agency theory is that agents can have their own
interests, opportunistic behaviors. When the company is not managed by the
owner, it is easy to encounter organizational instabilities and conflicts that can
arise from this because these two benefits may not meet. According to Fama and
Jensen (1983), “A company manager is the representative of the owner and when
the agent cares about and appreciate their personal interests, the true benefits of the
company will be threatened".

However, due to the characteristics of family businesses, shareholders are family
members and often members of the BOD or CEOs, who are involved in Corporate
Governance activities, the conflict between shareholders and managers is almost
eliminated. If the family business is managed by the owner, they will work their
best to maximize profits and maximize the value of their assets because the success
or failure of the company is tied to their personal assets.

Therefore, studies on the agency theory in family businesses often think that the
separation between the position of Chairman and CEO is no longer important.
However, most studies believe that increasing the number of independent BOD's
members can lead to an increase in business results and performance in family
businesses.
In addition, scholars studying family businesses also say that the result of the
ineffective business operations of family businesses is due to unprofessional
management, inconsistent leadership or complexity relationships in family
(Keanon Alderson, 2011).
The characteristics of the companies based on agency theory, the Corporate
Governance system should ensure that the Chairman of the BOD and the general
manager are 2 separate people. The ownership structure of these companies is
dispersed ownership - meaning that the company is diversified by a diverse group
of shareholders including individuals, organizations, and the BOD of these
companies is the representative for this diverse ownership structure, as well as a
large proportion of external BOD's members or independent ones.
2.2.2. Stewarship Theory
The stewarship theory of Davis et al. (1997) is in contrast to the agency theory.
According to this theory, executives are not opportunists but persons who want to
do their jobs well and want to be "stewarship" for the company's assets, so
Corporate Governance focuses on creating favorable conditions, empower and
integrate the roles of the Chairman of the BOD and the General Manager to
increase efficiency and create high profits for shareholders.
For family businesses, the stewarship theory shows that families take care of their
own businesses. They are responsible for supervising the company on the basis of
respect for the previous generations for the successful development of the next
generation. Regarding the Financial Results and performance of the company, this
theory supports the notion that the general manager or CEO is also the Chairman

of the BOD because they are "stewarship" and willing to work to increase results
and efficiency for the company.

family businesses have the capabilities, resources, and relationships that nonfamily businesses do not have and cannot grow.

The stewarship theory also said that the family company can achieve development
goals should bring experts with profound knowledge into the BOD. The members
of the Board of Directors or outside managers are selected to support the missing
competencies and skills of family members. All studies show that decision-making
will be greatly improved if family businesses have a BOD with capacity,
experience, qualifications and dynamism and creativity.

Five sources of capital the family company has helped explain the positive effects
from the resource dependence theory: human capital, social capital, stability,
viability and governance structures. Thus, the family businesses' advantage stems
from the interaction of the family and the business in the unique way that they
manage, evaluate, acquire, eliminate and utilize the necessary resources.

The companies based on stewarship theory in which the Chairman of the BOD and
the general manager may be the same person - the duality; the ownership structure
of these companies is the concentrated ownership - the company is owned by a few
large and controlling shareholders, and the BOD of these companies will represent
the centralized ownership structure and control as mentioned above, limiting the
presence of those who are not has great ownership, or independent BOD members.
2.2.3. Stakeholder theory
This theory emphasizes the role and interests of all parties involved in the
operation of a company; Customers, employees, communities, trade associations,
suppliers, governments, investors or institutions must all benefit and have a role for
the company. For the family business, the stakeholder theory is not supported as
much as the agency theory or the stewarship theory.

Recently, stakeholder theory created the interest of researchers in the family
business. Like non-family businesses, stakeholders are all people who have roles
and interests related to the company's operations or may be affected by the
company such as shareholders, employees, customers, suppliers or business
partners ... Differences in family businesses relate to "altruist" among those
involved in a "family" relationship.
However, the stakeholder theory appreciates the role of women members in the
BOD. These members are the ones who create gender diversity with many new
business ideas and the ability to deal with tasks in a flexible, accessible and
established way with their partners.
2.2.4. Resource Dependence Theory
Resource dependence theory also explained the competitive advantage of many
family businesses compared to non-family businesses. This theory holds that

2.3. Overview of research and research gaps
On a theoretical basis, practical studies have been widely used to build access
frameworks develop research as well as to develop research hypotheses to predict
the relationship between Corporate Governance and performance of the business.
In the world, there are many researches on BOD characteristics in joint stock
companies in general and family businesses in particular. The majority of research
focused on research subjects is joint stock companies.
A number of trends and research results can be summarized as:
Firstly, researching on the BOD size and the Financial Results.
In terms of this research, there are always conflicting results and specially focus on
comparing the differences between family businesses and non-family businesses.
Secondly, researching on leadership duality (CEO and Chairman of the BOD) and
the relationship with the Financial Results.
Thirdly, researching on the independence of members of the BOD
Fourthly, researching on the diversity of the BOD (gender, age, capacity,
experience, qualifications ...) and Financial Results of the company.

For family businesses, in addition to some similar research results of joint stock
companies, the directions showing the differences in the research on the BOD's
characteristics of the family business are:
Fifthly, primarily researching on analyzing the relationship between family
ownership and the efficiency of family businesses.
Sixthly, researching on the relationship between the structure of the B Directors
and the performance of family businesses in Vietnam.


Seventhly, researching on the processes or intergenerational transfers in
Vietnamese family businesses.
2.3.3. Research Gaps
Firstly, there are many theoretical and practical research methods for family
business research objects in the world. However, the biggest argument in the
family business field is how to define a family business to compare with a nonefamily business. Each definition has different criterions will affect to research
results. Therefore, thesis will provide general definition which is suitable with
practical Vietnamese situation and experimental research methods for Financial
Results in family business. If one definition of family research is not clear and lack
of essential conditions in variable number research, all hypotheses will not have
science meanings.
Secondly, most research about Corporate Governance and BOD
characteristics in Vietnam focus on listed joint stock company. BOD
characteristics research in family business is the foundation of finding basic
specipalities, differences between BOD characteristics in Vietnamese family
business and non-family business.
Thirdly, most family business in Vietnam is SMEs or unlisted company.
Therefore, listed family company research is essential for effective Corporate
Governance and orientation for other company and management agency to support
and promote family business development in Vietnam. Experimental research
results about the effects of BOD characteristics to Financial Resutlts will not be the

same because of different time, space and research methods. It is still necessary to
provide more practical proof to enhance Financial Results and promote effective
performances of BOD in family business.

CHAPTER 3
HYPOTHESES AND RESEARCH METHODS
3.1. Research hypotheses
3.1.1. BOD size
There are two research methods that distinguish different opinions about the
relationship between BOD and Financial Results.

The first opinion is BOD size has a reverse relationship with Financial
Results. A large size of BOD will be a determinant which decrese Financial
Results of that company (According to Dalton and Partners, 1992; Lipton and
Lorsch, 1992; Yermach, 1996). According to research of Mohammad Badrul
Muttakin (2010), A large size of BOD combines with family control will reduce
the effective performance of the company. A big BOD has to face with arise
problems of representative costs (Jensen and Meckling, 1976). On the other hand, a
big BOD will create the dependence, subjectivity in effective management control.
Information communication will be also complex and all decisions will be
prolonged. They will make Financial Results decline. Some research of Mishra and
partners (2011), Ibrahim and partners (2011) show the smaller size of BOD will
create better management for company which have family controls.
This opinion is same compare with some research results in Vietnam with
general listed company. It is a proof for reverse relationship between BOD size and
performance results of the company (Vo Hong Duc and Phan Bui Gia Thuy, 2013;
Truong and partners, 1998). It might be understood by differences in management
style of Vietnam which is effected by “Power distance”. When BOD size is bigger,
the authority and teamwork of each personal in BOD will be decreased.
The second opinion shows the same dimensional relationship between BOD

size and Financial Results of the company. The bigger size of BOD, the better
Financial Results (Pfeffer, 1972; Klein, 1998; Coles and partners, 2008). Big size
of BOD will create the better support and advisory for the Board of Managers
(Klein, 1998). Moreover, an BOD with a big size will collect information easier to
make a decision, which will affect positively to Financial results (Dalton and
partners, 1999).
Some researches about family business show the big size of BOD combines
with family control will increase efficiency because they have experiences,
expertise knowledge and social relationship will empower for family business
(Astranchan, 2002; Setia-Atmajia, 2009). In the first stage of building a company,
all decisions mostly are made by the founders and family members so a small size
BOD will be more effective. However, in other next stages, when the size of the
company is bigger and the performance is more complex, a bigger size of BOD
will adapt more easily for business fluctuations.
Therefore, it will be a difference between most of research in Vietnam about
BOD size with the object is all listed joint stock company. Thesis supports the
opinion of the positive effect of BOD size to Financial Results of family company


based on the family business features, benefits of directors and dedication abilities
to company power. The hypothesis is set:
H1: BOD size has the same dimensional relationship with Financial Results
of family business.
3.1.2. Leadership duality
Leadership duality and concurrent position of BOD and Directors researches
show different results even contradictory results. According to Dahya and partners
(2009), shareholders and investors think that Chairman of BOD should not
concurrently hold the position of General Director or Management Director
because this concurrent position will lead to personal assets appropriation affecting
shareholders’ benefits. Therefore, the separation of BOD Chairman and CEO of

company will contribute to the protection for the minority shareholders from the
acquisition of BOD whose members is family members. In Europe, there is up to
84% of companies in Finland, Germany, Netherlands, Sweden and United
Kingdom have the separation between the function of Chairman BOD and CEO
(Heidrick and Struggles, 2009). According to Fama and Jenson (1983) opinion, the
concurrent position will make BOD lose their management control ability, which
lead to the increase of representation costs. Researches supported this opinion can
be listed: Bolton research (2006), Vo Duc and Phan Thuy (2013), Le Quang Canh
and Nguyen Vu Hung (2015).
However, there are still some researches proved the same dimensional
relationship between the concurrent position and financial results of business such
as research of Hermalin and Weibacj (2003), Bhagat and Black (2002). Some
researches in Vietnam showed that the separation between Chairman of BOD
position and CEO will ensure the control, reduce performance costs and enhance
management ability, which affect positively to financial results (Dao Thi Thien
Trang and partners, 2014; Vo Hong Duc and Phan Bui Gia Thuy (2013a). The
concurrent position help BOD can control the Board of Director independently and
become the real representative for all shareholders and the business owner.
In family business, all family members have rights to control BOD and hold
important positions such as Management Director (Porta and partners, 1997).
Therefore, the leadership duality is more popular in companies which have the
control from family than non-family companies (Lam and Lee, 2008). The
leadership duality in family business management will provide more opportunities
for managers and taking over the ownership of minority shareholders, which affect
negatively to financial results. On the other hand, this concurrent position will

create a powerful basis and strong control ability, which against the power of
outside team and protect minority shareholders from the acquisition of family
business. Therefore, this research will support for the opinion of the leadership
duality is only good for company without family control and has reverse effect to

financial results of family business. The hypothesis will be:
H2: There is a reverse relationship between the concurrent position of BOD
Chairman and CEO and Financial Results of family business.
3.1.3. The proportion of independent BOD members
In family business, members of BOD actually are family members. The
independent members take an important role when the company develop to a
complex size. According to a research in US, there are more than 80 companies
having up to 3rd generation family ownership, the appearance of one BOD member
without family controls will be important element to the existence of these
companies (Fred and Alden, 1998).
In Corporate Governance point of view, the representative theory and other
theories show the role of independent BOD members. These members will contain
the family control in development orientation of the company. These members will
not only utilize the knowledge, skills, experiences and professional abilities which
family members are lack of but also increase the discipline of BOD meetings,
focus on the business strategies without problems of family. The independent
members also take the medium role when family members have opposite opinion
in business matters.
Some experimental researches about the relationship between the proportion
of independent BOD members and financial results have different conclusions.
According to Anderson and Reeb (2004), Daily and partners (2003), the
independent members have positive affect to financial results of family business,
their appearance in BOD can reduce arguments of management shareholders and
minority shareholders, they can prevent family members from dispossessing assets
through excessive compensation, special dividends or unwarranted perks.
However, other researches show that the independence in BOD will affect
negatively to company performance (Setia-Atmaja and partners, 2009;
Mohammad Mittakin and partners, 2010). Research of Chen and partners (2005),
Ibrahim and partners (2011) have opposite opinion, there isn’t any effect to
financial results from the proportion of independent members in BOD. They argue

that independent members are nominally not really independent, not enough to


perform the function of managing, supervising and protecting minority
shareholders before family members.
Therefore, the studies show different results on the relationship between the
proportion of independent board members and business results due to differences
in space, time and reliability of data used. However, from the perspective of
representative theory and other management theories implies that independent
BOD members will positively impact on the results of joint stock companies and
listed companies in general. Because of the above foundations, the research
hypothesis is set:
H3: The proportion of independent BOD members has positive impact on
financial results of the family business.
3.1.4. The diversity in BOD members
There is no unified definition of diversity of the BOD but it is often can be
understood from a demographic view. More simply, the diversity of BOD is that
there are many different people with many different demographic factors within
BOD of the company such as age, race, gender, education and profession
standards, independent members, foreign members or experience and attitude ...
The diversity of BOD is often approached on 2 theoretical points of view: (i)
The theory of representatives; (ii) Resource dependency theory. According to the
theory of representatives, BOD is set up to minimize the "representative costs"
through the structure and composition of BOD. Thus, the diversity in the members
of the BOD will contribute to reduce representative costs. From the perspective of
resource dependence theory, “BOD has a role to access the necessary resource for
the success of the company, therefore it is essential to utilize the resources of
intelligence, creativity as well as the relationship of those who can provide the
resources needed for the existence and prosperity of a company.”
Therefore, the diversity of BOD will bring some benefits to family

companies: (i) Firstly, creativity and different perspectives create a larger number
of opinion and solutions for any problems (Watson, Kumar and Michaelse, 1993).
This diversity will also limit the ability of the group thinking phenomenon,
members can contribute information from a variety of sources. (ii) Secondly,
accessing to resources and connections. By selecting members of BOD with
different characteristics, the company can easily access to different resources due
to the support from a diverse range of industries, experience, and qualifications.
(iii) Thirdly, public relations and investor’s relations. Some family businesses may
benefit more from complying with social expectations than non-family businesses

do. In the world, many countries' legal documents require an BOD of joint stock
companies to have a diverse structure, gender, age and ethnic group with the
purpose of creating a diverse voice, diverse experience, capable of bringing
resources and relationships that can benefit the company.
However, there are also potential costs surrounding the diversity of the
BOD. According to some research documents on social psychology, they show that
different demographic limits communication between small groups, creates
conflicts and reduces attractiveness among individuals. Therefore, the diversity in
BOD can lead to conflicts and lack of cooperation among members of BOD.
Some conclusions from the research results about the diversity in the
composition of the Administration affect financial results:
H4a: The proportion of women in the Board of Directors has a positive
impact on business results of family companies.
H4b: Educational level is positively correlated with business results of
family companies.
H4c: The age of the Board members has the same dimensional relationship
with the family business results
H4d: There is a negative correlation between the proportion of foreign
members in BOD and the business results of family companies.
3.1.5. Ownership rate of family members on BOD

The research of the relationship between family ownership and company
performance is based on the representative theory (Jensen and Meckling, 1976),
"There is a conflict of benefits among person who authorized, which leads to the
authorizing person has to face the acts of opportunity and moral risks of the
representative”. Representation and control problems in family companies is
reflected in the number of family members and the ownership ratio of board
members and related individuals. The research results will vary depending on the
context and time of the research. However, most of the studies focused on the
impact of family ownership on the financial results and the endogenous
relationship between these two factors.
One of the characteristics of a family company is the dominance shown by
the high concentration of ownership of family members in BOD. The
concentration of ownership will empower family members to help them achieve
their targets better than the minority shareholders. Therefore, the control of family
can minimize or eliminate representative issues stemming from conflicts of
shareholders and managers that help proactively control the company's operations,


positively affecting the financial results (Maury, 2006). However, there are also
opinions that family ownership reduces the performance of the company due to the
family nature has conservative mind, arbitrary control that harms the benefits of
minority shareholders. and company benefits. Research hypothesis of the thesis:
H5: Ownership of family members in BOD has a positive relationship with
the family business results.
3.1.6. The Proportion of family members in BOD
The percentage of family members in BOD of family companies is
determined by the number of family members in BOD among the total family
members. According to some studies, when the number of family members in the
Board accounts for a half of the seats in BOD, that enterprise has family ownership
(Jonchi Shyu, 2011). In addition, even though the family has only one member of

BOD, their ownership rate and related people accounting for a large proportion
they are also considered to be dominant in making decisions. For family
companies, due to the “Familiess” feature, the participation rate in terms of the
number of family members in BOD has directive feature in reducing management
control and especially greatly influencing the making strategic decisions affecting
the company's financial results. Thus, this relationship is usually linear relations in
the positive direction
H6: The number of family members in BOD has a positive relationship with
Vietnamese family business results.
3.2. Research methods
3.2.1. Qualitative research method
The author uses the desk research method to find a definition of family
company in accordance with the research direction of the thesis, the author has
synthesized practical studies in many regions and countries in the world especially
in Asian countries, combined with the author's review summarized, the author
systematized into 6 approaches and selected the approach followed experimental
research to determine the criteria of a family company.
Besides, the author also uses professional solution method to perform 2
phases before and after having the results of the research to reinforce and support
the explanation of research results in accordance with the reality in Vietnam. The
author interviewed 10 experts including: 2 experts who are managers from the
head of the department or above in the State Security Commission; 2 experts are
leaders of businesses (Chairman or members of BOD, CEO or members of the

Board of Managers); 2 experts who are consultants, supporters and legislators of
Corporation Governance; 2 experts are researchers on the same subject in the
University. Content of general interview in the appendix of the thesis. The results
of the thesis and expert interview contents are the foundation for the author to
make some recommendations and discussion in chapter 5.
3.2.2. Quantitative research method

(i) Research model:
The research model of the thesis is formed based on the basis of an overview
of foreign and domestic documents combined with the identification of operating
characteristics of family business to show the relationship between BOD features
and financial results of family business.
In order to orient the factors that belong to the characteristics of BOD which
may affect the business results of the listed family business, the thesis inherited the
research results from Table 1.3 summarizing the research overview in the chapter 1
with 4 groups of factors affecting business results are: (i) The size of BOD; (ii) The
leadership duality; (iii) The proportion of independent BOD members; (iv) The
diversity of BOD. These results are inherited from previous studies, and applied in
Vietnamese conditions. Especially, the thesis has pointed out that there are 2
groups of factors that are distinct characteristics expressing the basic
characteristics of family business, which help distinguish them from non-family
business about characteristics of the ownership ratio of family members in BOD
and the percentage of family members in BOD will also affect the company's
financial results.
Regarding to dependent variables, financial results are measured based on
two groups: (i) Indicators reflecting accounting book value (ROA, ROE); (ii) The
index reflects the market value (Tobin’Q) according to the research of author Pham
Nguyen Hoang (2013). To ensure the rigor of the research model, through a
preliminary discussion and consultation with a number of experts, the control
variables reflect the characteristics of the company, firm size, growth rate, number
year of operation, number of years of listing in stock market are added to the
model.


The size of BOD
The Leadership duality
Financial Results

The Proportion of independent
members in BOD

-

ROA
ROE

-

TOBIN’Q

The Diversity of BOD
The ownership ratio of family
members and related person
The proportion of family
members in BOD

- Size of company
- Growth Rate
- Operating years (Age)
- Listed years in stock
market

Source: Author
Figure 3.1: Thesis research model
(ii) Data and research sample
The thesis uses secondary data, information collected from 3 types of
reports: Financial statements, Annual reports and CG reports. For listed companies,

the requirement to disclose information on the stock market is one of the important
contents to comply with the Securities Law and Circular No. 155/2015 TT-BTC
dated 06 October 10, 2015 by Ministry of Finance. The research sample of the
thesis is family businesses satisfied the identification criteria and having sufficient
information for research in the overall listed companies on both HNX and HOSE.
The total number of listed companies as announced by the SSC accounted
for to December 2017 was 728 companies, of which HNX had 384 companies and
HOSE had 344 listed companies. Regarding to the enterprise structure, according
to the report of the Steering committee for enterprise Innovation and Development
under the Ministry of Finance evaluating the situation of restructuring,
equitization, divestment, restructuring of state-owned enterprises (SOEs) and
enterprise development in the first 6 months of 2018, only 150 out of about 700
SOEs enquitized listing. Thus, out of the 728 listed companies, the remaining 578
are privately owned.
Regarding to the number of family businesses, the thesis has filtered out 57
companies meeting the family identification criteria according to the thesis's
research. Thus, 57 family companies in the sample show that family companies
account for 9.87% in the private business sector. This is a relatively small

percentage but suitable for studies in China - a country that has many similarities
with Vietnam in culture, tradition, financial system and ownership structure. In
Chinese stock market, the total number of listed companies at the end of 2017 was
3485, of which private ownership accounted for 65% that means 2265 businesses
in which family companies accounted for 10% of the total private companies
(DRC/ERI-OECD, 2005)
On the other hand, in terms of the capitalization ratio of family businesses to
the total market capitalization from 2012 - 2017, it ranges from 18-22%. Thus,
with only 9.87% of the number of family businesses but accounted for 22% of the
total market capitalization. This is the foundation to ensure the representation in
the sample research.

Regarding to the study period, research was done in the period of 2012 2017 to ensure the latest updates in terms of data, the companies listed before 2012
and the earlier are also removed. Thus, with 57 family companies, the data
collected over 6 years (2012 - 2017) will create a well-balanced balance sheet with
342 observations. This is data that also ensures the representation relatively.
(iii) Methods of data analysis
The thesis uses descriptive statistical methods, correlation analysis methods,
regression analysis methods with 3 models: (i) The least square estimation model
(Pooled OLS), (ii) Fixed Effects Model (FEM); (iii) Random Effects Model
(REM). At the same time, to select the appropriate model, the thesis uses the
following tests: (i) Testing the equality of fixed effects - Redundant Fixed Effects;
(ii) Hausman test; (iii) Verify the suitability of the regression function; (iv) Durbin
Watson test (DW).

CHAPTER 4
THE RESEARCH RESULTS
4.1. The overview of stock market and corporate governance of listed
companies in Vietnam
4.1.1. The overview of Vietnam's stock market
After nearly 20 years of establishment and development (2000 - 2018)
Vietnam stock market has changed and developed strongly, increasingly improved
in structure, expanded in size, become a capital channel in medium and long term
which are important in the economy.


In terms of number of listed companies, there was a steady growth on both
HNX and HOSE.
About market capitalization scale: In the period of 2011 - 2017, the market
capitalization value had been increasing steadily over the years. Particularly, 2017
was the year when Vietnam's stock market experienced a great leap forward with
the growth and stability of the macro economy. In 2018, according to the SSC's

report, the market capitalization size reached more than 3.9 million billion VND,
increased 12.7% compared to 2017, equivalent to 79% of GDP in 2017 and 71.6%
of GDP in 2018, exceeding the target of 70% of GDP set out in the Vietnam stock
market development strategy for the period of 2011-2020.
4.1.2. Management of Vietnamese listed companies’ evaluation
Evaluating the corporate governance of Vietnamese listed companies from
2012 - 2015
According to the report "ASEAN Regional CG Scorecard: Reports and
evaluation of each country", the overall evaluation results show that the CG
situation in 4 years from 2012 to 2015 show that all areas recorded improvement.
In recent years, the situation of CG management of listed companies in Vietnam
are not as good as other countries in the region.
Corporate governance of Vietnam listed companies in 2018 evaluation
2018 is the first year Vietnam has launched a set of CG criteria applied to all
Vietnamese listed enterprises (VCGS). The CG evaluation sample in 2018
included 485 companies listed in the VNX Allshare index in April 2018 with a
total market capitalization of April 23, 2018 is 2,895,009 billion VND, accounting
for 91% of the total capitalization of the market. These enterprises are categorized
into 3 groups: large-scale listed enterprises (including 50 enterprises), mediumsized listed enterprises (including 150 enterprises) and small size listed enterprises
(including 285 enterprises). Summary of some results of the CG review in 2018 of
Vietnamese listed companies are as follows:
Regarding to the distribution of CG scores, it was found that the majority of
businesses scored between 50 and 70 points with 335 businesses accounting for
70% of the total enterprises. Among them, there are 17 enterprises with scores
above 70 (accounting for nearly 4% of the total enterprises); 97 enterprises had a
score of 60 - 70 points; 238 companies had scores of 50-60 (accounting for nearly
4% of the total number of enterprises); 133 enterprises had scores lower than the
average of 50 points (accounting for 25% of the total number of enterprises were
evaluated.) This result shows that the situation of implementing CG followed
Vietnam's CG score form (VCSG) is still not really good because the number of

enterprises with high scores accounts for very little, the number of enterprises
below the average score still accounts for ¼ of the total number of businesses
evaluated. This is not a challenge but also a requirement for the majority of listed
company in Vietnam today.
Overview of CG scores in Vietnamese listed companies in 2018: The
average CG score of all businesses is evaluated at 52.2% of the total score
compared to the maximum score of 104 points.
The assessment of the relationship between corporate governance and
performance effectiveness is assessed with 162 companies divided into 3 with the
highest, average and lowest CG scores with a statistical significance of 5%. The
results in Table 3.4 show that the companies with higher CG score will have higher
performance effectiveness. This shows a positive correlation between CG score
and performance effectiveness of listed companies.
Table 4.4: Corporate Governance and Performance Effectiveness
CG scores group
Tobin’s Q
ROA
ROE
1. The Highest
1,44
7,7%
14,9%
2. The Average
1,02
5,3%
11,5%
3. The Lowest
0,96
4,7%

9,8%
Source: Evaluation of CG of Vietnamese listed company in 2018 report
4.1.3. Family business management in Vietnam
Since “Revolution” in 1986 and especially in recent years, Vietnamese
family businesses have affirmed their position with business success and great
contribution to social and economic benefits. In Vietnam's stock market, when
listing the list of 50 - 100 richest people every year, the names of these businesses
are also associated with family companies.
For companies listed on the stock market, family businesses are primarily
private companies that participate in Vietnam's stock market in the form of group
joint stock companies. In the ownership structure of enterprises listed on the stock
market in our country, the State ownership accounted for 24%; foreign ownership
is 18% and the rest is 58% other ownership, most of which is private ownership.
The analysis results show three important issues in Corporate Governance of
family in Vietnam:
Firstly, there is a lack of professionalism in doing business of family
businesses.
Secondly, the composition and structure of BOD in family businesses in
Vietnam are not effective.


Thirdly, the issue of succession or transfer planning between generations in
the family businesses.
4.2. Descriptive statistics of the research sample
From the observed results, the thesis compares to other studies in Vietnam
on the characteristics of BOD in the general listed enterprises in the whole market.
Especially, comparing with the CG score and BOD characteristics in the "CG
Report of Vietnamese listed companies 2018" to clarify the characteristics of BOD
in family businesses with listed join stock companies on the market.
Compared to listed companies on the market in 2018 in the “Evaluation

report of Vietnamese listed companies 2018 '', family businesses in Vietnam have
positive financial results in group of companies which have average CG scores
(ROA in this group is 5.38%; ROE is 11.42%, TOBINQ is 1.02) but it is still lower
than the group of companies with the highest CG score in 2017. This shows that
companies family businesses in Vietnam still need to improve on CG issues in the
near future.
Thus, from the results analyzing descriptive statistics research sample, some
characteristics of BOD can be drawn from the family businesses in Vietnam:
- Firstly, family businesses' financial results are better than those listed on
the market but still belong to the group with CG scores that need to improve
operational efficiency.
- Secondly, the phenomenon of the leadership duality can be considered as a
distinctive feature of the family businesses compared to other companies in the
market when up to 37.42% of the positions of the Chairman of BOD cum CEO or
Director. executive director. This is suitable with the characteristics of the family
businesses - "Familiness" (family characteristics) confirms the dominant factor in
decision making for a company to be considered a family company.
- Thirdly, the percentage of family members in BOD as well as the family
ownership ratio of the Board members and related persons is quite high in family
companies. The research results are similar in some regional countries, especially
Asian countries on the Singapore stock market.

Market
Accounting
view
view
TOBINQ ROA ROE
Independent Variable
1. The size of BOD
2. The Leadership Duality

3. The proportion of independent
member in BOD
4. The proportion of woman in BOD
5. The education level of BOD
6. Average age of BOD
7. The proportion of foreign
members in BOD
8. The family ownership ratio in
BOD
9. The proportion of family
members in BOD
Control Variable
10. The size of the company
11. Operating year(s)
12. Listed in the stock market
year(s)
13. Growth rate
14. Financial Leverage

(+)
(-)
(+)

(+)
(-)
(+)

(+)
(+)
(+)

(-)

(+)
(+)
(-)

(-)
(-)

(+)

(+)

(+)

(+)

(-)
(+)
(-)

(-)
(-)

(+)

(+)
(+)
(+)

(-)
(+)
(-)

(+)
(+)
(+)
(+)
Source: Data processing results of the author
Note: The research results in Table 4.2 were performed with statistical
significance at 1% and 5%.

4.3. Main research results of the thesis
Table 4.2: Research Results of the Thesis Summary
Estimated coefficient of
Hypothesis
Elements
financial results
(correlation/sign)

(+)
(-)

CHAPTER 5


RESULTS DISCUSSIONS AND SOME
RECOMMENDATIONS
5.1. The research results discussion
In order to unify the results of the research thesis and explain the

relationship between the characteristics of BOD and the financial results of family
businesses based on business results with two main criteria: ROA and ROE.
Firstly, independent variables have the same directional effect as the
financial results
The results show that there are 4 independent variables that have a positive
impact on ROA, ROE results: BOD size (BODSIZE), Independent members in
Board of Directors (INDEP), Ownership ratio of BOD members and related
individuals in the family (BODOWN), the percentage of women members in the
Board of Directors (FEMALE). These 4 variables are all observed in the FEM
estimation model when the dependent variable is ROA, the FEM estimation model
when the dependent variable is ROE only finds the positive effect of one variable,
BODSIZE.
Among these variables, the size of the Board of Directors has the most
influence on the financial results. When the number of Board member increases by
1%, the average value of the ROA increases to 25.93%, and if the number of Board
member increases by 1%, the average value of the ROE increases to 60.83%
(assuming the factors other unchanged). Thus, the research results support the
hypothesis that H1 is the size of the Board of Directors having a positive
relationship with the results of family businesses.
The impact level of the next variables, BODOWN, FEMALE, INDEP,
respectively, has a positive impact on the outcome of ROA. The study results show
that if the family ownership ratio increases by 1%, the average value of ROA will
increase to 0.608%; The female ratio in the Board of Directors increased by 1%,
the average value of ROA increased to 0.27%; The ratio of independent members
in the Board of Directors increased by 1%, the average value of the ROA increased
to 0.123%. The dissertation found evidence when researching the Top 10
companies with the highest ROA shows that the average ownership rate of these
companies is 34% higher than the average of all family companies in the sample.
rescue is 24.83%.
Secondly, the independent variables have the opposite effect to the financial

results

There are 3 independent variables that have a negative impact on the
business results of family-owned listed companies in Vietnam: The leadership
duality (DUALITY), average age of BOD members (AGE), percentage of
members foreign Board of Directors (FOREIGN). This result is found in both
cases of FEM estimation model when the dependent variable is ROA, ROE.
Among these three variables, the biggest influence is the AGE variable, if the
average age of the board member increases by 1%, the average value of the ROE
decreases by 274.63% and if the average age of the board member increases by
1%, the average value of the ROA decreases by 112.13%.
The next level of influence is DUALITY variable, if the CEO concurrently
hold the chairman of the BOD position, the average ROA value will be decreased
by 4.76% and the average value of ROE will be decreased by 10.27%. Finally, the
positive effect of the FOREIGN variable, if the percentage of foreigners in the
Board of Directors increased by 1% if the percentage of foreigners in the Board of
Directors increased by 1%, the average value of the ROA decreased by 0.39%,
then the value The average of ROE decreased by 0.82%. For the DUALITY
variable, the thesis compares the average ROA of the two groups of companies
with a high 6.2% concurrent experience (5.1%). Similarly, the results showed that
the group of companies with the leadership duality was lower than the group of
companies that did not have this phenomenon.
Thirdly, the influence of control variables on the financial results
For control variables, both FEM estimation models when the results are
measured by ROA and ROE indicators have similar results on the influence of
factors. The two control variables having the same directional impact on the
financial results are the number of operating years and the growth rate, the two
variables having the opposite effect on the financial results are the number of years
of listing in stock market and firm size.
In addition, there are some variables in the model that have no impact on

business results of family businesses. These are the education level variables of the
Board members (EDU), the percentage of family members in the Board
(FAMILY) and financial leverage (LEVER).
5.1.2. Conclusion and discussion of research results
Hypothesis H1: The size of the Board of Directors having a positive
relationship with the results of family-owned listed companies which is accepted in
both models with dependent variables, ROA and ROE.


Hypothesis H2: There is a negative correlation between the duality of the
position of the Chairman of the Board of Directors and the CEO to the results of
family businesses which are accepted in both models with dependent variables,
ROA and ROE.
Hypothesis H3: The percentage of independent Board members having a
positive impact on the performance of the family businesses which is accepted in
the business results model as measured by ROA.
Hypothesis H4: Regarding to the diversity in the members of the BOD:
Hypothesis H4a: The percentage of women members in the Board who have
a positive impact on business results of family companies which is accepted
in the business results model as measured by ROA.
Hypothesis H4b: The age of the Board member has the positive influence on
the financial results of the hypothetical family companies that are rejected in
both cases the financial results are measured by ROA and ROE.
Hypothesis H4c: There is a negative correlation between the percentage of
foreign members in the Board of Directors and the results of family
companies that are accepted in both cases the financial results are measured
by ROA, ROE. However, the percentage of Board members who are
foreigners is very small, so this result is almost not statistically significant.
Hypothesis H5: Ownership of family members in the Board of Directors and
related persons positively influences the results of family companies that are

accepted in the business results model as measured by ROA.
5.2. Recommendations
5.2.1. Recommended for family-owned listed businesses
Firstly, it is necessary to professionalize the board of directors in family
companies: (i) build an effective and reasonable BOD scale; (ii) the positions of
the Chairman of the Board of Directors and the CEO need to be separated; (iii) it is
necessary to ensure the proportion of independent Board members in family
businesses; (iv) ensure a BOD structure with appropriate female membership in
family businesses; (v) Family businesses in Vietnam should rejuvenate the BOD
members.
Secondly, build an effective family businesses governance mechanism
The mechanism and regulations of the family business must be
institutionalized by specific activities such as: Defining the values, the mission
statement and business orientation of the family, separating the 2 issues on the
family and business; Develop a list of action rules in the family; clearly define

powers, responsibilities and relationships between family members, the Board of
Directors and the Board of Managers; Adding independent members outside Board
members who are not under family control to neutralize conflicts, family conflicts
and enhance discipline in the company; Constantly innovating in thinking, in
governance to improve the ability to approach the industrial revolution 4.0.
5.2.2. Recommendations to regulatory agencies
Firstly, the group of control measures to improve the financial results and
performance of family businesses: strict regulations and controls to ensure
transparency, especially for the disclosure of information in annual reports and CG
reports for family businesses; sanctions should be strictly imposed on businesses
that violate the transparency and quality of information disclosure; set up a
separate set of corporate governance rules for listed family business.
Secondly, the group of support measures to support the development of
family businesses: Expanding and developing separate training and coaching

programs for family businesses according to international standards; forming
individual family CGs and guiding information disclosure on the basis of good
family CG practices around the world to help family businesses “organize effective
CGs to meet the requirements of the law and avoid the objective fluctuations
affecting businesses.”

CONCLUSION
Besides finding axprimental research on the relationship between the
characteristics of the Board of Directors and the financial results of listed family
businesses in Vietnam, the thesis also summarizes the definitions of family
companies to select suitable one for the research subjects of the topic. Based on the
overview of domestic and foreign research to find the "research gaps", the thesis
develops research hypotheses, examines the impact of the Board's characteristics
on the financial results of listed companies having family ownership. Research
method combining qualitative and quantitative methods using estimation model for
table data is Pooled OLS model, FEM model and REM model then use tests to
select the appropriate model. Qualitative research with in-depth interviewing
techniques with research-oriented experts on CG, policy makers, business
managers, supporting the development of documents to reinforce research results
and giving some recommendations.
The thesis has given some research results as follows:


Firstly, developing a family company definition suitable to the subject of
experimental research on financial results is that the company has one of the
following characteristics:
Secondly, a research of the characteristics of the BOD affecting the financial
results shows the different impacts in the models when the financial results are
measured by ROA and ROE.
Thirdly, the research results show the different characteristics of the Board

of Directors in family companies: (i) The financial results of family companies are
better than those listed on the market but still belong to the group having a CG
score needs to improve operational efficiency; (ii) The leadership duality of family
companies is higher than other listed companies in the whole market; (iii)
Ownership of family members in the Board of Directors and related persons is a
characteristic that expresses family characteristics and dominance of the family
company; (iv) Financial results of family companies are better than other listed
companies in the whole market.
From the results of the thesis research, it is recommended that some
effective CG policies for family-owned listed companies with 2 groups for family
companies and management agencies.
However, the thesis also has some limitations that need to be completed,
such as the number of research samples due to the transparency of information
disclosure in the market. Moreover, the thesis has not compared the characteristics
of the Board of Directors that are different in how the two groups of family
businesses and non-family businesses. Therefore, the next research direction of the
thesis may refer to the study of the characteristics of the Board of Directors in
relation to the financial results based on the comparison of two groups of family
and non-family businesses. In order to see the impact on which group's business
results would be better or consider other aspects of family businesses, especially
who is the founder to confirm the existence of that business until the time of the
research or adding a number of other characteristics of the Board of Directors
affecting the business results such as the capacity, skills, experience, professional
qualifications of the Board of Directors.