The Dynamic Relationship between Ownership Structure and Corporate Performance: Evidence from the Vietnamese Food Industry
Purpose: Our analysis provides empirical evidence on the dynamic relationship between ownership structure and corporate performance in the context of Vietnam. Approach/Methodology/Design: Our findings are drawn from the comprehensive data set of stocks listed on both the Hochiminh Stock Exchange and Hanoi Stock Exchange in the food industry from 2007 to 2018. Findings: The results indicate that both managerial shareholdings and ownership concentration negatively drive corporate performance. We further find that corporate performance is also a positive function of both managerial shareholdings and ownership concentration. Practical Implications: The results support the entrenchment hypothesis that the divergence of ownership and control helps managers accumulate substantial private benefits without actually bearing the costs. Block-holders also accumulate private benefits of control through pyramid business structures and cross-holdings across different firms. Therefore, both block-holders and managers are motivated to indulge in non-value maximizing behavior, deteriorating corporate performance. Originality: The entrenchment hypothesis does only exist at a low level of ownership. At the high level of ownership, the entrenchment hypothesis is positioned by the incentive hypothesis. Accordingly, their self-interest behaviors are more likely to be detected and legally riskier. They are motivated to indulge in value-maximizing behaviors and synchronize the interests of shareholders and managers.