To list or not to list, that is the question: new evidence from the performance of Vietnamese commercial banks
| Pages | 163-186 |
| Published date | 24 August 2020 |
| DOI | https://doi.org/10.1108/JFRC-03-2020-0026 |
| Date | 24 August 2020 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation |
| Author | Tuan Quoc Le,Ha Ngan Duong,Phuong Thanh Nguyen |
To list or not to list, that is the
question: new evidence from the
performance of Vietnamese
commercial banks
Tuan Quoc Le
Faculty of Finance, Vietnam Banking Academy, Hanoi,Vietnam and
Centre for Applied Economics and Business Research, Hanoi, Vietnam, and
Ha Ngan Duong and Phuong Thanh Nguyen
Faculty of Finance, Vietnam Banking Academy, Hanoi,Vietnam
Abstract
Purpose –This paper aims to investigatethe decisions of listing for Vietnamese banks and the impactof
listingon bank performance.
Design/methodology/approach –A longitudinal data set of 30 commercial banks in the period of
2006–2018with various univariate and multivariate tests is used.
Findings –This study found that listing is positively associated with bank profitability.The results are
consistent even after the control for potential endogeneity problems by propensity score matching
methodology and Heckman selectionbias models. Further analysis suggests some new alternative channels
for the positive impact, namely, the increased quality of information disclosure, technological development
and income diversificationof commercial banks after listing.
Practical implications –Hence, this paper provides recommendations and policy implications for
regulatorybodies regarding the listing of commercialbanks in Vietnam.
Originality/value –The contributions to the literature are three-folds. First, this study contributes to a
strand of literature on the impact of going public[initial public offering (IPO)/listing] of financial institutions
on their performance. While the literatureon non-financial firm performance post-going public is ample, few
have directly consideredthe IPO/listing of banks and other financial institutions. Second,in further looking at
the impact of listing on bank performance, this studyalso sheds some light on the new possible channels of
the effect and provides evidenceof new channels. Then, last but not least, the case of Vietnamcould possibly
yield interesting results for a transitory stock market. From the evidence, the recommendations and policy
implicationsfor a listing of Vietnamese banks are provided.
Keywords Performance, Channels, Listing, Commercial bank, Transitory country
Paper type Research paper
1. Introduction
Listing is known as one of the going public methods. Throughout listing, companies gain
better access to external capital, reduce the cost of capital, increase the liquidity of their
securities, improve company’s visibility with better public and investor relation,which has
been found in severalresearch on initial public offering (IPO), listingand cross-listing (Dodd
and Gilbert, 2016;Nawaz and Haniffa, 2017;Park et al.,2018). Nevertheless, some research
studies also pointed out the negative aspect of listing such as easier to be acquired (Ritter,
1991), earnings management(Rosen et al.,2005) and cost of increased information disclosure
(Bailey et al., 2006) leading to lowerpost-IPO/listing firm performance. The impact of listing
Performance of
Vietnamese
commercial
banks
163
Received7 March 2020
Revised15 June 2020
Accepted29 July 2020
Journalof Financial Regulation
andCompliance
Vol.29 No. 2, 2021
pp. 163-186
© Emerald Publishing Limited
1358-1988
DOI 10.1108/JFRC-03-2020-0026
The current issue and full text archive of this journal is available on Emerald Insight at:
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on firm performance, therefore, is still debatable. Moreover, while most of the previous
literature focussed on the listing of non-financial firms, few have considered the listing-
performance relationshipof financial institutions.
In this paper, we attempt to fill this gap by studying the listing of Vietnamese
commercial banks on the stock markets and the listing effect on bank performance. We
examine whether the listing has any impact on the performance of the financial firms in
Vietnam and provide a view on whether or not banks should list their shares on the stock
market.
Towards this end, we collect the data from 30 domestic commercial banks during the
period of 2006–2018 and run a number of univariatetests and multivariate panel regression
models. To mitigate the potential selection bias in our study, we also deploy propensity
score matching methodology to match the listed banks and their non-listed peers in our
comparison, as well as the Heckman’s sample selection model. We find that listing
significantly and positively affect bank performance as listed banks improve their
profitability in the short period after being listed on the Stock Exchanges. The results are
consistent even after correction for selection bias. Our further study considered the new
channels for this effect and found some alternative channels, which have not been
researched widely by previous literature. Specifically, the quality of information disclosure,
the efficiency of technological development and the income diversification of banks are
significantly improvedafter listing, which, in turn, increases the performanceof Vietnamese
commercial banks.
Our contributions to the literature are three-folds. Firstly, we contribute to a strand of
literature on the impact of going public (IPO/listing) of financial institutions on their
performance. While the literature on non-financial firm performance post-going public is
ample, few have directlyconsidered the IPO/listing of banks and other financial institutions.
Secondly, in further lookingat the impact of listing on bank performance, we also shed some
light on the new possible channelsof the effect and provide evidence of new channels.Then,
last but not least, the case of Vietnamcould possibly yield interesting results for a transitory
stock market. From the evidence, we provide the recommendationsand policy implications
for a listing of Vietnamese banks.
The remainders of this paper are structured as follows: Section 2 discusses the current
listing scheme of the Vietnamese stock market, literature review and development of
hypotheses. Section 3 describes the data and methodology used in this study. Section 4
provides results and analysisand Section 5 concludes the paper.
2. Review of literature and hypotheses development
2.1 Listing on Vietnamese stock exchanges
Vietnam stock market currently has two stock exchanges and three trading platforms,
namely, Ho Chi Minh City Stock Exchange (HSX); Hanoi Stock Exchange (HNX) and
UPCoM market (managed by Hanoi Stock Exchange). Each has different listing criteria, in
which the HSX has the most stringent listing conditions. Requirements including charter
capital, firm performance, asset quality, information disclosure, etc. are much higher for
listing in comparison to IPO. For instance, to registrate for initial public offering, a firm’s
chartered capital must be at least 10bn VND (or nearly 450,000 in USD). However, to be
listed on HSX, the capital of the firm should be no less than 120bn VND (5.4mnin USD), 12
times higher than the requirementof IPO.
According to statistics from theState bank of Vietnam[1], commercial banks are divided
into four groups including State-owned commercial banks, Joint-stock commercial banks,
foreign-owned bank branches andrepresentative offices and Joint-venture banks. In which,
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