Abstract
This chapter explains the methodology of the empirical study in Vietnam conducted by the authors. The research aimed to understand if and how state ownership, state control and corporate governance structure affect M&A performance of state-invested enterprises (SIEs) and non-SIEs in Vietnam. The study adopted an exploratory sequential mixed-methods design with a qualitative study first, followed by a quantitative study. The former was to explore the factors driving M&A decision and performance, whereas the latter was to determine the significance of the research perimeters through inferential statistics. The qualitative component consisted of 31 interviews conducted with M&A professionals and corporate managers of acquiring firms, including listed SIEs. The quantitative study included 188 M&As of listed firms in Vietnam from 2004 to 2013. Our analysis considered a diverse set of factors comprising institutional factors, firm factors and individual characteristics of decision-makers.
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Notes
- 1.
Pragmatists could employ mixed methods to study both the external world existing out there independent of the minds, as in positivism and post-positivism, and that nested in the mind, as in constructivism (Creswell, 2014). Indeed, a practical research philosophy should guide methodological choice. The value of multiple methods is the neutralisation of the biases and weaknesses of each form of data and triangulation of data sources by systematically converging quantitative with qualitative databases. One database could be used to check the accuracy of or help explain the other database. Both subjective and objective points of view are well accepted by pragmatists, and both inductive and deductive logic could serve pragmatic research (Tashakkori & Teddlie, 1998). Further advocacy for the use of the mixed-methods approach includes its advantages in addressing the complexity of the research problem and presenting a greater diversity of views and perspectives (Tashakkori & Teddlie, 1998). The mixed-methods design can also serve the purpose of methodological triangulation in which different data sources are combined to study the same social phenomenon (Denzin, 1978)
- 2.
Other mixed-methods designs are convergent parallel mixed methods and explanatory sequential mixed methods and exploratory sequential mixed methods. (See Creswell (2014) for more details.) In a convergent parallel mixed-methods approach, the investigator typically collects both quantitative and qualitative data at the same time and integrates the analysis and interpretation of findings to obtain a comprehensive understanding of the research problem. In an explanatory sequential mixed-methods approach, the quantitative data results are further explained with qualitative data, more popularly applied in fields that are more quantitatively oriented.
- 3.
The approach applied in this research, however, deviates from the traditional school of grounded theory. This research relies on a set of a priori concepts including institutional factors and firm-specific factors proposed in the theoretical framework to explore new factors and form hypotheses.
- 4.
The grounded theory approach is widely used in organisational research (Martin & Turner, 1986).
- 5.
As specified in Chapter Appendix
- 6.
Public sources of M&A deal information include Stoxplus’ Annual M&A reports (http://www.vnexpress.net, http://www.vneconomy.vn, http://www.cafeF.vn, http://www.vietstock.vn, http://www.stockbiz.vn), Sai Gon Economic Times, NhipcauDautu (The Business Review) (http://www.nhipcaudautu.vn), (http://www.baomoi.com), Vietnam Investment Review (http://www.vir.com.vn), Thoi Bao Chung Khoan Viet Nam, (http://www.tbck.vn), Tin Nhanh Chung Khoan (http://www.tinnhanhchungkhoan.vn), Thoi Bao Tai Chinh Viet Nam (http://www.thoibaotaichinhvietnam.vn) and websites of major securities companies in Vietnam.
- 7.
The detailed description of the firms and the participants is in Appendix 3—List of Participants: Group 1—M&A professionals (P) and Appendix 4—List of Participants: Group 2—Corporate Managers (M).
- 8.
Detailed information on the research plan, the ethical procedure by the university and plan for dissemination of the research findings was provided to each participant to create professional trust in the participants, which could reduce the probability of intentional misinformation and controlled behaviour. For the full discussion of the interviews and ethics procedures, the Research Information Sheet and Consent Form, Interview Fact Sheets and Analysis Memos, please see Pham, N. (2015). The Impact of the State on M&A performance: an Empirical Study on Vietnam. Department of Finance. Melbourne, Australia, La Trobe University. PhD
- 9.
Endogeneity is a fundamental problem of causal inference, especially with binary treatments (Imbens & Wooldridge, 2009). The potential endogeneity issue of corporate governance—corporate performance research—should be acknowledged. If not addressed, endogeneity could result in “a serious methodological problem” (Iyengar & Zampelli, 2009). The possible solution, where applicable, is the two-stage least squares regression (Ramdani & Witteloostuijn, 2010) that includes instrumental variables (IV). Additionally, we checked to ensure that the results are not biased caused by endogeneity of the main predictor being a dummy variable. We used the propensity score matching (PSM) analysis technique (Armstrong et al., 2010; Tucker, 2010) to match the treatment group and control group so that the distribution of measured baseline covariates is similar between treated and untreated subjects.
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Appendices
Appendix 1: Interview Guidelines (Corporate Managers)
The interview | |||
Interviewed company | Location | ||
Recording method | Time | ||
The respondent | |||
Respondent name | Years at company | ||
Respondent position | Direct involvement with the M&A | Yes/No | |
Acquirer (A) | Target (T) | ||
Name | Name | ||
Year founded | Year founded | ||
Size (total asset $) | Size (total assets $) | ||
Employees | Employees | ||
Location | Location | ||
Industry | Industry | ||
State-owned status | State-owned status | ||
Listing status | Listing status | ||
Items | Questions | Notes | |
M&A transaction | When did the acquisition happen? How many per cent of ownership of T was acquired by A? At what price? Was the acquisition in cash or in security? | ||
M&A motivations | What was the motivation of the M&A? From the perspective of the A and that of T? Was the motivation related to: • An asset owned by the T • The financial condition of T • The management of T • The cash flow problem/potential of T • The cash flow of the A • The fitness between T and A • Synergies between T and A • Tax motivation (Did T have tax loss credits?) • The management experience of A • The M&A experience of A • Market entry and expansion for A • Value chain backward and forward integration • Industry pressure • Regulatory pressure • Others | Tick the ones mentioned and follow up to ask the respondent to be specific | |
M&A process | How could A identify T? Was there any financial intermediaries/advisor involved in designing the deal? How long was the negotiation process? Did A encounter any difficulty in the negotiation process? What was the value of the deal? How was the target valued? Did A encounter any difficulties with market regulators? How did managers, employees, investors and business partners react to the M&A? | ||
M&A results | Did the company think that the acquisition was successful/not successful? Why? Did the M&A contribute to the long-term strategic plan of the company? How did the company measure M&A results financially? (Stock price movement? Rate of return? Operating performance?) Relatively to the industry, has the performance of the company after the M&A been good? | ||
Important factors | What factors caused the acquisition to be successful/unsuccessful? • Target selection • Valuation and payment • Type of deal (related or diversified) • Synergies • Governance and management, pre- and post-acquisition • Ownership structure, pre- and post-acquisition • Risk management • Factors external to A and T | Tick the ones mentioned and follow up to ask the respondent to be specific | |
Additional notes | Any unexpected issues? | ||
Appendix 2: Interview Guidelines (M&A Professionals)
The interview | |||
Interviewed company | Location | ||
Recording method | Time | ||
The respondent | |||
Respondent name | Years at company | ||
Respondent position | Direct involvement with M&A services | Yes/No | |
The firm | |||
Name | Year founded | ||
Size (total asset $) | Employees | ||
HO location | Listing status | ||
State-owned status | |||
Items | Questions | Notes | |
General M&A activity | How has the M&A activity developed in recent years in Vietnam? In terms of the following aspects: • Domestic deals, cross-border deals • Types of deal (related vs. diversified) • Deal attitudes (hostile vs. friendly) • Popular payment methods • Popular valuation methods • Deal premiums • Popular M&A industries • Market responses • The development of M&A professional services Future trend of the activity in Vietnam? | ||
M&A process | Please describe a typical M&A transaction: • How could A identify T? • Types of financial intermediaries/advisors involved in deal making • Due diligence process • The negotiation process • Valuation process • Dealing with market regulators • Risks to closing a deal | ||
M&A motivations | What are the popular M&A motivations in Vietnam? • An asset owned by the T • The financial condition of T • The management of T • The cash flow problem/potential of T • The cash flow of the A • The fitness between T and A • Synergies between T and A • Tax motivation • The management experience of A • The M&A experience of A • Market entry and expansion for A • Value chain backward and forward integration • Industry pressure • Regulatory pressure • Others | Tick the ones mentioned and follow up to ask the respondent to be specific | |
M&A results | Does the M&A advisory firm follow up and assess the performance of the acquisition of the client after the deal is completed? • Assessment criteria (subjective management assessment, shareholder return, improvement in operating performance?) • Any absolute measurement versus relative measurement | ||
Important factors | What factors determine the acquisition to be successful/unsuccessful? • Target selection • Valuation and payment • Type of deal (related or diversified) • Synergies • Governance and management, pre- and post-acquisition • Ownership structure, pre- and post-acquisition • Risk management • Factors external to A and T • The roles of M&A professionals | Tick the ones mentioned and follow up to ask the respondent to be specific | |
M&A of SOEs | Has the firm ever provided M&A advisory services to any SOEs? Do M&As by SOEs share the same motivations and performance drivers with those by non-SOEs? | ||
Additional notes | Additional comments | ||
Appendix: 3 List of Participants: Group 1—M&A Professionals
Short ID | Case ID | Location | Interview date | Length (mins) | SOE status | Listed status | Years founded | Job title |
|---|---|---|---|---|---|---|---|---|
P1 | P-HQA1 | Hanoi | 3/12/2012 | 90 | Non-SIE | Unlisted | 2006 | Senior analyst |
P2 | P-NDP2 | Hanoi | 4/12/2012 | 60 | Non-SIE | OTC | 2007 | Hanoi branch manager |
P3 | P-HVB3 | Hanoi | 6/12/2012 | 40 | Non-SIE | Unlisted | 2003 | Director, Hanoi Branch |
P4 | P-BS4 | Hanoi | 10/12/2012 | 50 | Non-SIE | Unlisted | 2004 | Senior reporter |
P5 | P-TN5 | Hanoi | 10/12/2012 | 40 | Non-SIE | Unlisted | 2008 | CEO, founder |
P6 | P-NTP7 | HCMC | 17/12/2012 | 45 | Non-SIE | Listed | 2003 | Senior advisor |
P7 | P-KN8 | HCMC | 18/12/2012 | 40 | Non-SIE | Unlisted | 2008 | CEO, founder |
P8 | P-PNQ10 | HCMC | 19/12/2012 | 45 | Non-SIE | Unlisted | 2006 | Deputy director, corporate finance |
P9 | P-NPH11 | HCMC | 20/12/2012 | 50 | Non-SIE | OTC | 2007 | Deputy director, corporate finance |
P10 | P-NHL12 | HCMC | 21/12/2012 | 40 | Non-SIE | Unlisted | 2003 | Director, HCMC branch |
P11 | P-NVD16 | Hanoi | 8/01/2013 | 40 | Non-SIE | Unlisted | 2002 | Deputy director, corporate finance |
Appendix 4: List of Participants: Group 2—Corporate Managers
Case ID | Interview date | Time | Job title | SOE status | Listed Status | Years founded | Acquirer’s Industry | Deal time | Target listing status | Target SOE status | |
|---|---|---|---|---|---|---|---|---|---|---|---|
Location: Hanoi | |||||||||||
M1 | M-PHH6 | 10/12/12 | 60 mins | Investment director | SIE | Unlisted | 2003 | Finance and banking | 2010 | Listed | Non-SIE |
M2 | M-TA9 | 19/12/12 | 40 mins | CEO, founder | Non-SIE | Unlisted | 2001 | Manufacturing | 2006 | Unlisted | SIE |
M3 | M-NDH13 | 21/12/12 | 60 mins | CFO | SIE | Listed | 1999 | Cement production | 2009 | Listed | SIE |
M4 | M-TTF14 | 21/12/12 | 60 mins | CFO | Non-SIE | Listed | 2000 | Furniture | 2010 | Listed | Non-SIE |
M5 | M-NVD15 | 7/01/13 | 40 mins | CEO, founder | SIE | Listed | 1960 | Construction | 2010 | Unlisted | SIE |
M6 | M-SHB17 | 10/01/13 | 30 mins | Deputy director | Non-SIE | Listed | 1993 | Finance and banking | 2012 | Unlisted | Non-SIE |
M7 | M-VAM18 | 17/01/13 | 60 mins | CEO, founder | Non-SIE | Unlisted | 2006 | Finance and banking | 2012 | Unlisted | Non-SIE |
M8 | M-NKV19 | 18/01/13 | 45 mins | CFO | SIE | Listed | 2003 | Real estate | 2010 | Unlisted | SIE |
M9 | M-NHL20 | 22/01/12 | 45 mins | Compliance officer | SIE | Unlisted | 1981 | Finance and banking | 2011 | Unlisted | Non-SIE |
M10 | M-LAT21 | 23/01/13 | 45 mins | Deputy director | Non-SIE | Unlisted | 1985 | Energy | 2007 | Unlisted | SIE |
M11 | M-BAN22 | 23/01/12 | 30 mins | Deputy director | SIE | Unlisted | 1988 | Diversified | 2009 | Unlisted | SIE |
M12 | M-MAS23 | 24/01/13 | 45 mins | CFO | Non-SIE | Listed | 2004 | Food and beverage | 2011 | Listed | Non-SIE |
M13 | M-DON24 | 25/01/13 | 60 mins | CEO, founder | Non-SIE | Unlisted | 1994 | Electrical equipment | 2011 | Unlisted | SIE |
M14 | M-HPG25 | 25/01/13 | 45 mins | CFO | Non-SIE | Listed | 1992 | Mining and manufacturing | 2009 | Unlisted | Non-SIE |
M15 | M-BTC26 | 28/01/13 | 45 mins | CEO | Non-SIE | Unlisted | 1985 | Diversified | 2009 | Unlisted | Non-SIE |
M16 | M-NHT27 | 29/01/13 | 45 mins | CEO | Non-SIE | Unlisted | 2001 | Real estate | 2010 | Unlisted | Non-SIE |
M17 | M-NHN28 | 30/01/13 | 40 mins | Deputy director | Non-SIE | Unlisted | 2005 | Accounting and auditing services | 2010 | Unlisted | Non-SIE |
M18 | M-LCG29 | 30/01/13 | 40 mins | CFO | Non-SIE | Unlisted | 1996 | Construction and manufacturing | 2006 | Listed | SIE |
Location: Ho Chi Minh City | |||||||||||
M19 | M-HMH30 | 31/01/13 | 50 mins | Deputy director | Non-SIE | Unlisted | 1997 | Healthcare | 2011 | Unlisted | Non-SIE |
M20 | M-MGS31 | 31/01/13 | 40 mins | Deputy director | Non-SIE | Unlisted | 2004 | Media | 2011 | Unlisted | Non-SIE |
Appendix 5: Coding Template
Primary code | Secondary code | Type of code | Note |
|---|---|---|---|
Cross-border | Classification code | A priori | |
Domestic | Classification code | A priori | |
Deal valuation | Content code | A priori | |
Deal challenges | Content code | A priori | |
Deal structuring | Content code | A priori | |
Synergies | Content code | A priori | |
Operational synergies | Classification code | Emerged | |
Management synergies | Classification code | Emerged | |
Marketing synergies | Classification code | Emerged | |
Financial synergies | Classification code | Emerged | |
Direct quotes | Content code | A priori | |
Emerging market issues | Content code | A priori | |
M&A trends | Content code | A priori | |
Industry factors | Content code | A priori | |
Industry competition | Content code | Emerged | |
Legal requirements | Content code | Emerged | |
Professional services | Content code | A priori | |
Motivations | Content code | A priori | |
Strategic assets | Content code | Emerged | |
Land-use rights | Content code | Emerged | |
Business licence | Content code | Emerged | |
Business projects/contracts | Content code | Emerged | |
Certificates | Content code | Emerged | |
Economies of scale | Content code | A priori | |
Valuation | Content code | A priori | |
Political motivation | Content code | Emerged | |
Distribution | Content code | Emerged | |
Cost savings | Content code | Emerged | |
Marketing/branding | Content code | Emerged | |
Restructuring | Content code | Emerged | |
Publicity | Content code | A priori | |
M&A results | Content code | A priori | |
Management issues | Content code | A priori | |
Private targets | Classification code | A priori | |
Listed targets | Classification code | A priori | |
Regulatory environment | Content code | A priori | |
SOE | Classification code | A priori | |
Diversification | Classification code | A priori |
Appendix 6: List of Variables and Definitions
Variables | Definitions+ | Data source |
|---|---|---|
Acquirer duality | An indicator variable which takes on the value of one if the CEO of the acquiring firm also served as its Chairman of the Board of Directors and zero otherwise. | Company annual reports |
Acquirer SOE | An indicator variable which takes on the value of one if the acquiring firm had equity owned by the government and zero otherwise. | Company annual reports |
G ownership | Percentage of equity ownership of the acquirer held by the government. | Company annual reports |
Acquirer leverage | Total long-term debt as percentage of total common equity. | Datastream |
Acquirer size | Natural logarithm of market value of equity of the acquiring firm (in millions of VND), calculated as the number of shares outstanding multiplied by the stock price at two months prior to deal announcement. | Datastream |
Acquirer Tobin’s Q | Market value of assets over book value of assets of the acquiring firm. | Datastream |
Acquirer operating cash flow | Acquirer’s cash flow from operating activities divided by total assets. | Datastream |
Acquirer ROA | The acquiring firm’s earnings before interest, tax and depreciation and amortisation (EBITDA), scaled by book value of assets. | Datastream |
Acquirer board size | Total number of directors on board of the acquiring firm. | Company annual reports |
Acquirer auditor | An indicator variable that takes on the value of one if the acquiring firm had one of the Big 4 firms as their auditor and zero otherwise. | Company annual reports |
Non-executive | Percentage of non-executive directors on board of the acquiring firm. | Company annual reports |
CEO degree | An indicator variable which takes on the value of one if the CEO of the acquiring firm had a business-related degree and zero otherwise. | Company annual reports/prospectus |
CEO age | The age of the CEO of the acquiring firm at deal announcement time. | Company annual reports/prospectus |
CEO ownership | Percentage of equity ownership of the acquirer held by the CEO and his/her family members. | Company annual reports/prospectus |
Acquirer insiders | Percentage of equity ownership of the acquirer held by its directors, executives and other employees. | Company annual reports/prospectus |
Acquirer Dom institutional | Percentage of equity ownership of the acquirer held by investors that were registered with the State Securities Commission as a Vietnamese legal entity. | Company annual reports/prospectus |
Acquirer foreign institutional | Percentage of acquirer’s equity held by investors that were registered with the State Securities Commission as a foreign legal entity. | Company annual reports/prospectus |
Target listing status | An indicator variable that takes on the value of one if the target firm was a listed firm (on HNX or HSX) and zero otherwise. | Company annual reports/prospectus |
Target SOE status | An indicator variable that takes on the value of one if the target firm had the state among its shareholders and zero otherwise. | Company annual reports/prospectus |
Deal type | An indicator variable taking the value of one if the deal is related (acquirer and target sharing the same 2-digit SIC code) and zero otherwise. | ThomsonONE++ |
Equity acquired | The size of the equity of the target owned by the acquirer after the deal, measured in percentage. | ThomsonONE |
Toehold | An indicator variable that takes on the value of one if the acquirer owned a non-zero percentage of target’s equity prior to the announcement date and zero otherwise. | ThomsonONE |
Pre-deal ROA | The average of industry-adjusted ROA in the two years prior to the deal announcement for the acquiring firm. | Datastream |
Pre-deal EPS growth | The average of industry-adjusted EPS growth in the two years prior to the deal announcement for the acquiring firm. | Datastream |
Pre-deal sales per share growth | The average of industry-adjusted growth of sales per share in the two years prior to the deal announcement for the acquiring firm. | Datastream |
∆EPSG | The acquirer’s change in industry-adjusted growth in EPS from two years before to two years after deal completion. | Datastream |
∆ROA | The acquirer’s change in industry-adjusted ROA from two years before to two years after deal completion. | Datastream |
CAR(−n, +n) | Cumulative abnormal returns for the acquirer using the market model estimated based on the return data of 200 trading days ending 60 days before the announcement date. | Datastream |
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Pham, N., Oh, KB. (2021). The Empirical Research: Design and Methods. In: State on Board!. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-16-3525-0_5
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