The impact of political connection on firm performance: empirical evidence from Vietnamese listed companies in manufacturing sector.

The concept of political connection and its related determinants have received significant attention in academic discussion due to political heterogeneities across countries. Furthermore, although the appointment of current or former politicians to corporate boards is a highly prevalent corporate political strategy, empirical evidence is inconclusive as to whether and how such appointments create or destroy value for firms and their shareholders. To mitigate these challenges and ambiguities, a deeper understanding of the variances in the implication of political connection from different certain features of firm-, industry- and country-specific factors has been accentuated in this research area. Moreover, such implications might be contingent upon varying institutional environments. This results in a research call for fuller examination of considering institutional factors in the investigation of dynamic role of political connection. Drawing from different theoretical lens in the field of political connection, the thesis conducts two related empirical studies to analyse the impact of political connection on firm performance and what determinants influence this impact. In particular, the first goal seeks to investigate the relationship between political connection and firm performance. It also assesses the moderating effect of ownership structure (namely SOE1) on the relationship between political connection and firm performance. The second goal examines the joint effect of political connection and institutional indicators on firm performance. To achieve the purposes of research, the thesis applied main method of two-way fixed effects controlling for unobservable company and time characteristics and two-step system GMM controlling for endogeneity issue to a panel of 172 manufacturing companies during the period from 2007 to 2016. For the first goal, the research develops the hypotheses based on existing theories on political connection, namely helping-hand and resource-dependency against grabbing- hand and agency theory. Additionally, the study disentangles political connection into its types and calculates its strength based on political administrative rankings, and its ratio via number of politically connected directors relative to board size, thus suggesting the different roles played by different types, strength and ratio of political connection. This analysis helps to extend existing literature of political connection on emerging countries and generalise its findings to Vietnamese context. It challenges much of the current literature only focusing on the benefits of acquiring political capital on the board by showing the dark side of political connection in Vietnamese listed companies in manufacturing sector. Furthermore, the thesis concentrates on the factors receiving the limited attention in current literature by investigating the moderating effect of ownership structure on the relationship between political connection and firm performance. The findings show that the effects of political connection on the performance of state-controlled enterprises remain negative. These findings support the integrated viewpoint of grabbing-hand and agency theory to explain these negative effects. Through the analysis of margin, there is evidence that political connection has no benefit on the performance of non-state-controlled enterprises. The findings stay the same with those obtained by two-step system GMM technique. The further analysis is also done by examining the effect of different types, strength and ratio of political connection on the performance of state-controlled enterprises. The additional findings inform the different impacts of types, strength and ratio of political connection on the performance of state-controlled enterprises and non-state-controlled enterprises. As a result, the study contributes to existing literature on reconciling inconclusive findings of previous studies on the importance of taking into account the identity of controlling shareholders, which tends to be underexplored in previous literature, to investigate the net performance effect of political connection. For second study, the study scrutinises the contingent value of political connection on firm performance during the development of regional institutional development. There are the limited studies carried out regarding the effect of interactions of political connection and institutional indicators on firm performance. A few studies have put a major emphasis on Chinese context due probably to the influence of state over economy and data availability of regional institutional indicators as NERI index. In order to develop this line of literature, the study is thus to utilise data availability of provincial competitiveness index in Vietnam to capture the contingent role of political connection during regional institutional development. This chapter uses four different institutional indicators, such as legal system, corruption, entry costs and business support service. Through the results from the analysis of fixed-effect estimation, it shows the positive role of political connection in the face of the development of legal system, the high degree of local anti-corruption effort, but no its contingent role when the entry costs are diminished and the institution of business support service is developed. These results from fixed-effect estimations remain the same with those from two-step system GMM approach, excluding the interaction of entry costs and political connection. As a result, such finding of joint effect between political connection and entry costs should be interpreted with careful caution. Generally, the contribution of the chapter is to enrich our understanding on the contingent role of political connection in emerging countries with different institutional conditions

Minimizing Competition? Entry-level Compensation in Japanese Firms

This is the first empirical study of the determinants of pay for entry-level jobs among Japanese firms. Pay data of 1,382 companies obtained from the Nikkei survey was matched with company size, performance, industry, and foreign ownership data from Toyo Keizai’s Japan Company Handbook. We found that unlike the results based on U.S. data, company size is not related to entry-level pay. Firm performance is positively related, but its effect is minimal. Industry membership and foreign ownership are positively related. We believe that these findings highlight the influence of the Japanese employment context and information sharing in Japan. Implications for research and practice are discussed

Retaking Ability Tests in a Selection Setting: Implications for Practice Effects, Training Performance, and Turnover

This field study investigated the effect of retaking identical selection tests on subsequent test scores of 4,726 candidates for law enforcement positions. For both cognitive ability and oral communication ability selection tests, candidates produced significant score increases between the 1st and 2nd and the 2nd and 3rd test administrations. Furthermore, the repeat testing relationships with posthire training performance and turnover were examined in a sample of 1,515 candidates eventually selected into the organization. As predicted from persistence and continuance commitment rationales, the number of tests necessary to gain entry into the organization was positively associated with training performance and negatively associated with turnover probability

The Effect of Charter Schools on Districts’ Student Composition, Costs, and Efficiency: The Case of New York State

Charter schools can influence a school district's costs by reducing economies of scale and by changing the share of high cost students a district serves, but might also increase the district's efficiency through competition. Utilizing data for New York State school districts from 1998/99 to 2013/14, we estimate difference-in-differences models to assess the effect of charter schools on enrollment and student composition. Then, we estimate an expenditure function, using data prior to the charter school program, to measure the costs associated with reaching a given performance standard for students in various need categories and different enrollments. Next, using the entire data set, we run a second expenditure function to determine changes in efficiency associated with charter school entry. We find that charter schools increase the cost of providing education, and that these cost increases are larger than short-run efficiency gains, but are offset by efficiency gains in the long term

Does the Entry Mode of Foreign Banks Matter for Bank Efficiency? Evidence from the Czech Republic,Hungary, and Poland

This paper investigates the impact of specific modes of entry of foreign banks, i.e. greenfield investment versus merger and acquisition, on bank performance in three transition economies ñ the Czech Republic, Hungary, and Poland. We use stochastic frontier analysis to model and measure the cost efficiency of banks. We adopt a maximum likelihood approach to estimation in which the variance of the one-sided error term is modeled jointly with the cost frontier, thus enabling us to retrieve efficiency scores, as well as estimating the various determinants of X-inefficiency. We first find that foreign banks are generally more cost efficient than their domestic counterparts, a result that confirms those of the existing empirical literature. We then turn our focus to comparative performance of greenfield banks versus merger and acquisition banks (M & As), and of M & As versus domestic banks. The results show that on average, M & As are surpassed in terms of efficiency by greenfields banks, but no cost efficiency difference is apparent between M & As and domestic banks. However, we find a strong age effect with respect to M & As which suggests that the evolution of M & Así efficiency follows an inverse U-shape, that means M & As tend to get more inefficient following the acquisition, but approximately 4 years and a haft later, their efficiency starts to improve.http://deepblue.lib.umich.edu/bitstream/2027.42/64431/1/wp925.pd

An investigation into the effects of gender, prior academic achievement, place of residence, age and attendance on first year undergraduate attainment

The number of people engaging in higher education (HE) has increased considerably over the past decade. However, there is a need to achieve a balance between increasing access and bearing down on rates of non-completion. It has been argued that poor attainment and failure within the first year are significant contributors to the overall statistics for non-progression and that, although research has concentrated on factors causative of student withdrawal, less attention has focused on students who fail academically. This study investigated the effects of a number of a number of factors on the academic attainment of first-year undergraduates within the Faculty of Humanities and Social Sciences at the University of Glamorgan. Results showed that gender and age had only minor impacts upon educational achievement, while place of residence, prior educational attainment and attendance emerged as significant predictors of attainment. Further analysis showed these three factors to be interrelated , with attendance correlating strongly with both entry points and place or residence. In turn, prior attainment was strongly linked to place of residence. Findings may be used to identify and proactively target students at risk of poor academic performance and dropout in order in order to improve rates of performance and progression

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Expanding to outward foreign direct investment or not? A multi-dimensional analysis of entry mode transformation of Chinese private exporting firms

This research examines the factors determining whether or not exporting firms expand to outward foreign direct investment (OFDI) as part of their internationalisation strategy, using a recent survey of Chinese private-owned enterprises. We carry out a multi-dimensional analysis to investigate the impact of firm productivity, internal resources and the external environment on OFDI decisions, including both the decision to undertake OFDI and the volume of OFDI flows. It is found that productivity, technology-based capability, export experience, industry entry barriers, subnational institutions and intermediary institutional support affect firms’ OFDI decisions. The findings have important policy and managerial implications

Reforms, Entry and Productivity: Some Evidence from the Indian Manufacturing Sector

It is now stylized that, while the impact of ownership on firm productivity is unclear, product market competition can be expected to have a positive impact on productivity, thereby making entry (or contestability of markets) desirable. Traditional research in the context of entry has explored the strategic reactions of incumbent firms when threatened by the possibility of entry. However, following De Soto (1989), there has been increasing emphasis on regulatory and institutional factors governing entry rates, especially in the context of developing countries. Using 3-digit industry level data from India, for the 1984-97 period, we examine the phenomenon of entry in the Indian context. Our empirical results suggest that during the 1980s industry level factors largely explained variations in entry rates, but that, following the economic federalism brought about by the post-1991 reforms, variations entry rates during the 1990s were explained largely by state level institutional and legacy factors. We also find evidence to suggest that, in India, entry rates were positively associated with growth in total factor productivity.http://deepblue.lib.umich.edu/bitstream/2027.42/57202/1/wp822 .pd

Size matters: entrepreneurial entry and government

We explore the country-specific institutional characteristics likely to influence an individual's decision to become an entrepreneur. We focus on the size of the government, on freedom from corruption, and on 'market freedom' defined as a cluster of variables related to protection of property rights and regulation. We test these relationships by combining country-level institutional indicators for 47 countries with working age population survey data taken from the Global Entrepreneurship Monitor. Our results indicate that entrepreneurial entry is inversely related to the size of the government, and more weakly to the extent of corruption. A cluster of institutional indicators representing 'market freedom' is only significant in some specifications. Freedom from corruption is significantly related to entrepreneurial entry, especially when the richest countries are removed from the sample but unlike the size of government, the results on corruption are not confirmed by country-level fixed effects models