Ownership Structure Impact on Dividend Policy of Listed Companies on Vietnamese Securities Market

This research aims to investigate the relationship between ownership structure and dividend policy of Vietnamese listed companies. The empirical findings show that the government-controlled companies, the companies with high concentrated ownership and with recent right issue activities would have higher dividend payments. In addition, due to the change of Vietnamese dividend tax rate to encourage the market development after global economic crisis, we discover that when the personal income tax rate at higher level of 5%, the sate-owned firms in Ho Chi Minh Stock Exchange would still pay higher dividends, which represents the dividend preferences of the investors, the status of firms’ stable development and the effectiveness of national economic policies.


Introduction
Dividend-payout policy is always considered as one of the most important decisions in financial management of company. The dividend payment may affect directly the interests of shareholders and the future development of a company.
In a new security market as Vietnam, due to the information asymmetry, investors often rely on the dividend payment as a viewpoint to predict the company's future prospects.
Vietnamese security market, a new market with around two decades of Investors enjoy an attractive low-tax rate for dividends in Vietnam which currently is at 0% for institutional investors and 5% for individual ones. At the same time, to deal with global economic recession, the government applied the 0% dividend tax of individual in some specific period to encourage more active securities trades. Also, to maintain the market growth and keep an attractive share trading environment, the Vietnamese government is continuously improving their policies as well as the law and the market regulation. As a result, by the 2014 law, the time for dividends distribution now is even more restricted for business firms. It can be considered as a legal protection for shareholders. The authorities recognize that the dividend payout policy and its announcement are one of the most important considerations for stock trading decision of Vietnamese. Hence, they try to make the companies' dividend payouts a reliable signal in the capital market.
However, as a new market, challenges remain. As the majority of Vietnamese still calls it "playing stocks", trading stock is more likely to a gamble than an investment. It can be challenging to convince investors about the merits of investment principles, such as buy-and-hold, to identify and confirm the market signal for understanding the trade-movements. Joining the market, investors should analyze the company's financial status, its business activities, history and management. But, "about 30% of investors jump in based on what other investors do, and the others 40% are investing on basic information." 2 Also, there is another problem about the way Vietnamese manages their economic. Especially for those state-owned enterprises (SOEs) or partly government-controlled firms, they are supported by the "Equitization 3 " process, the transformation of all state-owned enterprise, the key role of the Vietnamese economic sectors to be joint-stock companies. According to Nguyen & Van Dijk [1], they find that there is positive relation between the Vietnamese SOEs' growth and the corruption experienced by SOEs. This problem can be harmful for the government-controlled firms to play an important role in Vietnamese national economic strength. If corruption exists in SOEs, it can become practic- 1 Hoang Phu Cuong, deputy director of State Security Commission (2014). 2 Nguyen Quang Hai, deputy manager of the HOSE's brokerage department (2010). 3 "Equitization" is a Vietnamese-English term that denotes the conversion of a state-owned enterprise in Vietnam into a public limited company or a corporation. able in the securities market, where many of the listed companies are current or former SOEs. In which, dividend distribution is likely to be decided beneficially for some specific individuals or groups, instead of the whole. Therefore, we wonder whether the current dividend payout policy of Vietnamese listed companies (especially SOEs firms) could be considered as a dependable signal for investors? Is it affected or controlled by any power behind screen?
The controlling shareholder not only can easily acquire information, but can also decide when or how to introduce the related information to the capital markets. Thus, in Vietnamese listed firms, how the unique ownership structure influences information communication and affects the dividend policy are important issues of management. In addition, before 2009 and during 2011-2012, Vietnam practiced a zero tax policy on dividends for all local and foreign individual and institutional investors which not only affected the corporate payout policy, but also influenced the information transparency of firms. Therefore, this study aims to examine whether the ownership structure influences the dividend policy of Vietnamese listed firms, and whether the Vietnam's non-zero tax policy affects the relationship between the ownership structure and corporate dividend policy.
We find that, in Vietnam, when ownership concentration is higher, dividend payouts will be higher. The government-controlled firms pay higher dividends than non-government-controlled ones. Listed companies would pay more dividends after IPO or rights offerings. The results indicate that dividend policy is a viable tool for conveying information to the capital market.
In relation to the effect of the change of the dividend tax policy, it has been found that overall effect of the change of the dividend tax policy is significant.
We further separated the sample period into two sub-periods with a higher tax rate of 5%, we discovered that when the personal income tax rate is at the higher level of 5%, the sate-owned firms in HOSE would still pay higher dividends, which represents the dividend preferences of the investors, the status of firms' stable development and the effectiveness of national economic policies. capital owned by the representative government institutions, or government profit organizations". By that, "The state-owned corporations, or corporative bodies whose stocks are owned over 50% by the government" (Article 4). However, under the amendment on "Enterprise Law 2014", the term of "Stateowned" will only be pronounced for those companies has 100% capital belongs to government. Also, due to the information asymmetry problem as well as the protection by law in some indispensable industry such as energy, electricity and the related field, information about the proportion of Vietnamese government in capital market and its control to the firm's management decision are not always fully showing to the public. This somehow is trouble to identify and to make a clearly definition of State-owned enterprises in Vietnam's market. Especially when study about the impact of government to firms' strategy, it raises concern about the separation between ownership and management. The equitized SOE's managers combine governmental advice with their firm's operational activities (Gainsborough [2]).

Dividend Policy Regulation
Under current regulation, Vietnamese firms are allowed to retain 100% their earnings or distribute it in form of cash dividends, stock dividends or share repurchases. The dividend can be distributed if the company may fulfill the following requirements: 1) Fulfillment of all taxes and other compulsory finance obligations.
2) Making appropriate reserve funds for previous losses or possible losses; and 3) After paying dividends, the enterprise is still able to guarantees its financial capacity for payment of all current payable.
According to analysis of Alphonse & Quoc Trung [3], similarly to other emerging markets, Vietnamese stock market enjoyed a high proportion of paying firms, at 80% during the period 2006-2011. While, Tran & Nguyen [4] reveals a stable behaviour in dividend policy of Vietnamese firms. Thus, to encourage more investment in stock market, Vietnamese government provides very attractive tax policy on dividend. It is worthy mentioning that wherever the corporate investors are foreign or domestic entities, they are exempted from tax in Vietnam. In case of individual shareholders, they are currently responsible for a 5% of Personal Income Tax for the cash dividend received, this is the flat tax rate for both Vietnamese and foreign investor without any consideration of their tax-resident status in Vietnam. Table 1 shows the tax rate on dividend on

School of Thought
The basic theory of dividend and dividend policy were early born since the 50 s of the last century. Damodaran [5] distinguishes three schools concerns about dividend policy. Starting from some theoretical school of thought which contains several opposing, a variety and plentiful of empirical study system about analyzing dividend payout policy has been developed in the world.  [8] and Fisher [9] bring results that support this argument, the regression results show that dividend has greater impact to the share price, compared to the impact of retained earnings.
Thirdly, according to Brennan [10], if dividend tax is higher than income tax from the sale of shares (capital gain), the higher dividend will reduce the value of shares. The company will choose to retain the earnings, in order to increase the income of shareholders. Experimental study of Litzenberger & Ramaswamy [11] using personal taxes in the US stock market has proved this argument.
Study the case of China, the second largest world's economic (based on GDP ranking 2014), the representative for new economic force, the emerging markets.
It is new developing countries with recently open up capital market but high rate of expansion and potential investment opportunities for future benefits. Studying about factors impact on dividend policy in China, there are two interesting points: The ownership structure and the corporate governance. According to Gul [12], a unique feature of the listed companies on China market is that the state owns various levels of the shares in some companies. This is partly because many of the large listed companies are former state owned enterprises (SOEs).
Wang et al. [13] reveals the dividend payment ratios as well as decision of pay dividends tend to rise in Chinese companies with large state ownership. The reason for this result is due to the high dividend payout benefits for the government to use a portion of profits from the business; it also suits to the needs of the state cash as an incentive to maintain state ownership in the business. While, Bradford et al. [14], with sample are China listed companies from 1998 to 2010, show that state-owned companies pay higher dividends than the private companies,  [15] shows that the government-controlled companies, highly concentrated companies, and companies after rights issue tend to have higher dividend payout ratios. Their findings support the conjecture that "Tunneling effect" exist in China market, in which dividends are used by controlling shareholders to divert resources from their companies to their own pockets. Vietnamese capital market has similar features to China's, in which they also completed transforms all of SOEs to be the Join-stock companies.

Hypotheses Development
As mention above, there is a fact that major of current listed companies on Vietnamese stock markets account for the transformed stated-own enterprise H1: Companies with high concentrated ownership are likely to pay higher dividends than those with low concentrated ownership.
With the dominant of State in controlling former SOEs in the Vietnamese market, it is necessary to review the studies by some close markets to recognize the impact of government-controlled factor to the dividend policy. Chen et al. [15] finds that dividend payouts increase as the governments owns more shares.
Moreover, they suggest that the government pays high dividends to extract the corporate resources. Identically, Bradford [14] in case of China concludes that compared with the privately controlled firms, the state-controlled firms pay higher dividend. Based on the close situation of those countries as the emerging markets, this study makes a developed Hypothesis based on the H1 in order to investigate the effect of government control to the dividend policy in those Vi- H2: The government controlled companies have higher dividend payments than non-government controlled companies.
As many Join-stock companies are often lack of working capital, if companies distribute too much of dividends, obviously they may lack of fund for future growth. Therefore, it pushes up the company to be listed in the market (IPO) as well as conducting new issuance (rights offering). According to Lee & Xing [16], paying cash dividends with the receipts from these financial activities may harm the negotiable (minority) shareholders. Moreover, as effect of tunneling, the dividends will be distributed more aligned (close) to the time of fund raising from the capital market.
This phenomenon is even more essential to be considered as the Vietnamese H3: Companies will pay higher dividends after IPO or rights offerings.

Determinants of Dividend Payout
In this research, we focus on the impact of ownership structure on the high dividend distribution of listed firms, especially those companies which were the former State-owed entities. The research model was built based on a study of Chen et al. [15]. As the dividend yield is considered as a sign of an investors' return and of a company's future prospect, it is chosen as the dependent variable to explain the ownership impact to dividend policy. According to the hypotheses development, three variables are chosen to be the proxies for the ownership dominants: block shareholders (Largest), government-controlled companies (Gov), IPO or rights issues (IPO_RI).
The following multivariate regression model was used to test the determinants of dividend payout of the listed companies in Vietnamese security market: For specific, the variables using in this research are defined as Table 2.

Data Collection
The   Specifically, in this research, those companies with annual dividend payout-ratio larger than 1 was excluded from the sample, as this high ratio means the companies spent more than what they can earn (the Earnings) for dividend payment. Explaining for this phenomenon, researchers can assume the company applied some policies such as cumulative dividend. Some companies were even facing an insolvency period and going to bankrupt. This kind of reason makes their payment policy seems to be abnormal. Thus, to ensure the accuracy of the research evaluation, these special treatments were removed from the Sample.
In addition, the researcher used the Industry Classification Benchmark 6 to illustrate the non-financial observations in different industry sector to clearly classify their decisions about dividend payout policies.  In general, most of ratio in HOSE is quite identical to HNX, instead of some small difference in the ownership and dividend payout method. In HOSE, government and high-concentrated shareholders share smaller proportion, at 44.9%

General Statistic
(453/1008) and 45.3% (455/1008) respectively. HOSE's listed companies also more enjoy the stock dividend issue at 16.3%, double than that of in HNX. In addition, "Industrial" and "Consumer goods" are sharing the highest number of firms in Industry sector.  Identically, Table 6 indicates the correlation between testing variable using HOSE observation. Basically, it presents similar trend with HNX in the correlation between those key testing variable and the dependent variable (Dividend Yield), except for IPO_RI. Table 7 shows the determinants of dividend payout policy to test for the precision of Hypothesis 1, 2 and 3. The negative siginificant between SIZE and Dividend reveals that the larger firms with better accounting performance on

Empirical Results
Asset are likely to pay lower dividend. However, the difference between companies' dividend in case of SIZE is very small, at 0.007% only.
With the positive coefficient in LEV variable, the more debt comapnies use,     Adj R 2 0.14 0.14 0.14 the higher dividend they pay. It suggests the idea that the company is running well, thus makes them use debt as a channel for further investment in-need.
However, leverage level need to be concerned to avoid of financial risk.
In all case, the ROE is positive significant with dividend yield, while the coefficient of STD_Earning is insignificant. Otherwise, the controlling variables DIV_STOCK (dummy) has insignificantly negative coefficient with the dependent variable in every models.
Analyzing the hypothesis testing for the determinants of dividend yield, only the Government controlled companies (Model 2) consistent with research's Hypotheses (possitvie significant at 5%). In detail, SOEs tend to distribute higher ratio of dividend, by 0.01% more dividend than Private-owned firms. Even the difference between those companies with quite small, at around 0.01% only, but with the huge number of outstanding shares in the market, at dozens or hundreds millions share per company, the total cash companies need to spend for dividend will be a big number. This may confirm the research assumption that dividend is an important to distribte cash which preferd by state-owned firms.
The results in Model 1 showing that high concentrated ownership companies will pay 0,003% higher dividend than the Low-concentrated one. However, the p-value of the Largest testing variable is higher than 0. policies between before and after the low tax applied.
From Table 9 and   [19]). These results magnify the effectiveness of the government policy.

Conclusions
This research contributes to the limited study on the link between the ownerships, the government role, the capital raising activities, the future growth and The majority shareholders seem to have incentive to distribute high dividends because of their disproportionate high investment return, which is risky to the minority shareholders due to their low influence on management policy decision and lack of legal protection. Morever, the empirical results reveal evidence to believe the existence of the high dividend policy in those companies which formerly are state-owned. The government controlled companies pay higher dividends than the non-government organizations.
Furthermore, combined with the different dividend tax treatments in Vietnamese market from 2010 to 2015, we find an interesting point that even in period of higher tax issue, state-owned enterprise still more prefers in paying high dividend, as a method to encourage the shareholder to secure in their investment. At the same time, it is used as good evidence to the efficiency of government policy in economic control, which is consistent with the long-term development policy, the Renewal process of the Vietnamese government. With the high advance on investment opportunities, Vietnamese SOEs tend to spend more capital to future project, rather than to pay dividend. However, they still maintain a positive level of dividend payout, which keeps (maintains) the stock attractiveness to dividend preferred investors.
We encourage the Vietnamese government to maintain their controlling on dividend policy to ensure this financial activities as a precise signal to investors, which is beneficial to the long-term development. It is suggested that to reduce the unfair treatment for minority shareholders, thus the negative effects on the security market would be mitigated and the public governance quality would be improved.