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Foreign ownership and firm-level characteristics in the Vietnamese stock market

By Nguyen Thi Kim Cuc (VNP 15)

Supervisor: Dr. Pham Hoang Van / Dr. Nguyen Trong Hoai

Abstract

This paper investigates foreign ownership and firm-level characteristics of firms listed on the Ho Chi Minh Stock Exchange – the formal and biggest stock exchange in Vietnam. Applying fixed-effects and random-effects models to quarterly data from 2006-2010 for 30 companies, the findings show that foreign investors often invest into large firms – firms with high market capitalization and in firms with high leverage –firms with high debt over equity ratio. Furthermore, the results also show that returns on equity have significance on foreign ownership ratio of foreign investors at listed firms. The results show no effect of Earnings per Share (EPS) and Price to Earnings ratio (P/E) on foreign ownership. The paper also checks the pattern growth between VN Index with Shanghai, and Dow Jones indices and answers why foreign investors invest in the Vietnamese stock market.

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