Financial disclosure and cost of equity capital

atement. In the latter stage, the frequency of financial statement disclosed by banks has been increased, supplemented by mid-term and quarterly report. In 2017, of the 31 research banks, more than 70% bank provided quarterly reports. By contracts, as of 8/2018, there are still two banks that do not provide 2017 financial statements, namely DongA Bank and Ban Viet. These are two weak banks that are under the supervision of the State Bank or have legal problems. This reflects the picture of the level of information disclosure by commercial banks in Vietnam, when weak banks tend to reduce the level of disclosure to the public. 4.2. The effect of bank disclosure on cost of equity capital 4.2.1. Descriptive statistics Table describes the variables in regression model of the effect of financial disclosure on bank cost of capital. The average asset of the eight banks in the sample is VND 302.69 trillion and net interest revenue is VND 7.83 trillion. With this total assets and turnover, the eight banks in the sample are among the largest banks in the banking system in Vietnam. Performance indicators include ROE (9.97%), and EPS are also among the leading banks. The credit growth rate is 6.06% per year, representing good business prospects. In the period from 2011-2017, average Vnindex growth is 15,79%. Table 7. Descriptive statistic Variable No Average St. Dev Min Max COE 52 0,076 0,031 0,003 0,128 DISC 52 1,020 0,053 0,818 1,091 405 INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION DRANK 52 0,655 0,216 0,226 1,000 VnIndex 52 15,790 20,561 3,020 71,400 ROE 52 9,975 6,787 0,070 27,490 EPS 52 2730,769 2650,162 7,000 8224,000 LRGO 52 0,061 0,235 0,000 1,000 SIZE 52 14,230 0,546 13,000 15,000 BM 52 1,0458 0,495 0,269 2,969 ASSET 52 3,03e+14 2,61e+14 2,16e+13 1,10e+15 NIR 52 7,83e+12 6,39e+12 5,96e+11 2,23e+13 The average cost of equity of commercial banks was 7.62%, fluctuating between 0.2% and 12.7%. The cost of equity of commercial banks has changed over time. Of which, 2014, 2015 are two years with the highest cost of equity. This is a period witnessing many fluctuations in banking activity, reducing the confidence of investors, thereby raising the cost of equity. In 2017, the bank with highest cost of equity is Joint Stock Commercial Bank for Foreign Trade of Vietnam (VCB) (12.2% per annum). Meanwhile, the lowest cost of equity was National Citizen Commercial Joint Stock Bank (NVB), at 5.2%.The average disclosure level of these 8 banks is 1.02, ranging from 0.81 to 1.09. Information disclosure on all eight commercial banks has increased each year and is higher than the average information disclosure of the whole sector. 4.2.2. Impact of Bank Disclosure on Cost of Equity Capital In this section, we describe the result of testing the hypothesis specified in Model (1). Pearson correlation coefficients for the variables are shown in table 8. The correlation matrix shows no correlation coefficient in excess of 0.6. The highest coefficient is 0.504 which shows the relationship between ROE and EPS. The remaining correlation coefficients were lower than 0.4. Thus, model (1) does not have autocorrelation problems. Table 8. Correlation Matrix between variables in the model COE DRANK SIZE BM Vnindex LGRO ROE EPS COE 1,000 DRANK -0,120 1,000 SIZE 0,076 -0,037 1,000 BM 0,006 -0,066 -0,409 1,000 Vnindex -0,363 -0,039 -0,134 -0,002 1,000 LGRO 0,060 0,292 -0,111 0,211 -0,121 1,000 ROE -0,208 0,106 0,355 -0,425 -0,105 0,160 1,000 EPS 0,328 -0,107 0,223 -0,505 -0,163 -0,071 0,504 1,000 The research use Hausman test to determine the appropriate form of the model. The Hausman test of the above models has p value <0.05, the Hausman Test reject the hypothesis H0. Therefore, appropriate form of models 1 is fixed effects models. Running the model with fixed effects showed that information disclosure were inversely and statistically significant relate to the cost of equity. However, the heteroskedasticity test of the FEM model (using the Wald test) has p-value <0.05, rejected Ho, the model encountered heteroskedasticity problem. To overcome the above errors, the topic using Robust Standard test. The results are following: 406 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA Table 9. Regression result COE Coef. Robust Std.Err T p> |t| [95% Conf. Interval] DRANK -.0636591 .0330086 -1.93 0.095 -.141712 .0143938 SIZE -.0189864 .0184552 -1.03 0.338 -.0626261 .0246533 BM -.0182454 .0098488 -1.85 0.106 -.0415341 .0050434 Vnindex -.0005839 .0002512 -2.36 0.053 -.001178 .0000101 LGRO .0062924 .0146689 0.43 0.681 -.028394 .0409787 ROE -.0031522 .0005032 -6.26 0.000 -.004342 -.0019624 EPS .0099516 .0059419 1,67 0.138 -.0040987 .024002 -cons .3764945 .2784357 1.35 0.218 -.2819013 1.03489 R-sq 0.4275 Number of obs 52 Testing for autocorrelation with Durbin-Watson test give P-value>0.05, and testing for multicollinearity with Variance Inflation Factor give VIF<5 for all variables, showing the above model is not encountered autocorrelation and multiconllinearity. Thus, after controlling for heteroskedasticity, the estimates from model 1 is BLUE (linear, reliable, unbiased and consistent). The R-sq is 0,4275. Since table data usually yields a low R-sq, R-sq of the above equation is on acceptable threshold, indicating that the above equation explains well for the dependent variable as the cost of equity. The result show that financial disclosure has an inverse and statistically significant relationship with cost of equity capital, even after controlling for bank characteristics and market characteristics. This result is consistent with the theory of the relationship between information disclosure and cost of equity and Botasan (1997), Rikanovic (2005), Retrova et al. (2012), Armitage and Marston (2007) works. Increasing the disclosure level reduces the investor’s estimation risk and agency cost, which in turn has a negative impact on the cost of equity. In addition to the disclosure level, other control variables in the model also have an explanatory role for the cost of equity. In turn, ROE has a opposite and statistically significant relationship to the cost of equity, suggesting that the higher the return on equity, the higher the cost of equity. The VnIndex showing market yields are negatively correlated and statistically significant for the cost of equity. When the stock market in general shows signs of improvement, investors move their capital from other markets, such as consumption, savings into the stock market. Higher capital supply leads to lower capital costs. 5. CONCLUSIONS AND POLICY IMPLICATIONS Research conclusions In this study, we measure the information disclosure of Vietnam banking system and investigate the effect of bank’s disclosure on cost of equity capital. The research shows the upward trend in level of information disclosure of Vietnam commercial banks from 2006 to 2013. Along with this trend, the difference in disclosure level among banks is narrowed. From 2014 onwards, the inefficient performance of some commercial banks due to high non-performing loans and the wave of mergers and acquisitions among those banks has partially lowered the level of information disclosure of the banking system. In terms of each bank, the level of information disclosure is positively correlated with their performance and listing of banks on the stock market. 407 INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION The second objective of this research is to examine the impact of information disclosure on the cost of equity. Using the data of 8 commercial banks in the period from 2011 to 2017, this research shows that information disclosure have inverse affect on the cost of equity. Thus, in order to attract investment capital and reduce the cost of equity, weaker banks need to improve the level of disclosure, at least to reach the general level of the market. Policy implication The study presents an overview of information disclosure, the contemporary theories as well as empirical evidence on the impact of information disclosure on the cost of equity. Previous research has concluded that increasing disclosure will reduce the cost of equity. With such conclusion, the study has some suggestions for the banking system in Vietnam as follows: First, increasing the level of information disclosure is urgently needed to help regulators, investors and banks themselves see and evaluate their operations. Besides, in the context that the State Bank of Vietnam is aiming to manage the banking system on market principle, increasing the information disclosure level will help banks to get better support from management agencies, such as early warning. Secondly, increasing disclosure of financial information is not an easy choice because it does not always increase cost benefits. Therefore, commercial banks need to increase disclosure of financial information as progressively as possible, such as increase the disclosure frequency of financial statement information, addition of contents of information disclosure in financial reports ... Thirdly, the State Bank of Vietnam should support the development and publication of information disclosure indicators of the banking system to promote disclosure, thereby protecting bank’s investors and customer and can help bank to reduce the cost of equity. Appendix a. Commercial banks in vietnam No Symbol Name Objective 1 Objective 2 1 ABB An Binh Commercial Joint Stock Bank-ABBANK X 2 ACB Asia Commercial Joint-stock Bank X X 3 AGRB Vietnam bank for Agriculture and Rural – Agribank X 4 BID Bank for Investment and Development of Vietnam X 5 BVB Bao Viet Commercial Joint Stock Bank X 6 CTG Vietnam Joint-Stock Commercial Bank for Industry and Trade X X 7 DAB DaiA Bank X 8 DCB Ocean Commercial One Member Limited Liability Bank X 9 EAB DongA Commercial Joint Stock Bank X 10 EIB Vietnam Export Import Commercial Joint Stock Bank X X 11 FCB First Commercial Bank – Ficombank X 12 GDB Viet Capital Commercial Joint Stock Bank X 13 HBB Habubank X 14 HDB Ho Chi Minh City Development Joint Stock Commercial Bank X 15 KLB Kien Long Commercial Joint Stock Bank X 408 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA No Symbol Name Objective 1 Objective 2 16 LVB Lien Viet Post Joint Stock Commercial Bank X 17 MBB Military Commercial Joint Stock Bank X X 18 MDB Mekong Development Joint Stock Commercial Bank X 19 MHBB Mekong Housing Bank X 20 MSB Vietnam Maritime Commercial Stock Bank X 21 NAB Nam A Commercial Joint Stock Bank X 22 NASB Ngan hang Thuong mai Co Phan Bac A-BAC A Bank X 23 NVB National Citizen Commercial Joint Stock Bank X X 24 OCB Orient Commercial Joint Stock Bank X 25 PGB Petrolimex Group Commercial Joint Stock Bank X 26 PNB Southern Bank X 27 PVF Vietnam Public Joint Stock Commercial Bank X 28 SCB Saigon Commercial Bank-Saigonbank X 29 SEAB Southeast Asia Commercial Joint Stock Bank X 30 SGB Saigon Bank for Industry and Trade X 31 SHB Saigon - Hanoi Commercial Joint Stock Bank X X 32 STB Saigon Thuong Tin Commercial Joint X X 33 TCB Vietnam Technological and Commercial Joint-Stock Bank X 34 TPB Tien Phong Commercial Joint Stock Bank X 35 VAB Vietnam Asia Commercial Joint-Stock Bank X 36 VCB Joint Stock Commercial Bank for Foreign Trade of Vietnam X X 37 VIB VietNam International Commercial Joint Stock Bank X 38 VPB Vietnam Prosperity Joint Stock Commercial Bank X REFERENCES Armitage, S. and Marston, C. 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Các yếu tố ảnh hưởng đến mức độ minh bạch thông tin của doanh nghiệp niêm yết theo cảm nhận của nhà đầu tư, truy cập tại https://text.123doc.org/document/309116-cac-yeu-to-anh- huong-den-muc-do-minh-bach-thong-tin-cua-doanh-nghiep-niem-yet-theo-cam-nhan-cua-nha-dau-tu.htm Lê Thị Mỹ Hạnh (2015). Minh Bạch Thông Tin Tài Chính Của Các Công Ty Niêm Yết Trên Thị Trường Chứng Khoán Việt Nam. Luận án Tiến sĩ, Đại học Kinh tế Thành phố Hồ Chí Minh Võ Văn Hiền (2016). Các Nhân Tố Ảnh hưởng đến Sự Minh Bạch Thông Tin Trên Báo Cáo Tài Chính Của Các NHTM Nghiên Cứu Trên Địa Bàn Tỉnh Tiền Giang, Luận văn Thạc sĩ, Đại học Kinh tế Thành phố Hồ Chí Minh Nguyễn Thị Phương Hồng (2016). Các Nhân Tố Ảnh Hưởng Đến Chất Lượng Báo Cáo Tài Chính của Công Ty Niêm Yết Trên Thị Trường Chứng Khoán: Bằng Chứng Thực Nghiệm Tại Việt Nam, Luận án Tiến sĩ Đại học Kinh tế Thành phố Hồ Chí Minh