RATIONALE, MOTIVATION AND EFFECT OF FOREIGN INVESTMENT IN VIETNAMESE COMPANIES

Existing literatures have documented that foreign investors in developed markets hold disproportionately more shares of firms with high turnover rates. In Vietnam, I find evidence that foreign investor ownership percentage is higher in firms with lower turnover rates, firms located in the south of Vietnam, firms listed on the Hochiminh stock exchange, firms that are listed longer on the exchange, large firms, and firms with low past returns. The effect of turnover rate on foreign ownership percentage is weak, while the coefficients of firm size and firm age since IPO are consistently robust. I find that foreign investors hold more in firms with lower government ownership, and firms audited by a prestigious international audit company only holds for firms listed on the Hanoi exchange. I find that the thesis that foreign investor percentage ownership stakes are higher in firms with higher current ratios holds only for the firms listed on the Hochiminh stock exchange. Although average firm size is higher for State-Owned Enterprises (SOEs) and foreign investors strongly prefer investing in large size firms, they strongly show their preference in firms other than SOEs. By excluding the effect of size, I find that foreign ownership percentage stakes in firms listed on the Hanoi exchange are lower than foreign ownership percentage stakes in firms listed on the Hochiminh exchange. Interestingly, since dividend began being taxed, foreigner ownership percentage has been lower in firms with high dividend yields