THE IMPACT OF INITIAL PUBLIC OFFERING (IPO) ON THE

PERFORMANCE OF ENTERPRISES IN VIETNAM

Ron Chuen Yeh,

Associate Professor & Director, Graduate Institute of Business and Management,
Meiho Institute of Technology, 23, Pingkuang Rd, Neipu, Pingtung, 912, Taiwan ROC
x2051@meiho.edu.tw

Tran Tu Uyen,
Graduate Student, Graduate Institute of Business and Management,
Meiho Institute of Technology, 23, Pingkuang Rd, Neipu, Pingtung, 912, Taiwan ROC
uyen.trantu@gmail.com

Pansy Chung,
Lecturer, Department of Information Management, Meiho Institute of Technology,
23, Pingkuang Rd, Neipu, Pingtung, 912, Taiwan ROC
x3046@meiho.edu.tw

Shih-Jung Chen,
Lecturer (part-time), Department of Business management, Meiho Institute of Technology,
23, Pingkuang Rd, Neipu, Pingtung, 912, Taiwan ROC
x1570@meiho.edu.tw

Tse-Chih Hsia
Associate professor, Dept. of MIS, Ling-Tung University,
tchisa@mail.ltu.edu.tw

ABSTRACT

Over the last few years, Vietnam has witnessed very strong growth in its
Initial Public Offering market. The total capital in the Vietnamese stock market at the
highest point (at the end 2007) was estimated to be 35 billion USD accounting for 50% of
the GDP. However, among nearly 300,000 enterprises in Vietnam only 317 listed
companies on stock market (up to March 2009).
The purpose of this study is to assess how and why an Initial Public Offering impacts
the performance of the Vietnamese enterprises and provides some decision support for
entrepreneurs planning a public offering sometime in the future. The objective of this study
are (1) to understand Vietnamese stock market in general, (2) to investigate the significance
impact of IPOs in enterprise’s performance in the Vietnamese stock market through
financial ratios, (3) to explore why IPO impact on the firm performance in the Vietnamese
stock market, (4) to give suggestions and to encourage non listed enterprises to progress
into an IPO more effectively.
The study is performed in two steps. The first step determines whether an IPO affects
firm performance by collecting and analyzing around 40 listed companies, the premier
results to be yielded by the study presented here included a positive impact of Initial Public
Offering on the performance of enterprises in Vietnam. The second step will use a
questionnaire to confirm the hypotheses and examine why an IPO influences a firm’s
performance.

1
 Finally, a number of suggestions and implications for further researches will be
presented.
Keywords: Impact, Initial Public Offering (IPO), Stock Market, Vietnam.

2
 A. Background of the study

This research was conducted based on the following obvious motivations.

Firstly, a number of past studies have pointed out a significant relationship
between stock markets and economic performance (Richard, 1997). The stock
market plays an important role in economic development in every country. An
economic recession, depression, or financial crisis may eventually lead to a stock
market collapse. Therefore, the movement of share prices and the stock indexes in
particular can be an indicator of the general economic trend.

During 2006, in response to more and more demands from Vietnam’s

investors, and in order to privatize the state-owned business sector, the
Vietnamese government pushed many state-owned enterprises (SOEs) to go
public. Those SOEs are the major supply of IPO stocks to Vietnam’s stock
market. The majority of listed firms are SOEs which account for over 90% of all
listed firms, leaving a mere 10% to POEs (Toan, 2007). In 2008, affected by the
global economic crisis, Vietnam’s stock index took a deep plunge in March,
falling 22% over the month. This brings the fall year-to-date drop to 44% and the
drop from the peak last March to 53%. The highest point was nearly 1200 (March
2007) and now has fallen to 370 points (October 2008). Despite the fact that the
VN Index has fallen down dramatically, the number of listed companies has
increased sharply in 2008. There have been 65 newly listed companies in 2008
accounting for 20% of the total listed companies in Vietnamese stock market

Second of all, until now, among the 28,000 firms in Vietnam, up to March
2009, only 357 firms are listed in the stock market. The important question has
been asking, how and why does IPO impact on the performance of Vietnamese
enterprises? If firms could perform better after IPO, why so little Vietnamese
companies go public.

Finally, Vietnamese stock market only opens less than eight years
therefore there are only few empirical researches about Vietnamese stock

1
market and corollary of insufficient information for investors, those are the
reasons why this research was so urgently to be conducted.

B. Purpose and objectives of the study

Despise the small number of listed companies, only 196 companies before
2008 and 357 companies up to March 2009, the total capital in the Vietnamese
stock market at the end of 2007 was estimated to be 35 billion USD, accounting
for 50% of the GDP. The Vietnamese stock market (represented by VN Index)
ranks 24th in the world with an average annual growth of 45% over the last seven
years. Therefore, the future of Vietnamese stock market will be one of the
attractive targets for international investors. Correctly understanding the
Vietnamese stock market is a valuable goal.

The primary purpose of this study is to investigate the significance impact

of IPOs in enterprise’s performance in the Vietnamese stock market through
financial ratios and to give suggestions and to encourage non-listed enterprises
to progress into an IPO more effectively. These studies will compare the pre- and
post- IPOs’ financial ratios by using MNR method in order to examine how an
IPO affects a firm’s performance.

The second purpose of this study is to understand why IPOs impact

Enterprises’ performance, profitability, operating efficiency and sales revenue by
using a questionnaire survey. The goal is to investigate whether the impact is
caused by the change in human resource management or operation management.

Finally, this research will give suggestions and implications for non-listed
enterprises in Vietnam on the way to IPOs.

From these purposes, the research questions needing to be answered are as

follows:

1. If an IPO influences the performance on the listed enterprise in the Vietnamese

Stock Market?

2
2. How does the IPO influence the performance of the listed enterprise in the
Vietnamese Stock Market?

3. Why does the IPO influence the performance of the listed enterprise in the
Vietnamese Stock Market?

C. Explanation of Professional Terms

1. Initial Public Offering (IPO)

IPO stands for Initial Public Offering; an Initial Public Offering (IPO) is
the first sales of stock by a private company to the public. IPOs are often issued
by smaller, younger companies seeking capital to expand, but can also be offered
by large privately owned companies looking to become publicly traded (B.O’
Neill Wyss 2001).

2. Profitability

The most important actor to measure the firm performance is profitability.

This paper concentrated on the impact of IPO on the profitability of Vietnamese
enterprises.

Profitability is the primary goal of all business ventures. Without

profitability the business will not survive in the long run. So measuring current
and past profitability and projecting future profitability is very important
(Michael, 1995).

Profitability is measured through income and expenses. Income is money

generated from the activities of the business. For example, if crops and livestock
are produced and sold, income is generated. However, money coming into the
business from activities like borrowing money does not create income. This is
simply a cash transaction between the business and the lender to generate cash for
operating the business or buying assets.

Profitability is the most important goal since it represents the ability to

earn income and measure the effectiveness of a business. Investors, customers,

3
share holders, and financial organizations are looking for profitable enterprise to
give their final commitment. So profitability takes a very important role in
company performance (Narjess, 2005). A variety of measurements for
profitability have been employed. Rates of return on equity or assets are defined
as accounting profits divided into either equity or assets. Profits may be calculated
before- or after-tax and may or may not include interest payments. Normally,
interest payments are excluded when calculating the rate of return on equity, but
are included when calculating the rate of return on assets. The rate of return on
assets reflects operating results and, if interest rates are included, should not
reflect financing decisions.

Measurement of profitability figures prominently in both the empirical

literature in industrial organization and in the resolution of anti-trust cases. At
issue is the extent to which observed (accounting) measures of profitability can
indicate the presence of monopoly power (Truong, 2007)

D. Initial Public Offering in Vietnam

The Vietnamese economy is currently sustaining strong growth. Both
domestic and external demand remained was robust in 2007 leading to a GDP
growth of 8.4%, well above 7.8% from the period of 2001-2006, and one of the
highest GDP growth rates in the world. Vietnam became a formal member of the
WTO on 13 January 2007. Meanwhile, the US granted Vietnam a permanent
normal trade relation (PNTR) status on 12 December 2006. Vietnam’s WTO
membership demonstrates its commitment to market liberalization and
globalization. The highest authority over the Vietnamese stock market is the State
Securities Commission.

a. The State Securities Commission (SSC)

The State Securities Commission, officially established in November

1996, is responsible for the organization, development and supervision of the
country’s securities market. Before February 2004, the SSC had operated as an

4
organ operating directly under the Prime Minister. During this period, the SSC
could not well regulate the market due to various structural weaknesses.
Consequently, the Prime Minister decided on February 19th 2004 to hand over the
task of managing the SSC to the Ministry of Finance. The Government hopes that
the transfer would help to improve the performance of the market, which has not
been performing well since its establishment in July 2000 (Toan, 2007)

Under the new model of operation, according to the Decree 90/2003/ND-

CP issued by the Government on August 12th 2003, the main functions of the
SSC are as follows: Issuing, implementing, and enforcing regulations and
guidelines related to securities and securities markets; organizing and managing
the stock trading centre in Vietnam.

Despite the fact that the first stock auction in Vietnam can be
traced back to 1992, little information on those preliminary IPO activities is
available. Thus, time scope of the thesis should be limited to the period between
the years 2000 to May of 2009. This is because the Vietnam stock market was
established in 2000, and the information of IPOs is available only after
2000.. The firms covered in this study include state-owned enterprises (SOEs)
and privately-owned enterprises (POEs.) as following: Licensing for securities
companies, securities advisers, securities investment funds, and securities
depositaries & custodians and training specialized personnel for the securities
industry.

Regarding the organizational structure, the SSC is divided into eight

departments: Securities Market Development, Securities Issuance Management,
Securities Business Management, Legal Affairs, Supervision and Enforcement,
Planning and Finance, International Cooperation, Human Resource; and four
centers: Ho Chi Minh City (HCMC) Stock Trading Centre, Hanoi Stock Trading
Centre 18, Securities Information Technology Centre, and The Centre for
Securities Research and Training.

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b. Security Trading Centre

In 2000 the first securities trading centre was established in HoChiMinh

City. To date (November 30, 2007), Vietnam has one Securities Exchange in
Hochiminh City (HoSE) and one Securities Trading Center in Hanoi (HaSTC).
The differences between a Securities Exchange and a Securities Trading Center
lies mostly in their listing conditions which are summarized in following table 1.

Table 1 Conditions for listing at HoSE and HaSTC

Conditions HoSE HaSTC

VNĐ 80,000,000,000 (-
30% in special cases) VNĐ10,000,000,000
Minimum capital
(equivalence 4,989,000 (equivalence 623,000 USD)
USD)

Number of years
having profits
2 1
before listing

No un-provisioned
No debts which are more than
overdue debts, publicizing
1 year overdue; having
Debt policies all debts to the firm by the
fulfilled all financial
firm’s key members and
obligations with the State
big shareholders

At least 20% of the firm’s

Voting shares of the firm must
Diversity of total voting shares are held
be held by at least 100
shareholders by 100 or more
shareholders
shareholders

Lock-up period 100% shares in 6 months 100% shares in 6 months since

since the listing date, and the listing date, and 50%
50% shares in the shares in the following 6

6
 following 6 months. months

Filing Filing for listing properly Filing for listing properly

(Source: Toan Nguyen 2007)

In order to understand the Vietnam stock market properly, it is very

important to distinguish state-owned enterprises (SOEs) and privately-owned
enterprises (POEs.) The term “state-owed enterprise” refers to the enterprise
directly operated by a government department or one in which the government
holds a majority of the shares directly or indirectly through other state-owed
enterprises. It also includes enterprises in which the state holds a minority of
shares if the distribution of the remaining shares leaves the government with its
effective control. It excludes many state-owned sector activities, such as
education, research, and health services and etc. that are financed in other ways,
usually by the government’s revenue. The law on State enterprise in Vietnam that
was first promulgated in 1995, defined the SOE as: “an economic organization
which is capitalized, set up, organized and managed by the State. It carries out
business or public utility operations with the aim of achieving the socio-economic
objectives that are assigned by the State” (Toan N, 2007).

Launched in mid 2005, HaSTC has already had a healthy number of listed
firms, 154 as compared to HoSE (163.) Like HoSE, most firms listed on HaSTC
are SOEs. Though 317 listed firms on both exchanges is still a modest number,
the number of privatized firms is far greater than this number of listed firms. In a
report published by the Vietnam Ministry of Finance, there were 2,996 SOEs
converted into privatized firms during the period of 1992-2005. However, only
less than 6% of those SOEs have been listed so far. This could be explained by
the absence of a stock market exchange until 2000.

After long time, slow increases from 2000 to 2005, there was a boom in
the stock market in 2006 and 2007. The figure 2-1 shows the evolution of the VN-
Index, the stock price index including all of the listed firms on HoSE. The VN-

7
Index started in the year 2006 at 300 points and by the first quarter of 2007 was at
1180 points. After booming from 2006 to the first quarter in 2007, and during the
first six months of 2007, the growth rate only reached 35% and it has fallen in the
last 6 months of 2007 (Thieu Minh, 2007). In 2008 Vietnam’s stock index took a
further stomach churning plunge in March, falling 22% over the month. This
brings the fall year-to-date to 44% and the drop from the peak of last March to
53%.

Pagano, Panetta and Zingales(1998) suggested that larger companies are

more likely to go public because of the high fixed cost of flotation. Toan (2007)
studied IPO activity in Vietnam. These studies also analyzed and explored
phenomena in the IPO activity in Vietnam, such as under prising and long-run
performance. This study found out that only 18% of listed stocks have positive
prices after their IPO. This study is only one study on IPO in Vietnam and it only
concentrated on the price of the stock. It did not focus on the prodigality of
enterprises. All enterprises listed in the Vietnamese Stock Market on HoSE are
VND 162 billion, and HaSTC is 147 billion. This size is for large firms in
Vietnam because in fact more than 95% of Vietnam’s firms are smaller than 50
billion in size.

Figure 1 VN INDEX
(Source: http://www.tvsi.com.vn)

8
 The figure 2 shows the sharp increase in the amount of companies that
went to IPO in the stock market. By the end of December 2007 there were 196
companies in total for the two centers; by November 2008 there are 317 listed
companies.

Number of company IPO

160

140

120

100
Number

80
Company
60

40

20

0
2000 2001 2002 2003 2004 2005 2006 2007 2008
Year

Figure 2 The number of Vietnamese IPO companies

(Source: http://www.ssc.com.vn)

In brief, reviewing the progress of IPO helps to make a conducted

enterprise more efficient and profitable for the economy as a whole and for
enterprises the future.

E. Literature review.

In 2006, Lubos and Taylor, studied firm profitability after an IPO. This
study focused on the average profitability of private firms. This study predicted
that firm profitability should decline after the IPO. This study used the sample of
7183 IPOs in the US between 1975 and 2004. Many IPO models assumed that the
entrepreneur has private information about its own firm (Chemmanur and

9
Fulghieri, 1999). Asymmetric information may well explain some of the observed
post-IPO declines in profitability, but it is not clear how it would generate higher
declines for firms with more volatile profits and firms with less uncertain average
profits.

Another possible explanation for the profitability pattern is earnings

management. Teoh, Welch and Wong (1998) argued that firms opportunistically
inflate their earnings through discretionary accruals shortly before going public.
However, firms that are willing to manipulate their earnings around the IPO are
likely to manipulate them after the IPO as well. Such firms are likely to smooth
their post-IPO earnings, given the apparent market preference for less volatile
earnings.

Wai-yan Cheng (2005) showed that there is not a significant difference in

performance between the two IPO sub-samples. This implies that the existence of
pre-listing earnings does not guarantee good long-term IPO performance and that
the pre-listing earnings of new issues are not an effective screen for ‘bad’ IPO
performers. This study further analyzed the rationale for rule change in the
context of recent developments in the Hong Kong stock market and concluded
that the rule change is part of the reform program aimed at introducing a second
board market for small companies and at attracting more China-related listings to
the main board.

On the contrary, some other studies pointed out many benefits of IPOs.
Manas and Manoj (2007) studied the IPO process in India by using a sample that
included all IPOs completed between 1999 and 2005. The study found that the
size and probability of going public is positively related. The larger and profitable
companies are more likely go to public than the smaller companies. The result is
consistent with the finding of several empirical studies (Pagano et. al., 1998;
Helwege and Packer, 2004; Chemmanur et al., 2005; Kim and Sung, 2005; Rosen
et al., 2005). This study also found that the probability of going public is
positively related to “profitability” measured in terms of “return on net worth”.

10
The relationship is positive and significant for all the time periods. A quantitative
method was used and the results showed that an increase of one standard
deviation in profitability corresponds to 13 percent increase in sample average
probability.

The positive relationship between IPOs and profitability was also found in
a report of the Boston Consulting Group (2000). This report shows that Europe’s
most dynamic entrepreneurs not only grow in terms of turnover, they also grow in
profitability and they create superior value from an investor’s point of view. The
results of the research on inputs, effects, and success factors of an IPO may
provide some “decision support” for entrepreneurs planning a public offering in
the future.

Eije (2000) used a questionnaire to Conduct a questionnaire survey

on Dutch companies that issued public shares for the first time in the period
1987-1997 and found that IPO can cause changes within a company and that they
can contribute positively to long-term performance.

In 2006, there was a boom in the Vietnamese stock market and many
companies became famous after their IPO; but what about their profits? Can they
earn profit after their IPO and is there a positive impact on enterprises and their
profitability in Vietnam?

In summary, empirical studies have demonstrated that the benefit of IPOs

is in raising capital, enhancing and companies’ reputations, it is a good market
tool and can result in a profit increase

Based on the above evidences, the following hypothesis is offered for the
study:

H1: There is a positive impact between the pre- and post- IPO’ firm profitability
in Vietnam

There is a positive impact between the pre

H1
and post IPO’s profitability in a Vietnamese
IPO 11 firm.
 H2: Human resource management improves after IPO in Vietnam

H2
Human resource Human resource management
management improves after IPO in Vietnam

H3: Operation management improves after IPO in Vietnam.

The following is the proposed relationship of operation management and firm

performance

H3
Operation management Operation management improves
after IPO in Vietnam

F. Research method and data collection

1. Research Method

Megginson et al.(1994) was the first to employ a matched-pair methodology,

which is called the MNR method, to do the comparison of firm pre- and post-
privatization performances. Afterwards, several research projects such as Ralijohn
(1998), Boardman et al (2002) and Truong et al.(2003), etc., have been conducted
and used MNR as a major method, meanwhile evaluating company performances
of pre- and post– privatization periods. Given that previous studies have applied
the matched–pair or MNR method, to analyze and make the prove this study,
without any exclusion, will also use it as the main methodology.

To test the predictions or hypotheses mentioned in the previous chapter,

this research performed the comparisons of pre- and post- IPO profitability
performance measures. The data was obtained from a three-year period (from

12
one year before, the year of the IPO, and one year after) in the Vietnam stock
market will be included in the study sample. The study continued to calculating
the mean of each variable for each firm covering the one-year period prior to IPO
(year-1), the year of IPO (year 0), and one year following IPO (year +1).

Quantitative research was also used for this study. Quantitative research
is the systematic scientific investigation of quantitative properties and phenomena
and their relationships. The objective of quantitative research is to develop and
employ mathematical models, theories and/or hypotheses pertaining to natural
phenomena. The process of measurement is central to quantitative research
because it provides the fundamental connection between empirical observation
and mathematical expression of quantitative relationships. The sample of subjects
is drawn to reflect the population (Newnam and Benz, 1998).

2. Sampling Design

2.1. Collection of Financial and Accounting data

At present, there are two Securities Trading Centers in Vietnam; Hanoi
and HoChiMinh with a total number of companies of 357 (up to March 2009), in
which 65 companies initially listed in 2008 (Thieu, 2007) and only 41 companies
had listed before 2006. To support this study, a sample of 35 companies from
HoChiMinh Securities Trading Central and 20 companies from Hanoi Securities
Trading Central will be used. These companies will be selected for the sample
according to their scale and their field so that it can represent for the whole
population.

It should be noted that the IPOs included in this study sample can only be
the largest and the most economically significant companies, and those operating
in important fields. In addition, sample originating from both Securities Trading
Centrals will be included. Therefore, although this sample is small (55
companies), it represents of Vietnamese listed companies.

2.2. Mail survey

13
 Because Vietnam is a very young market, the age for companies to be
studied is under seven years old. The total sample population will be 252
companies listed before 2007. Over half population will be chosen as the sample
for this study. 152 companies.

3. Data Collection

On the way to gather the data for this empirical study, first, it will be
necessary to determine which kind of data or information would be useful and
helpful. This study will collect data by choosing Vietnamese enterprises that have
offered IPOs, listed on the Vietnamese stock exchanges by the end of December
2008. These firms should have at least one year pre-and post-IPO financial and
accounting data as presented bellow;

3.1. Pre-IPO Data

Information on pre-IPO data will be collected from the Local State-owned

Enterprise Reform Board (each province has its own SOE Reform Board), the
General Department of Taxation, the General Statistic Office and the Corporate
Finance Division as well as some large banks in Vietnam, because these
enterprises have to submit their audited financial information and their accounting
statements to these organizations. Data collected will include data on profits, sales
revenue; number of employee, total asset, shareholder’s equity for at least 1 year
prior to IPO, which are almost all presented in a company’s offering prospectus
and other primary documents.

Moreover, from the list of IPO enterprises on the Vietnamese’s stock

exchanges, it is possible to get the pre-IPO financial data by downloading
information from company-owned websites and from the news reporting websites
as well as other sources on the internet. By government regulation, these
companies have to reveal all their financial and accounting information to
investors publicly. It would be economical and timesaving by doing so through
the internet.

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3.2. Post-IPO Data

The post-IPO financial and accounting data are rather easy to collect for
the reason that they are all published on the Vietnamese stock exchange every
quarter of the fiscal year. Alternatively, the data can be obtained, by downloading
it from company-owned websites, large banks’ websites on the internet, and
secondary data sources. This data and relevant information are also easily
available to be obtained. The companies have to, by regulatory law, disclose all
their financial and accounting information in annual reports to investors and
publicize their annual reports.

Furthermore, a Post Office Box for the return address will be

established at a post office in HoChiMinh and Hanoi for the mail survey. The
research should be conducted by a mail survey instead of an online survey. The
objective of the survey will be the manager listed for each company. A mail
survey is more formal and solemn than an online survey. From there,
questionnaires will be delivered and collected. The questionnaire will be delivered
by post and the addressees will be the General Directors of the companies in the
sample. Because of most of the questions are regarding to management. A
cover letter will be attached to the questionnaire in each envelop to introduce the
research and describe the purpose of the survey. Prepaid return envelopes will be
attached to the questionnaire sent to respondents to encourage participation and
facilitate return of the questionnaire. After two weeks from the initial mailing, 152
questionnaires with the same enclose materials will be sent to the same company
the second time. After one month from the day of the second mailing,
questionnaires will be collected and research will be conducted for analyzing the
data

G. Result and discussion

After collecting the data from 55 listed companies, we use SPSS to run the
data and the detail of result as the table 2

Table 2- Descriptive Statistics of Profitability

15
 Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

profit_1 55 308.00 100326.00 16994.1455 22740.86866
profit_2 55 311.00 118725.00 21426.8000 28543.70781
profit0 55 344.00 354369.00 31072.0364 55715.68327
profit1 55 264.00 544080.00 53018.1273 94405.48973
profit2 55 1019.00 551915.00 55129.7091 70186.44011
Valid N
55
(listwise)

The unit measure is 1,000,000 VND (= 56,500USD). Profitability of two

years, one years before IPO and year of IPO and one year, two year after IPO.
The number of observing companies is 55 companies. From the table 2 we can
see the increasing in the mean of profit after IPO. In the two first years mean of
profit only 16994 and 21426 but after IPO the number are 53018 and 55129
respectively.
The second step we compare the average profitability of the two year before IPO
and after IPO and we have the data as follows:.

Table 3: Descriptive Statistics of profitability

Wilcoxon Signed Ranks Test

Descriptive Statistics

N Percentiles
25th 50th (Median) 75th
Aprofit1 55 3366.5000 7613.0000 20457.5000
Aprofit2 55 14923.0000 37200.0000 114687.0000

Table 4: Test Statistics(b)

Aprofit2 - Aprofit1
Z -6.192(a)
Asymp. Sig. (2-tailed) .000
a Based on negative ranks.
b Wilcoxon Signed Ranks Test

The result from table 4 reveals that there is a significant increase in the mean of
profitability before IPO and after IPO with the Asymp.sig. (2-tailed) = 0.000.

16
We accept the Hypothesis1: There is a positive impact between the pre- and post-
IPO’ firm profitability in Vietnam

Moreover we have a detail of total profitability in 5 year from the figure 3 as

following:

Total profit through 5 year

3,500,000.00

3,000,000.00

2,500,000.00
Bililion VND

2,000,000.00
Billion VND
1,500,000.00

1,000,000.00

500,000.00

-
-2 -1 0 1 2
Figure 3: Total profitability over five years
Y ear
In addition to collect the data from many sources we conduct the surveys. The
questionnaire was sent to the director of Human resource department of listed
companies. In the surveys we got the answer from 59 listed companies. Some
descriptive statistics of the sample are presented in the following section.

Table 5 Communalities

Initial Extraction
Item 1 Recruiting 1.000 .715
Item 2 Compensation 1.000 .795
Item 3 Training 1.000 .739
Item4 Employee program 1.000 .870
Item 5 Recruiting - effort 1.000 .844
Item 6 Employee development 1.000 .797

17
 Item 7 Evaluate employee 1.000 .726
Item 8 The gaps in the
1.000 .825
knowledge
Item 9 Use multiple sources 1.000 .868
Item 10 Higher starting salaries 1.000 .818
Item 11 Extensive interviews 1.000 .801
Item 12 Multiple screening 1.000 .847
Item 13 Open positions-
1.000 .797
individuals
Item 14 Selection process- many
1.000 .689
employees
Item 15 Right person 1.000 .771
Item 16 Salaries for core
1.000 .854
positions
Item 17 Extensive specialized
1.000 .908
training
Item 18 Staff scheduling 1.000 .788
Item 19 Customer services 1.000 .796
Item 20 Productivity 1.000 .874
Item 21 Cost reduction 1.000 .742
Item 22 Investment 1.000 .832
Item 23 Sales revenue per
1.000 .826
employee
Item 24 Revenue growth 1.000 .824
Item 25 Average net profit 1.000 .884
Item 26 Well Financially 1.000 .873
Item 27 Capital investment 1.000 .826
Item 28 Brand name 1.000 .824
Item 29 Marketing activities 1.000 .872
Item 30 Larger volume of sales 1.000 .873
Item 31 Innovatory activities 1.000 .749
Item 32 Procurement 1.000 .768
Human resource 1.000 .993
Operation management 1.000 .981
Firm perform 1.000 .989
Extraction Method: Principal Component Analysis.
For the factor analysis all the extraction are bigger than 0.6 so all 32 questions are
Model fit, we didn’t eliminate any factor.

18
 Figure 4. The result for Operation Management

Mean 1= 3.5557 and mean 2= 3.625 that means 71% and 72% participant
agree that Human resource management and operation management will be better
after IPO.
Based on the result of the survey, we strongly conclude that Human resource
management and operation management are improved after IPO.

19
 Figure 5. The result for Human Resource Management

H. Recommendation and limitation.

Throughout the data analysis, research result and finding, the impact of IPO
on the firm profitability has been demonstrated. In conclusion, positive results
have been founded in the firm profitability after IPO. In addition, human resource
management and operation management have shown better performance after
IPO. Significantly, companies have used the IPO image to create positive effects
and boosted their growth performance. Those organizations have cashed to
finance internal growth and invest more capitals for the future such as facility,
human resource management therefore, their companies will be better in the
future. After two years of IPO, their profit may not increase immediately but in
the long term their performance will be improved.
It is obvious that IPO have a positive impact on firm performance in
Vietnam, however until now there is only small number of listed companies
(account for only 1% of the total companies in Vietnam). Vietnamese
Government should promote/ launches more policies to encourage enterprise go
to public. Some policies are suggested/ recommended as follows:
- Priority/ Incentive income tax for the new IPO companies.
- Encourage enterprise listing in the international market such as Hong
Kong, Taiwan…
Although the research has broadened the readers’ understanding of the
process of IPO/ IPO process, especially the impact of IPO on firm performance, it
still has some limitations which should be addressed in further research.
The first weakness of this study concerns with only the profitability to
measure the firm performance. Further researcher can deeply take into account of
this interesting topic by analyzing other factors such as revenue, efficiencies...
Finally, Vietnamese stock market is very young so that the number of
companies used to have adequate data is very small that leads to small population
as well as small sample.

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 Desire the rather long list of limitations might suggest otherwise, the
author still think that the positive results concerning the impact of IPO on firm
performance are robust enough to justify a policy recommendation to the
government of Vietnam to continue to encourage enterprise go to IPO

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