The impact of product market competition on firm performance through the mediating of corporate governance index: empirical of listed companies in Vietnam

Abstract

Over the past decade, Vietnam has opened the market and attended in large economic organization like ASEAN Free Trade Area, ASEAN Comprehensive Investment Agreement, Regional Comprehensive Economic Partnership, Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Therefore, the increasing of product market competition has a significant impact on businesses. In order for businesses to improve firm performance, the solution needed today is to improve corporate governance system. Corporate governance not only helps to limit agency problem but also increases the role of inspection, control, and orientation for the development of business activities. The study examines the influence of product market competition on firm performance through the mediating role of corporate governance. Our data collected from Thomson—Reuters DataStream and finance report of 180 listed non—finance companies in Vietnam from 2015 to 2019. The research model and hypotheses were tested by Maximum Likelihood with Structural Equation Model method in Stata 14 software. The results showed that product market competition has positive effect firm performance through the mediating of corporate governance. Besides, the study revealed that business strategy negatively and significantly effects on product market competition and firm performance. Research results provide theoretical and administrative implications for improving firm performance.

Keywords:

• business strategy
• corporate governance
• product market competition
• firm performance

JEL:

• G34
• L25

PUBLIC INTEREST STATEMENT

In developing countries like Vietnam, businesses are facing with the increasing product market competition because governance enhances to open the market. While corporate governance system is still in its infancy, it is not yet complete, so it’s very difficult to maintain and control activities in business. We demonstrate that product market competition positively affects firm performance through the mediating role of corporate governance. Moreover, the research indicates that business strategy is negative effect to between product market competition and firm performance. The results have contributed to profound governance implications for managers, which is the need to improve the efficiency of corporate governance system that can increase the ability to control, regulate and improve firm performance. At the same time, firms need to build business strategy based on product market competition and resources to have a good impact on firm performance.

Acknowledgements

This research is funded by University of Economics Ho Chi Minh City, Vietnam.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Thach Xuan Ha

Thach Xuan Ha is an Associate Professor, PhD at the University of Economics Ho Chi Minh City, Vietnam. His research focuses on accounting and auditing. His publications have appeared in Recent Developments in Vietnamese Business and Finance, Journal of Asian Finance, Economics and Business, Journal of Asian Business and Economic Studies. Email: [email protected].

Thu Thi Tran

Thu Thi Tran is a lecturer at the Faculty of Transport - Economics at University of Transport and Communication, Vietnam. She is a PhD student at the University of Economics Ho Chi Minh City, Vietnam. Ms Thu Thi Tran has some papers accepted and presented in UEH International Conference on Business and Finance 2020, 2021; Journal of Asian Finance, Economics and Business.