Does firm performance withstand the test of time? New evidence from a transactional economy

ABSTRACT

Few studies have examined how the age of a firm can influence its economic performance over time. This study fills that gap by examining this issue from a large and unique sample of Vietnamese listed companies. Overall, we find evidence of a U-shaped relationship between firm age and firm performance (an initially negative effect of firm age on firm performance before the positive returns of firm age are realised). Our main findings are consistent with the liability of the ‘market newness’ hypothesis.

KEYWORDS:

• Firm age
• firm performance
• transactional economy
• Vietnam
• stock market

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. This is because Vietnam is considered a transactional economy.

2. ROA: return on assets; ROE: return on equity.

3. A synonym for privatisation (Meyer & Nguyen, 2005).

4. This is a capitalisation-weighted index of all the companies listed on the HOSE.

5. Eurostat (2014). Eurostat Yearbook.

6. See Vassilakis (2008) for an in-depth discussion of the concept.

7. Not reported in Table 3.

8. For instance, if the listing date is 2010, at the end of 2010, firm age is equal to 1 (2010–2010+1).

9. The results are not presented here due to limitations of space. However, they are available on request from the authors.

10. As shown in Table 4, the mean (logarithmic) value of firm size is 13.050, that is, approximately 19,077,115 million VND, which is equivalent to $US891.97 million. By comparison, Wintoki et al. (2012) reported an average value for firm size of $US3 billion in their sample. Consequently, we can see that the size of Vietnamese listed firms is relatively small.

11. The percentage of shares held by the state multiplied by the stock market price in the numerator and, in the denominator, the market value of securities.

12. The results are not shown here due to lack of space. However, they are available on request from the authors.

13. See footnote 12.

14. The results are not shown in Table 7. However, they are available on request from the authors.