Board directors, financial derivatives, and corporate governance : the case of Vietnam

This book gives readers a look inside the boardrooms and directors’ minds―a desirable but highly challenging task for researchers due to the lack of access to top teams in organizations. This book breaks through that barrier with a mixed-methods investigation of boardrooms in the emerging country of Vietnam particularly on the topic of financial derivatives. Directors are the leading players within the corporate governance framework. The general effectiveness of the board depends on their roles, processes and competencies. Given the scandals marring the history of the financial industry, this book aims to tackle the question of whether board directors have the financial acumen required to handle the tricky instruments of financial derivatives through interviews with board directors and analysis of their organizations. Providing a managerial perspective of financial derivatives, this distinguishes itself from more popular financial engineering books and would be a useful read for government officials, board directors, training organizations and scholars, particularly in Vietnam. Preface References Acknowledgments Contents Abbreviations 1 Corporate Governance: A Brief History 1.1 The History of Corporations and Their Nature 1.2 Developments in Corporate Governance 1.2.1 The 1970s 1.2.2 The 1980s 1.2.3 The 1990s 1.2.4 The 2000s 1.3 Definitions and Areas of Interest 1.4 Corporate Governance Models 1.4.1 The Anglo-Saxon Model 1.4.2 The Germanic Model 1.4.3 The Latin Model 1.4.4 The Japanese Model 1.4.5 The Chinese Model 1.4.6 The Asian Model (with the Exception of China and Japan) 1.5 Theories of Corporate Governance 1.5.1 Agency Theory 1.5.2 Institutional Theory 1.5.3 Stakeholder Theory 1.5.4 Management Hegemony Theory 1.5.5 Resource Dependency Theory 1.5.6 Stewardship Theory References 2 Board Directors: Roles, Processes and Competencies 2.1 Roles of the Board of Directors 2.1.1 Directors’ General Duties 2.1.2 The Chair’s Roles and Duties 2.1.3 The Board of Directors’ Role of Conformance 2.1.4 The Board of Directors’ Role of Performance 2.1.5 Performance and the Board’s Capacity and Ability 2.2 Board Processes and Directors’ Human Capital 2.3 Directors’ Competencies 2.3.1 The Chair 2.3.2 Members of the Board 2.3.3 Training 2.3.4 Power References 3 Financial Derivatives: Generals, Board Roles and Scandals 3.1 Overview of Financial Derivatives 3.2 Uses of Financial Derivatives 3.2.1 Hedging 3.2.2 Speculation 3.3 Financial Derivatives Scandals in the World 3.4 Directors’ Knowledge of Financial Derivatives 3.5 Financial Derivatives Scandals in Vietnam References 4 Methodology 4.1 Pragmatism and Mixed Methods 4.1.1 Pragmatism 4.1.2 Research Objectives, Questions and the Necessity of Mixed Methods 4.2 Informing Theories 4.2.1 Stakeholder Theory in Corporate Governance 4.2.2 Theory of Planned Behaviour 4.2.3 Model of Board Attributes and Roles 4.3 Quantitative Inquiry 4.3.1 Objectives 4.3.2 Hypotheses 4.3.3 Measurements 4.3.4 Questionnaire Preparation 4.3.5 Data Collection 4.3.6 Analysis 4.4 Qualitative Inquiry 4.4.1 Objective 4.4.2 Interview Questions 4.4.3 Interviewees 4.4.4 Data Collection Procedures 4.4.5 Analysis References 5 A Big Picture of Directors’ Understanding of Financial Derivatives in Vietnam 5.1 Data Description and Variate Creation 5.1.1 Data Description 5.1.2 Variate Factor Analysis 5.2 Directors’ Understanding of Using Financial Derivatives from Descriptive Analysis 5.2.1 Knowledge 5.2.2 Attitude 5.2.3 Risk Propensity 5.2.4 Subjective Norm 5.2.5 Perceived Behavioural Control 5.2.6 Intention to Use Financial Derivatives 5.3 Association Between Directors’ Understanding with Attitude and Other Variables 5.3.1 Associations Between Personal and Corporate Features and Directors’ Knowledge 5.3.2 Variate Correlations 5.4 Extensive Impact of Directors’ Knowledge of Financial Derivatives 5.5 Connecting Directors’ Knowledge and Attitude with Corporate Policy References 6 Directors’ Perspectives of the Big Picture 6.1 Directors’ Understanding of the Use of Financial Derivatives: An Explanation 6.1.1 Perceived Benefits and Risks of Using Financial Derivatives 6.1.2 Reasons for Directors’ Poor Understanding of Financial Derivatives Use 6.2 Influence of Directors’ Knowledge on Attitude and Other Variables 6.2.1 Positive Attitude 6.2.2 Strong Intention 6.2.3 Risk Propensity 6.2.4 Limited Supply of Capable Human Resources for Financial Derivatives Market 6.3 Gaps and Risks 6.3.1 Reasons for Worry About the Gaps 6.3.2 Reasons not to Worry About the Gaps 6.4 Business Culture 6.4.1 Low Levels of Trust in Employees 6.4.2 Low Care About Avoiding Losses, Focusing on Making Money 6.5 The Government’s Role in Establishing a Financial Derivatives Market 6.5.1 Setting up a Legal Framework 6.5.2 Developing Underlying Markets 6.5.3 Disseminating Knowledge and Training 6.6 The Market for Financial Derivatives in Vietnam 6.6.1 Suppliers and Products 6.6.2 Users and Purposes for Using Financial Derivatives 6.6.3 Market Development Predictions 6.6.4 Reasons for not Using Financial Derivatives 6.6.5 The Most Popular Types of Financial Derivatives in Vietnam References 7 Ways Forward: Corporate Governance Policies 7.1 Combination of Qualitative and Quantitative Elements to Address Research Questions 7.1.1 Directors’ Understanding of Using Financial Derivatives 7.1.2 Association Between Directors’ Knowledge and Attitude to Financial Derivatives 7.1.3 Key Stakeholders in Board Directors’ Consideration of Using Financial Derivatives and Their Roles 7.2 Directors’ Recommended Ways to Improve Their Knowledge of Financial Derivatives 7.2.1 Combination of Financial Derivatives Experts in Boards of Directors 7.2.2 Training 7.2.3 Self-Learning and Actual Practice 7.2.4 Outside Consultancy 7.3 Corporate Policy on Financial Derivatives as Suggested by Directors 7.3.1 Risk Management Framework 7.3.2 Delegation of Approval Authority 7.3.3 Ethics 7.3.4 Outside Consultancy 7.4 Ways Forwards for Stakeholders 7.4.1 Implications for Theorists 7.4.2 Government Authorities 7.4.3 Corporate Boards 7.4.4 Board Directors 7.4.5 Training Organisations 7.5 Contribution, Limitations and Recommendations for Future Research 7.5.1 Contribution to Knowledge 7.5.2 Contribution to Theory and Practice 7.5.3 Contribution to Methodology 7.5.4 Limitations and Recommendations for Future Research 7.6 Conclusion References Appendix A Non-parametric Correlations Among Directors’ Knowledge, Attitude, Risk Propensity, Subjective Norm, Perceived Behavioural Control and Intention to Use Financial Derivatives Appendix B Double Check on Factor Analysis by Covering All Selected Items Appendix C Normal and Partial Non-parametric Correlations of Variates in the Research Model Appendix D A Sample Risk Management Policy This book gives readers a look inside the boardrooms and directors minds a desirable but highly challenging task for researchers due to the lack of access to top teams in organizations. This book breaks through that barrier with a mixed-methods investigation of boardrooms in the emerging country of Vietnam particularly on the topic of financial derivatives. Directors are the leading players within the corporate governance framework. The general effectiveness of the board depends on their roles, processes and competencies. Given the scandals marring the history of the financial industry, this book aims to tackle the question of whether board directors have the financial acumen required to handle the tricky instruments of financial derivatives through interviews with board directors and analysis of their organizations. Providing a managerial perspective of financial derivatives, this distinguishes itself from more popular financial engineering books and would be a useful read for government officials, board directors, training organizations and scholars, particularly in Vietnam