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Understanding financial derivatives usage by directors and its impact on corporate governance policies in Vietnam

Tran, Lien (2018) Understanding financial derivatives usage by directors and its impact on corporate governance policies in Vietnam. PhD thesis, Murdoch University.

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Purpose: Directing and controlling a company to achieve its strategic and tactical goals requires a complex network of relationships with stakeholders which means boards need to have directors with adequate competencies and skills. Do directors of boards have the required level of knowledge and does such knowledge have potential impacts on corporate governance policy? This thesis examines these questions in the context of financial derivatives in the emerging economy of Vietnam to add to the literature on individual directors’ understanding of the use of such controversial instruments.

Methodology: This thesis used a mixed methods approach, with a survey of 119 directors followed by qualitative interviews with 19 directors of public corporations in Vietnam using insights from the theory of planned behaviour combined with the model of board roles and attributes, and stakeholder theory.

Findings: Directors’ knowledge of financial derivatives is relatively low and strongly affected by their education and working experience. In addition, directors’ knowledge is associated with critical factors that impact their intention to use financial derivatives, which is the direct predictor of their future behaviour in deciding to use the instruments. Such an interaction among knowledge, intention and behaviour is a concern to the directors who were experienced in financial issues; directors worry about threats to corporations when directors lack knowledge while having positive attitudes and high levels of intention. Financially experienced directors suggested appropriate corporate risk management policy and director training as two key solutions to these threats. The interviews also uncovered emerging themes about business culture, the government’s role and the market for financial derivatives which have impacted directors’ knowledge and corporate policies.

Research Limitations and Implications: Key limitations include the use of single country and cross-sectional data combined with a relatively small sample size and potential self-reporting bias. The main implications include the need for enhanced collaboration and cooperation among key stakeholders including the government, boards, individual directors and relevant training organisations. The government should lead by setting up a legal and regulatory framework for financial derivatives. Boards should clarify their corporate risk management policy, choose members to ensure the necessary competencies are available and accept continuous training. Individual directors should be aware of and take part in self-learning and training to be suitable for their position. Finally, training organisations should customise their courses for directors to suit directors’ time constraints and their strategic level leadership.

Originality: This thesis was the first to investigate individual board director behaviour in Vietnam and to analyse directors’ understanding of financial derivatives and their related decision making in an emerging economy.

Keywords: Theory of Planned Behaviour, Stakeholder Theory, Board Directors, Financial Derivatives, Corporate Governance, Risk Management, Vietnam, Mixed Methods

Item Type: Thesis (PhD)
Murdoch Affiliation(s): School Of Business and Governance
Supervisor(s): Holloway, David, Paull, Megan, Girardi, Antonia and Gasbarro, Domenico
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