Competition and firm performance: evidence from Vietnam

Tuyet, Nguyen Le Hoa; Ninh, Le Khuong

doi:10.1108/RAUSP-03-2022-0094

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Sumário

Research Paper • RAUSP 58 (2) • Apr-Jun 2023 • https://doi.org/10.1108/RAUSP-03-2022-0094 copy

Competition and firm performance: evidence from Vietnam

Authorship SCIMAGO INSTITUTIONS RANKINGS

Abstract

Purpose

This paper aims to examine the impact of competition on firm performance using a data set of 352 firms listed on Vietnam’s stock exchanges from 2015 to 2019.

Design/methodology/approach

The two-step system generalized method of moments is used to estimate this impact.

Findings

The findings reveal an inverted U-shaped relationship between competition and firm performance. Competition improves firm performance if its intensity is moderate. However, if the competition intensity exceeds the optimal level, the performance deteriorates accordingly.

Research limitations/implications

The authors only studied Vietnamese firms due to the limited ability in data collection. It would be better to validate the findings using data from other transition economies.

Practical implications

The non-linear relationship between competition and performance implies that government should pay more attention to retaining competition at an appropriate level.

Social implications

Firms contribute a lot to the prosperity of Vietnam. Therefore, the findings have a meaningful implication for Vietnam’s government to moderate competition to improve its firms’ performance.

Originality/value

This paper contributes to the extant literature by providing firsthand evidence of the impact of competition on firm performance in Vietnam – a transition economy.

Keywords
Boone indicator; Competition; Leverage; Performance; Vietnam

Sectors	ROA (%)	ROE (%)	ROS (%)	Comp (BI)	Fage	Size	Labor	Fass	Lev	Growth
Manufacturing	6.15	12.16	5.89	1.04	30.28	13.42	3,165.67	0.28	1.53	12.46
Trade	4.58	11.23	6.07	1.06	24.19	13.79	770.89	0.17	2.16	15.92
Service	6.92	12.76	11.46	0.58	23.25	13.57	3,353.99	0.40	1.41	16.82
Sample	6.10	12.16	7.07	0.95	28.01	13.50	2,884.97	0.29	1.59	13.82

Variables	ROA	ROE	ROS
Intercept	–6.734^* Notes: (*), () and (*) denote significant at 1, 5 and 10%, respectively. (–1.880)	–22.180^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.410)	–16.176 (–1.560)
Comp_i,t	11.378^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (2.800)	25.044^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (2.220)	22.646^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (3.450)
$C o m p_{i, t}^{2}$	–3.247^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.660)	–6.647^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.130)	–6.107^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–3.440)
Fage_i,t	–0.005 (−0.320)	–0.027 (–0.880)	–0.033 (–1.000)
Size_i,t	0.175 (1.400)	0.732^* Notes: (*), () and (*) denote significant at 1, 5 and 10%, respectively. (1.710)	1.024 (1.430)
Labor_i,t	0.000 (–0.630)	0.000 (1.350)	0.000 (–0.760)
Fass_i,t	–1.088^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.330)	–6.425^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.420)	–4.303^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.350)
Lev_i,t	–0.247^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.530)	–0.033 (–0.030)	–0.435^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.620)
Growth_i,t	0.029^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (3.290)	0.074^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (2.890)	0.018^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (2.520)
Perf_t ₋₁	0.458^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (4.440)	0.703^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (6.750)	0.262^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (2.090)
Trade_i,t	–2.262^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–3.220)	–4.443^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.560)	–7.148^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–4.080)
Manu_i,t	–2.213^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.700)	–5.047^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–2.230)	–8.151^* Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (–4.840)
GDP_i,t ₋₁	0.408^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (2.280)	0.763^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (2.200)	0.383^ Notes: (), () and () denote significant at 1, 5 and 10%, respectively. (2.110)
Number of observations	1,408	1,408	1,408
Number of groups	352	352	352
Wald test	1,042.010	1,297.350	329.930
Wald test p-value	0.000	0.000	0.000
AR(1) p-value	0.000	0.000	0.000
AR(2) p-value	0.288	0.363	0.309
Hansen-J test p-value	0.540	0.550	0.490

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E-mail: rausp@usp.br

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[1] Le Khuong Ninh Le can be contacted at: lekhuongninh@gmail.com