Ever since the economic reform “Doi Moi” in 1986, Vietnam has been showing impressive growth as a nation economically. The policies implemented changed the country’s economic type from an agriculture-based command economy to a socialist-oriented market economy. As a result, the country enjoyed major boosts in production of all sectors over the years. With the change came along foreign investments, openness to trade with other countries, and most importantly the privatization of firms, which has been regarded as the most prominent change of the economic renovation that contributed the most to Vietnam’s increase in firm efficiency. This paper aims to investigate the validity of this notion by exploring the effect privatization had on firms’ productivities through the comparison of the performances of both private firms and state-owned enterprises (SOEs). We use the theoretical frameworks of the Property Rights Theory, the Agency Theory, and the first-order condition of the profit function to analyze the intuition behind the differences in efficiency of these two firm types. Our fixed effects model shows public firms’ return on investment decrease with the level of human capital, whereas private firms gain positive returns from additional levels of education. Meanwhile, average yearly income has positively significant effect and the number of workers hired exhibits miniscule, yet significant negative correlations to the return on investments on all types of firms and enterprises.
Nguyen, Dung, "“Keep It Private:” A Study on the Effect of Privatization on the Efficiency of Firms in Vietnam" (2021). Senior Independent Study Theses. Paper 9342.
Business Administration, Management, and Operations
privatization, productivity, economic transition, state-owned enterprises, fixed-effect model
Bachelor of Arts
Senior Independent Study Thesis
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