Improved financial reporting can drive more money into Vietnam stock market

The peak season for firms releasing their regular financial reports is a key time for investors to access information about businesses and make their investment decisions.

According to VNDirect, a leading Vietnamese brokerage house, as of August 3, 1,085 listed companies on the three Vietnamese stock exchanges, or 95.3% of the market capitalization, had announced their business results for the second quarter of 2023. This shows a significant number of firms did not meet the deadline.

At the end of August, the Ho Chi Minh City Stock Exchange (HoSE) sent reminders to companies including Dong A Plastic JSC (DAG), Hai Phat Investment JSC (HPX), Apax Holdings Joint Stock Company (IBC), Sunstar Investment Joint Stock Company (SJF), and Binh Duong Trade And Development JSC (TDC) regarding delays to their financial releases.

This problem is not uncommon in the Vietnamese stock market and happens every year and every quarter. A prime example is national flag carrier Vietnam Airlines JSC (HVN) which failed to meet deadlines for its audited financial reports in 2022. As a result, HVN shares were restricted from trading from July 12, 2023, negatively impacting shareholders and slowing investors’ access to information.

The quality of financial reporting is also a concern as more and more “data cooking” issues are being detected. This leads to differences between audited and unaudited reports, even from profits to losses and vice versa. Although firms provide clarifications for these differences, such changes negatively impact investors, shareholders, and the market.

Another notable problem is that firms rarely release other information, such as operational activities, stock issuances, and others.

Transparency in financial reporting empowers market

Timely, correct, and complete disclosure of financial information can not only help fortify the confidence of shareholders, potential investors, and relevant sides, but also boost the firm’s reputation among market regulators. Transparency is also key to upgrading the stock market's status and a major factor in its sustainable growth in the long term.

It is stipulated that large-scale public companies and listed organizations must release their quarterly financial reports within 20 days from the end of the quarter, and their audited financial reports within five days of auditors completing the report but no more than 45 days from the end of the quarter. In case they are the parent bodies of other entities, or their parent firms have separate accounting departments, they must release their financial reports within 30 days from the end of the quarter.

It is also stipulated that the release of financial information can be delayed in cases of force majeure, such as natural disasters, fire, war, plague, and others. Listed companies must announce such delays to the governing bodies and the public immediately at the time of the events.

The non-disclosure of information has led to problems related to transparency, making it difficult for investors to access the “health” of businesses and make investment decisions. However, the consequences are light, such as fines of between VND10 million and VND3 billion ($415-124,600) which fail to deter violations.

Nguyen The Minh, chief analyst at Yuanta Securities Vietnam, said that “data cooking” remains a chronic problem for the market. He pointed out that individual investors are usually unable to verify information and rarely pay attention to other details besides revenue and profits, hence it is difficult to detect information that firms intentionally plans to hide from the report. "Nevertheless, firms can only conduct themselves in this way in the short term as their performances always lead to equivalent results."

Offering recommendations, Minh noted that investors should themselves compile a list of firms with massive differences between unaudited and audited reports and skip investments in suspicious cases. For businesses, they should ensure transparency to attract more investors.