The Impact of Foreign Ownership and the Moderating Role of Ownership Concentration on the Financial Performance of Listed Non-Financial Firms in Vietnam

Amidst conflicting empirical evidence on the impact of foreign ownership in emerging markets, stemming from the dichotomy between the active monitoring role posited by agency theory and concerns over information asymmetry, clarifying this relationship becomes particular pressing in Vietnam, a market characterized by high ownership concentration. This study aims to comprehensively examine (i) the direct effect, (ii) the nonlinear relationship of foreign ownership, and (iii) the moderating role of ownership concentration on firm financial performance. Using an unbalanced panel dataset of 485 non-financial listed firms over the period 2015-2024 (4125 firm-year observations), with financial performance measured by Tobin’s Q and ROA, the study employs the Fixed Effects Model (FEM), complemented by robust estimation methods such as the System Generalized Method of Moments (System GMM) to address endogeneity concerns. The results yield three core findings: (i) foreign ownership has a positive and statistical significant impact on financial performance, supporting the monitoring role of foreign investors; (ii) ownership concentration plays a negative moderating role, significantly weakening this positive relationship, suggesting that the power of large shareholders can impede the benefits derived from foreign investors; and (iii) an inverted U-shaped nonlinear relationship is identified, with an optimal foreign ownership threshold between 25-28 %, beyond which marginal benefits begin to diminish. The study concludes that the benefits of foreign ownership are not absolute but are constrained by the internal governance context and that an optimal point exists.