Navigating corporate governance and involuntary delisting in frontier markets: a nuanced perspective from Vietnam

This study investigates the impact of corporate governance quality on the risk of involuntary delisting in Vietnam’s emerging capital market. Utilizing data from 895 non-financial Vietnamese firms over 2008–2023, we create a comprehensive Corporate Governance Index (CGI) focusing on board composition and diversity aligned with Vietnamese corporate governance practices. We find a substantial link between higher corporate governance quality proxied by a higher index and a decreased risk of involuntary delisting, particularly for non-state-owned enterprises, firms with significant foreign ownership and lower ownership concentration, and high-growth companies. Additionally, corporate governance measures improve the accuracy of delisting prediction models, a finding consistent across alternative dependent variables. The robustness of our results, after addressing endogeneity concerns, underscores the significance of these findings for the Vietnamese government’s efforts in attracting foreign capital amid ongoing financial market liberalization.