Vietnam FTSE Inclusion Puts Governance Under Pressure

State Securities Commission Chair Vu Thi Chan Phuong told a conference on corporate governance and financial reporting that many companies have improved board operations, internal controls, risk management and investor relations. But she said a significant group still does only the minimum required, with limited attention to board independence, minority shareholder protection and accountability.

The warning lands at a sensitive time for Vietnam’s market structure. State-owned and formerly state-owned companies account for about 50% of listed and registered firms and 42.7% of market capitalization, so any upgrade in governance at that layer would reshape the broader market, not just a handful of names.

The commission also pointed to recurring problems in financial statements, including large gaps between pre- and post-audit figures, revenue and expense recognition in the wrong period, poor classification of items and thin disclosure of key information. Some companies are still not fully reporting related-party transactions, executive pay, pledged assets, loans or business cooperation contracts.

Those lapses matter for investors because foreign institutions typically pay as much attention to how companies make decisions as to how fast they grow. Weak disclosure increases the discount investors demand, complicates index inclusion at the stock level and raises the risk that capital entering on FTSE reclassification does not stay.

Audit quality is also under the microscope. The commission said it reviews around 8 to 10 approved audit firms each year and has sanctioned auditors in cases where procedures were incomplete, evidence was insufficient or opinions did not match standards. It said it will step up inspections, penalties and further rulemaking on board responsibilities, ethics, diversity, risk management and sustainability disclosure.

The policy signal is that Vietnam wants market upgrading to force a broader lift in standards, not simply open the door to foreign money. For investors, that means the next catalyst is not just the Sept. 21 inclusion date, but whether regulators can translate it into higher reporting quality, cleaner governance and a lower risk premium across the market.