THE INFLUENCE OF ACCOUNTING INFORMATION ON STOCK PRICE OF LISTED CONSTRUCTON AND REAL ESTATE FIRMS IN VIETNAM45460

IN TERNATIONAL CONFERENCE ON - CIFBA 2020 THE INFLUENCE OF ACCOUNTING INFORMATION ON STOCK PRICE OF LISTED CONSTRUCTON AND REAL ESTATE FIRMS IN VIETNAM Pham Ngoc Quang*, Vu Thi Thuy Dung University of Economics and Business - Vietnam National University, Hanoi ABSTRACT The objective of this study is to examine the relationship between accounting information and stock price movements of companies listed on both Hanoi and Ho Chi Minh Stock Exchange.The data used for thí study is the panel data collected from 136 listed companies in the construction and real estate industry for the period 2015 - 2018 Using the regression methods OLS, FEM, REM, FGLS and hyposethis testing, research results show that Earning per share (EPS) and Dividend per share (DPS) have a positive relationship with stock prices, in which Earnings per share has the most significant impact to stock prices As a result of that, the author recommends for investors to selectively consider accounting information; and listed firms need to improve the relevant accounting number in financial statements to attract potential investors Keywords: accounting information, stock price, construction and real estate INTRODUCTION Stock price is an important index for both firms to raise capital and investors to making investment decisions It can be influenced by many factors, including macroeconomic and microeconomic or financial and non-financial information According to a study by Drummen and Zimmermann (1992), characteristics of companies affect up to 50 % of stock prices Beaver (1968) found that the company’s financial reporting and accounting information could influence stock price Earning dislosure leads to significant change of stock price or trading volume Ball and Brown (1968) also proved that there is a corelation between accouting information and stock price Investors use declared accounting information when they trade stocks According to the survey done by the Boston College (2007), with regard to relationship between accounting information and investment decisions, 62% of respondents favored *Corresponding author Email address: quangngocpham@rocketmail.com 570 VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS financial information and only 38% favor to the non financial information for use in investment decisions According to Yen (2012), there are three main groups of factors causing stock price fluctuations: economic factors, non-economic factors and market factors Accordingly, factors affecting the price fluctuations of listed stocks include internal factors of the enterprise, corporate income, dividends, political conditions, government policies, periods expectation of investors Meanwhile, the basis of financial analysis to support investors' decisions is largely based on accounting information from the company's public reports Stock price is one of the important factors for investors to consider when deciding to invest This is also the factor that managers of listed companies are interested in because it affects the value of company assets, decisions to buy or sell shares of shareholders and especially greatly affects the position of the firms in the market Vietnam's stock market has been increasingly expanding and developing strongly, gradually approaching standards and international integration The construction and real estate firms is considered to support, link economic sectors and have longterm potential According to a report of the Ministry of Construction, in 2019 the construction industry has achieved many important results Specifically, construction activities grew at a rate of 7.85% over the same period in 2018, contributing 0.48 percentage points to the growth rate of the total added value of the whole economy; construction production value of the whole industry at current prices reached VND 647.46 trillion (up 10.8% compared to the same period in 2018); real estate business increased by 4.43%, contributing 0.27 percentage points A great deal of researchs have been carried out to evaluate the influence of accounting information on stock price However, the results of those researches are different between regions, industrial sectors or period of studies Given the importance of accounting information and stock prices for both investors and corporate executives, the relationship of accounting information and stock prices of listed construction and real estate firms in Vietnam needs to be evaluated LITERATURE REVIEW Many studies have been conducted to examine the  relationships between accounting information and stock prices or stock returns This study present the  empirical literature focused on the  relationship between stock prices and financial ratios which are used widely in researches Ohlson (1995) built a model to show the relationship between stock prices and two accounting information on financial statements namely earnings per share (EPS) and book value per share (BV) The research proved these information positively related to stock price Durán et al (2007) studied and improved the Ohlson model by adding four dependent variables: profit before tax, interest, fixed asset depreciation (EBITDA), active cash flow per share (OCF), net cash flow per share (NCF), dividend per share (DPS) to test the relationship of accounting importance on stock prices Data were collected during the period 1991 - 2003 of companies listed on Mexican stock market The 571 IN TERNATIONAL CONFERENCE ON - CIFBA 2020 results show that the Ohlson model cannot be improved by replacing income with EBITDA, OCF, NCF, and DPS variables However, if the Ohlson model is improved by adding the independent variable operating cash flow per share, the independent variables have a better explanation of the fluctuation of the dependent variable Another study by Wang et al (2013) analyzed the relationship between accounting information and stock prices of 60 companies listed on Shanghai Stock Exchange in 2011 The results show that there is exists a positive relationship between accounting information and stock prices, and the impact of each indicator is different Earnings per share (EPS) and return on ordinary equity (ROE) have the most significant impact on share prices Receivables turnover, inventory turnover ratio, and liquidity ratio also impatc to stock prices, but the impact is not clear Vijitha and Nimalathasan (2014) studied the related value of accounting information including: earnings per share (EPS), net asset value per share (NAVPS), return on equity (ROE), earnings Per Share (P / E) to share prices of manufacturing industry companies on the Colombo Stock Exchange in Sri Lanka Survey results of 20 companies in the period 2008-2012 showed that except for EPS and NAVPS, other independent variables such as ROE and P/E had no significant impact on share prices Muhammad et al (2016) also studied the impact of accounting information on stock prices of companies listed on the Pakistani stock exchange The variables used in the empirical model are earnings per share (EPS), book value per share (BV), capital used per share (CEPS), net operating cash flow Per share (NOCFPS), the average stock price (SP) The results show that accounting variables such as earnings per share, book value per share and net operating cash flow per share have a significant influence on share prices during 2006-2013, in which EPS has the greatest impact Amahalu and Mary-Fidelis (2018) conducted a study with 11 ICT listed companies on the Nigieria Stock Exchange from 2010 to 2016 to examine the impact of accounting information on market share prices Research has shown that at the 5% significance level, DPS, EPS, ROE are statistically significant and have a positive relationship to the stock market price In 2019, Shahida Perveen published a study on the relevance of accounting information to the average stock price of 20 banking enterprises listed on Karachi Stock Exchange (Pakistan) over a period of years from 2007 to 2012 The independent variables used include: shareholders' equity, operating profit, ompany age, earnings per share, firm size, business growth and non-traditional activities The dependent variable is the average stock price The regression results show that earnings per share (EPS) is the most important variable in the model and positively impact on stock prices, 38% of the change in the average share price is explained by EPS Besides, firm size and non-traditional activities also have statistical significance and significant impact on stock prices In Vietnam, Doan (2011) applied the Ohlson model, testing the relationship between accounting and financial information (including book value, earnings per share, profitability ratios on equity and financial leverage ratio) and stock price of 474 listed companies in 2009 The results show that of the four independent variables surveyed, 572 VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS there is only earnings per share, profitability ratios on equity positively related to the share price However, the level of explanation of the variables in the model is quite low The data was collected only in year The stock price is the price of two times, has not been adjusted Loc and Nhat (2016) also applied the Ohlson model in combination with the Aboody (2002) price adjustment, collecting earnings per share and book value of each stock of 104 companies listed on the HOSE stock exchange during the period of 2008 - 2013 to measure the impact of accounting information on the price of stocks listed on HOSE The study provides empirical evidence that the earnings per share (EPS) and the book value of each stock (BVPS) were positively correlated with the stock price at a significant 5% The analysis also indicates that the ability of accounting information to reflect the stock price has a certain lag, consistent with the characteristics of Vietnam's stock market As mentioned, a number of studies using Ohlson model to evaluate the affect of accounting information on stock price with different markets, independent variables, period of study and therefore the results are different RESEARCH METHODOLOGY AND HYPOTHESIS DEVELOPMENT 3.1 Methodology Data collection The sample data is collected from 136 audited financial satements of construction and real estate companies in the period of 2015-2018 This result to 544 observations Share price is calculated basing on average share price closed on days from April to April 30 Due to fact that Circular 200/2014/TT-BTC affects the data of construction and real estate companies The companies in the sample has to be satisfied following conditions: listing before 1/1/2015, trading stocks during the period of publishing annual reports and not violating regulations on information disclosure Regression model Research methodology is based on Ohlson's model and previous studies, using six independent variables: earnings per share, book value per share, return on equity, dividend per share, net operating cash flow per share The regression model is created as follow: Pit = bit+ b1BVit+ b2ROEit + b3 EPSit + b4 DPSit + b5 NOCFPSit + uit The author applies regression methods of OLS, FEM, REM, FGLS to find the most suitable model and assesses the relationship of explanatory variables to stock prices The variables in the model are measured as follows: 573 IN TERNATIONAL CONFERENCE ON - CIFBA 2020 Dependent and Independent variables Symbol Measurement P The average share price closed on days from April to April 30 Stock price Earning per share Book value per share Return on equity ROE Profit after tax / Equity Dividend per share DPS (Common share - Preferred share) / Total outstanding share Net operating cash flow per share NOCFPS (Net income + Depreciation + Interest expense) / Total outstanding share EPS BV Profit after tax / Total outstanding shares (Total asset - Intangible asset - Total payable) / Total outstanding shares 3.2 Hypothesis development Ohlson (1995), Durán et al (2007), Adetula et al (2016), Muhammad (2016), Dung (2009), Loc Nhat (2016), Hung et al (2018), Ha et al (2018) poit out that book value per share positively affect on stock price Therefore, the first hypothesis is: H1: Book value per share (BV) positively affect on stock price of construction and real estate firms Wang et al (2013), Amahalu and Mary-Fidelis (2018), Đoan (2011) prove that return on equity has positive impact on stock price The second hyposethis is: H2: Return on equity (ROE) positively affect on stock price of construction and real estate firms Ohlson (1995), Durán et al (2007), Wang et al (2013), Vijitha and Nimalathasan (2014), Muhammad (2016), Amahalu and Mary-Fidelis (2018), Shahida Perveen (2019), Dung (2009), Đoan (2011), Loc and Nhat (2016) and Hung et al (2018) point out that earning per share positively affect on stock price Therefore, the third hypothesis is: H3: Earning per share (EPS) positively affect on stock price of construction and real estate firms Arccording to Adetula et al (2016), Amahalu and Mary-Fidelis (2018), dividend per share has positive affect on stock price The fourth hyposethis is: H4: Dividend per share (DPS) positively affect on stock price of construction and real estate firms Durán et al (2007) concludes that net operating cash flow per share (NOCFPS) has positive affect on stock price Therefore, the last hyposethis is: H5: Net operating cash flow per share (NOCFPS) positively affect on stock price of construction and real estate firms 574 VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS RESULTS AND DISCUSSION 4.1 Desciptive results Table 4.1 Descriptive statistics Variable Obs Mean Std Dev Min Max p 544 11.20189 13.70822 62 186.0716 bv 544 19.6025 25.39936 -36.68779 286.9193 roe 544 9.280083 13.10509 -117.6456 79.40587 eps 544 1.963084 3.325128 773 51.411 dps 544 9133821 1.657131 11.04899 nocfps 544 10.7156 14.35564 -3.0956 107.6817 Source Author’s statistics Table 4.1 describes variables used in the study, with the sample of 136 companies corresponding to 544 observations In the period of 2015 - 2018, it can be seen that the average share price was in the range of VND 11.2019 thousand and the highest at VND 186.0716 thousand The average book value of companies is VND 19,6025 thousand, the highest is VND 286,9193 thousand The rate of return per share ranges from -117.6% to 79.4%, averaging at 9.28% Descriptive statistics also show that the highest earnings per share of companies is at 51,411 thousand VND, an average of 1,963 thousand VND In addition, the average dividend per share of the companies fluctuated slightly, at about VND 0.9134 thousand, the highest of only VND 11,04899 thousand The net operating cash flow per share ranged from -4.0956 thousand VND to 107.6817 thousand VND, an average of 10.76156 thousand VND Table 4.2 Correlation analysis between independent and dependent variables P Bv Roe Eps Dps Nocfps P 1.0000   0.3624 0.0000 0.2273 0.0000 0.5070 0.0000 0.2063 0.0000 0.3062 0.0000 Bv   Roe   Eps   Dps   Nocfps   1.0000 0.0934 0.0293 0.2747 0.0000 0.1262 0.0032 0.6061 0.0000 1.0000 0.5062 0.0000 0.2144 0.0000 0.2276 0.0000 1.0000 0.1998 0.0000 0.3801 0.0000 1.0000 0.1745 0.0000 1.0000 Source Author’s statistics From the result of checking the correlation among variables in the model, it can be seen that level of Sig correlation of Pearson's test between independent and dependent variables is less than 5% As the result, the independent variables BV, ROE, EPS, DPS, NOCFPS are correlated with dependence variable In particular, with Pearson correlation coefficient of 0.0507 and significance level of 0%, EPS is closely correlated with stock prices, followed by BV, NOCFPS, ROE and DPS 575 IN TERNATIONAL CONFERENCE ON - CIFBA 2020 4.2 Regression results and discussion Results The author uses Stata 14.0 for analyse data collected First, the least squares regression model (OLS) is applied After having OLS results, Fixed impact (FEM) and Random impact (REM) models are used to analyze the data The model that most fits the research data is tested through F test and Hausman test FEM model uses F test to verify with the hypothesis H0 that there is no difference between different objects or time points Rejecting the H0 hypothesis with a given significance level will indicate that the fixed impact estimate is appropriate The F test shows that Prob > F = 0.0000 or P-value < 5%, thus rejecting the hypothesis H0 (H0: fixed effects = 0), thus using FEM is more appropriate than OLS Hausman test will be used to select the appropriate estimation method between FEM and REM Hausman's test shows that Prob> chi = < α = 5%, so the errors are not correlated with the independent variables in the model Therefore, using the FEM fixed impact model is appropriate After finding a regression model that is consistent with the research data, the author examines the model's defects The authors finds the autocorrelation defects and variance of errors In order to solve the defects, estimated error correction model (FGLS) then is applied Table 4.3 Regression results after remedying defects with FGLS Cross-sectional time-series FGLS regression Coefficients: generalized least squares Panels: heteroskedastic Correlation: common AR(1) coefficient for all panels (0.5719) Estimated covariances Estimated autocorrelations Estimated coefficients P Bv Roe Eps Dps Nocfps _cons Coef .0098058 0184174 9202356 3270751 0052476 6.628772 = = = 136 Std Err .0140616 0172124 1293863 1320495 0148165 3439047 Z 0.70 1.07 7.11 2.48 0.35 19.28 P > |z| 0.486 0.285 0.000 0.013 0.723 0.000 Number of obs Number of groups Time periods Wald chi2(5) Prob > chi2 [95% Conf -.0177544 -.0153183 6666432 0682628 -.0237922 5.94731 = 544 = 136 = = 104.57 = 0.0000 Interval] 0373661 0521531 1.173828 5858874 0343873 7.302813 Source Author’s statistics From table 4.4, FEM was rated as the most suitable model based on the tests of F test and Hausman However, FEM has some shortcomings such as autocorrelation and variance of variance Therefore, FGLS has been used to overcome the model's defects Based on FGLS regression results in Table 4.4, EPS and DPS have a positive relationship with stock prices 576 VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS The variable book price per share (BV) impacts the share prices at the 1% and 5% significance levels in the OLS and FEM models The earnings per share (EPS) variable has an affect on the stock price at 1% significance level in all models Besides, dividend per share (DPS) variable also has an impact on stock price with a 5% and 10% significance level in the OLS and FGLS model respectively Table 4.4 Summary of regression model results Bv Roe Eps Dps Nocfps _cons N R – sq T OLS FEM P P 0.131*** -0.114** (5.38) (-3.12) -0.0403 -0.00779 ( -0.92) (-0.21) 1.846*** 0.846*** (10.24) (5.24) 0.809** 0.159 (2.66) (0.62) -0.0182 -0.140 (-0.41) (-1.34) 4.846*** 13.20*** (6.78) (17.44) 544 544 0.320 0.134 statistics in parentheses *p 0, DPS has a positive impact on construction and real estate stocks Hypothesis H4 is accepted H5: Net operating cash flow per share (NOCFPS) positively affect on stock price of construction and real estate firms P - value of NOCFPS is equal to 0.723> 0.1, so the net operating cash flow per share (NOCFPS) is not statistically significant, rejecting the hypothesis H5 The net operating cash flow per share has no relationship with stock prices of listed companies in construction and real estate industry Discussion Independent variable earnings per share (EPS) has a positive relationship with stock prices This result coincides with most previous studies: Ohlson (1995), Durán et al (2007), Wang et al (2013), Vijitha and Nimalathasan (2014), Muhammad (2016), Adetula et al (2016), Amahalu and Mary-Fidelis (2018), Shahida Perveen (2019), Nguyen Viet Dung (2009), Nguyen Thi Thuc Doan (2011), Truong Dong Loc and Nguyen Minh Nhat (2016), Hoang Thi Viet Ha et al (2018), Dang Ngoc Hung et al (2018) Thus, the more profitable company earns, the higher stock price gains This result reinforces the attention of investors to earnings per share information of construction industry and real estate firms Independent variables dividend per share (DPS) positively relates to the price of listed stocks This result is consistent with the studies of Adetula et al (2016), Amahalu and Mary -Fidelis (2018) Dividend is the income as well as the rights of shareholders Company pays a high dividend rate can prove the ability to operate effectively as well as strengthen the confidence of shareholders, attracting potential investors and pushes the stock price higher Therefore, in addition to the company's operating income, dividend paid to shareholders is also an important factor affecting stock price changes and affecting investor actions For businesses, complete, timely and accurate disclosure of audited financial statements, annual reports will bring transparency in information, creating confidence for investors in decision making purpose For potential investors, when deciding to invest in a construction and real estate business, it is important to pay attention to the most important influential information such as earnings per share and dividends per share The changes of these two independent variables will have significant impact on the industry's share price Futhermore, because the impact of accounting information such as earnings per share and dividends on each stock ranges from 15.9% to 69%, investors should also consider other market factors, economic trends, and other non-financial information in order to make resonable decision Limitation Firsly, due to the validity of regulations on accounting and information disclosure, the data is collected from the year 2015 to 2018 The data can be more meaningful 578 VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS if the number of year observations increased Secondly, the research is conducted quantitatively on the basis of Ohlson model and the variables are adjusted according to modern research trends However, Vietnam is not an efficient stock market, the theory for price adjustment, the level of interpretation of the independent and dependent variable in this study are still limited Therefore, research more deeply in theory about the raltionship between accounting information and stock price at an inefficient market is strongly recommened REFERENCES [1] Adetula, D T., Obigbemi, I S., Owolabi F and Nwobu O., (2016), “Accounting Numbers and Stock Prices in the Nigerian Stock Market”, Journal of Accounting and Auditing: Research & Practice, Vol.2016 (2016), DOI: 10.5171/2016.252697 [2] Amahalu, N N., Abiahu Mary-F C., Obi, J C & Nweze C L., “Effect of accounting information on market share price of selected firms listed on Nigeria stock exchange”, International Journal of Recent Advances in Multidisciplinary Research, Vol.5(1), pp 3366-3374 [3] Ball R, Brown (1968), “An empirical evaluation of accounting income numbers”, Journal of Accounting research, 159-178 [4] Drummen, M and Zimmermann, H (1992), “The structure of European stock returns”, Financial Analysts Journal, 48(4): 15-26 [5] Doan, N N T (2013), "Impact of accounting information and financial indicators on stock prices on Vietnam's stock market", Journal of Banking Technology, Vol.62, pp 23-27 [6] Dung, N V (2009), "The relationship between financial reporting information and stock prices: flexible application of modern theory to the case of Vietnam", Journal of Economic Research, Vol.375, pp 18-32 [7] Durán, R., Lorenzo, A and Valencia, H (2007), “Value relevance of the Ohlson model with Mexican data”, Contaduría y Administración, Vol.223, pp 33-52 [8] Ha, H T V, Hung, D N and Dung, T M (2018), “Impact of Accounting Data on Stock Prices: The Case of Vietnam”, International Journal of Accounting and Financial Reporting, Vol.8(1) pp 140-154 [9] Hung, D N, Dung, T M and Anh, N T L (2018), “Investigation of the impact of financial information on stock prices: the case of Vietnam”, Academy of Accounting and Financial Studies Journal, Vol.22(2) [10] Loc, T, D and Nhat, N M (2016), “Ảnh hưởng thơng tin kế tốn đến giá cổ phiếu: chứng thực nghiệm từ sở giao dịch chứng khốn thành phố Hồ Chí Minh”, Tạp chí khoa học Đại học mở TP HCM, Vol.4(49), pp 62-71 [11] Loc, T, D and Nhat, N M (2016), “Ảnh hưởng thơng tin kế tốn đến giá cổ phiếu sở giao dịch chứng khốn Hà Nội”, Tạp chí Khoa học Cơng Nghệ, Vol.126 [12] Muhammad, A., Kashif, A & Waqar, A (2016), “Impact of Accounting Information on Share Price: Empirical Evidence from Pakistan Stock Exchange”, International Finance and Banking, Vol.3(1), pp 124-135 [13] Ohlson, J A (1995) “Earnings, book values, and dividends in equity valuation”, Contemporary Accounting Research, Vol.11, pp 661-688 579 IN TERNATIONAL CONFERENCE ON - CIFBA 2020 [14] Shahida Perveen (2019), “Value Relevance of Accounting Information: An Empirical Analysis of Banking Sector of Pakistan”, Journal of Markeing and Information Systems (JMIS), Vol.1(2), pp 10-17 [15] The Ministry of Finance, “Quyết định 15/2006/QĐ-BTC Về việc ban hành Chế độ Kế toán doanh nghiệp”, download from http://vbpl.vn/botaichinh/Pages/vbpq-van-bangoc.aspx?ItemID=16280 [16] The Ministry of Finance, “Thơng tư 200/2014/TT-BTC Hướng dẫn chế độ kế tốn doanh nghiệp”, download from http://vbpl.vn/botaichinh/Pages/vbpq-van-ban-goc aspx?ItemID=66801 [17] Vijitha P and Nimalathasan B (2014), “Value relevance of accounting information and share price: A study of listed manufacturing companies in Sri Lanka”, Merit Research Journal of Business and Management, Vol 2(1) pp 001-006 [18] Wang, J., Gang, F and Chao, L (2013), “Accounting Information and Stock Price Reaction of Listed Companies - Empirical Evidence from 60 Listed Companies in Shanghai Stock Exchange”, Journal of Business & Management, Vol.2(2), pp 11-21 [19] Wu, S N., & Huang, Z G (1997) An Empirical Analysis on Report of Earnings Information, Stock Price Changes and Stock Market Efficiency Accounting Research, 1997(4), 12-17 580 ... position of the firms in the market Vietnam's stock market has been increasingly expanding and developing strongly, gradually approaching standards and international integration The construction and. .. no relation to the stock price of listed companies in construction and real estate industry H3: Earning per share (EPS) positively affect on stock price of construction and real estate firms P... Thus, the more profitable company earns, the higher stock price gains This result reinforces the attention of investors to earnings per share information of construction industry and real estate firms