Seasoned equity offerings evidence in vietnamese stock market

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY DINH THI THU HA SEASONED EQUITY OFFERINGS EVIDENCE IN VIETNAMESE STOCK MARKET DOCTORAL THESIS HoChiMinh City – 2017 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY DINH THI THU HA SEASONED EQUITY OFFERINGS EVIDENCE IN VIETNAMESE STOCK MARKET Specialization: Finance – Banking Specialization code: 62340201 DOCTORAL THESIS SUPERVISOR: Asso.Prof HO VIET TIEN Asso.Prof BUI KIM YEN HoChiMinh City – 2017 i TABLE OF CONTENTS List of Abbreviations List of Tables List of Figures Chapter 1: Introduction 1.1 Research motivation 1.2 Research objectives .6 1.3 Research questions 1.4 Research scope 1.5 Research methods 1.6 Research contributions 10 1.7 Structure of the study 11 1.8 A summary of thesis findings 13 Chapter 2: Literature review and Hypotheses development 16 2.1 Introduction 16 2.2 Theoretical literature on SEOs 16 2.2.1 Trade-off Theory 16 2.2.2 Growth Opportunities Theory 18 2.2.3 Market timing theory 20 2.2.4 Agency problem theory 23 2.2.5 Efficient Market Hypothesis 24 2.3 Literature review on SEOs empirical studies 27 2.3.1 Determinants of company’s SEOs motivation 27 2.3.1.1 Trade-off theory 27 2.3.1.2 Growth Opportunities Theory 28 2.3.1.3 Market timing theory .30 ii 2.3.1.4 Agency problem theory 32 2.3.2 Market’s reactions to company’s SEOs .33 2.3.2.1 Growth Opportunities Theory 33 2.3.2.2 Market timing theory 35 2.3.2.3 Efficiency market hypothesis 37 2.4 Hypotheses building and variable measurements 40 2.4.1 Determinants of company’s SEOs motivation 40 2.4.2 Market’s reaction to company’s SEOs 43 2.5 Conclusion 45 Chapter 3: Data and methodology .47 3.1 Data 47 3.2 Methodology .51 3.2.1 Determinants of company’s SEOs motivation 51 3.2.2 Market reaction to company’s SEOs 56 3.2.2.1 Event study 56 3.2.2.2 Determinants of market reaction to company’s SEOs 64 Chapter Determinants of company’s SEOs motivation 71 4.1 Statistics summary .71 4.1.1 Distribution of SEOs over the sample period (2007-2013) .71 4.1.2 SEOs probability description 73 4.2 Determinants of company’s SEOs motivation 79 4.3 Determinants of company’s SEOs motivation by issuance method 85 4.4 Conclusion 91 Chapter Market’s reaction to company’s SEOs .92 5.1 Data description 92 5.2 Market reaction to company’s SEOs .93 5.2.1 Market reaction around announcement day 93 5.2.2 Market reaction around ex-right day 102 5.3 The relation between announcement day and ex-right day 111 5.4 Determinants of market reaction to company’s SEOs 112 5.4.1 Determinants of market reaction around announcement day 112 5.4.2 Determinants of market reaction around ex-right day .117 5.5 Conclusion 122 Chapter Conclusion and Suggestion 124 6.1 Conclusion 124 6.2 Suggestion for stakeholders 126 List of publications References Appendices LIST OF ABBREVIATIONS AAR: Average abnormal returns AD: Announcement day AR: Abnormal returns CAR: Cumulative average abnormal returns EMH: Efficient market hypothesis HOSE: Ho Chi Minh City Stock Exchange SEOs: Seasoned equity offerings XR: Ex-right day REC: Real estate and construction MAI: Manufacturing industry SER: Service FBI: Financial – Banking – Insurance services AFF: Agriculture, Fishery and Forestry LIST OF TABLES Table 1.1: Vietnamese lending interest rate Table 3.1: VNIndex and Market capitalization of listed domestic companies (% of GDP) in 2006 -2013 50 Table 3.2 Classification criteria: 51 Table 3.3 SEOs-motivation independent variables description 55 Table 3.4 SEOs-price reaction independent variables description .69 Table 4.1 Distribution of SEOs over the sample period (2007-2013) 71 Table 4.2 SEOs probability data description 73 Table 4.3 Characteristics between SEOs companies and non-SEOs companies 75 Table 4.4 SEOs description by issuance method 78 Table 4.5 SEOs conducting probability 83 Table 4.6 Average marginal effects on SEOs probability 84 Table 4.7 SEOs by equity right and by equity bonuses or dividends probability 88 Table 4.8 Average marginal effects on SEOs equity right and by equity bonuses or dividends probability .90 Table 5.1 Characteristics of SEOs companies around event day data description 92 Table 5.2 AAR and CAR around announcement day 95 Table 5.3 AAR and CAR around announcement day in favorable and unfavorable market timing .97 Table 5.4 Market reaction around announcement day divided by criteria .100 Table 5.5 AAR and CAR around ex-right day 103 Table 5.6 AAR and CAR around XR day in favorable and unfavorable market timing 106 Table 5.7 Market reaction around announcement day by criteria 109 Table 5.8 Determinants of market reaction around SEO announcement day 116 Table 5.9 Determinants of market reaction around SEOs ex-right day 121 LIST OF FIGURES Figure 1.1: Listing value and Market capitalization Figure 1.2: Research methods Figure 2.1: Conceptual framework .39 Figure 5.1 Relation between AD and XR 111 CHAPTER INTRODUCTION 1.1 Research motivation: Seasoned equity offerings (SEOs) draw enormous attention from researchers around the world This method is an effective and popular way to expand company financial resources to maintain and develop its activities, to reconstruct capital and stakeholder structure of company In order to finance companies’ activities, they can choose either internal sources or external sources of funding While the former mainly refer to profit or retained earnings, the latter mention the concept of debt financing as well as equity financing To estimate company’s financing decisions Modigliani and Miller (1958, 1963) suggest that capital structure is not consistent with firm value Nevertheless, this observation is based on the important assumption that the market is perfect The idea of perfect capital market consists of the following characteristics: (i) companies are classified based on their risk; additionally, companies having the same risk generate similar returns; (ii) perfect capital market which implies that there is no transaction cost, also no tax or bankruptcy cost; (iii) the interest rate for lending and borrowing activities are similar for private and investors as well as corporation However, in the real market, tax is deducted from interest expenditure Nevertheless, debt financing pressure may discourage firms to entirely use debt financing instead of equity financing (Huang, 2012) Besides the trade-off theory which mainly discuss tax shield as well as financial distress, there are also other factors affect the financing decision of company including information asymmetry costs, agency conflict costs and the availability of promising growth opportunities Besides, a trend of increasing international equity issuance has also been reported, especially after the financial crisis in 2010 To compensate for the losses and larger writedowns suffering from the crisis as well as to raise capital in the prediction of more strict regulations will occur, global financial institutions have to raise equity issuance substantially A report of Bloomberg in July 2010 shown that financial institutions, mainly from Europe and the United States, since mid2007 had raised US$1.5 trillion equity issue to offset their crisis losses (Witmer, 2010) The paucity of literature and case study in emerging market where results are inclusive also urge a solution There have been many research to find out company and market behavior such as determinants of companies that lead them to conduct SEOs, impact of SEOs on company stock prices when information about SEOs are publicized The number of research on this topic has been increasing with many aspects have been discovered and applied in practice However, the majority of existing SEOs research are examined at developed market (Eckbo et al., 2007) while only few research on cases of emerging market are conducted The paucity of literature and case study in emerging market has drawn attentions from researchers to this market Therefore, examining emerging economy case attracts the interest to fill the research gap and emphasize the own nature of this market In additional, examining whether the results of developed markets can be carried over to emerging market also becomes appealing In addition to examining determinants of company’s SEOs decision, researchers also show that stock prices on the market will be affected when information about the issuance is publicized In contrast to negative reactions in developed markets, the results of emerging markets are inclusive While there is a trend of positive reaction in the research of Kim and Lee (1990) for Korea; Salamudin et al (1999) for Malaysia; Tan et al (2002) for Singapore; Marisetty et al (2008) for Indian, the findings of Cahit (2006) for Turkey; Chen et al (2007) and Shahid (2010) for China; and Lerskullawat (2011) for Thailand, on the other Besides the results regarding to proxies for SEOs motivation explaining theories, all of our controlling variables show significance results We find that firm size estimated coefficients (Size) are significant with negative sign in all estimations, implying that smaller companies are more likely to conduct SEOs Our result in table 4.6 shows that smaller companies are 4% more likely to conduct SEOs than larger companies, we expect this result is explained by the fact that small companies with limited access to bank loan will try to increase their financial resources through SEOs instead of borrowing from the banks Secondly, the relation between the ratio of total debts/total assets and SEOs motivation is highly significant with positive sign in all estimations Our result shows that companies with higher ratio of total debts/total assets are nearly 88% more likely to conduct SEOs in comparison to those that have lower ratio of debt/total assets (Table 4.6) We believe that companies with higher ratio of debt are more motivated to issue SEOs as means to reduce their level of debt Thirdly, all the estimated coefficients for profitability are significantly positive, which is not consistent with pecking order theory prediction This theory claims that company profitability has negative correlation with SEOs decision because the more profitable the company is, the higher internal resources company has; therefore, it does not have to excess external resources such as loans borrowing or issuing SEOs However, within the case of Vietnamese companies, to guarantee the attraction and the success of the issuance, companies with more profitability will be more self-motivated to issue SEOs to attract the investors to the bright scenario future of companies The result in table 4.6 shows that companies with higher profitability are 72% more likely to conduct SEOs in comparison to those that have less profitability Table 4.5 SEOs conducting probability: Motivation of SEOs: panel data probit estimation This table presents results of Determinants of company’s SEOs motivation The sample period is from 2007 to 2013 The dependent variable is the probability that company issue its SEOs DILR is measured as Difference between company’s leverage ratio and average of industry’s leverage ratio; TobinQ is measured as (Market value of stock + Book value of debt)/Book value of total assets; MB is ratio of Market value/Book value; RMH indicates ratio of managerial holding include the board of directors, board of supervisor, president and CEO/Total outstanding shares; Size is Logarithm of total assets; DA indicates Total debt/Total asset; Profitability is EBIT/Total assets; t-statistics are in parentheses; *** Statistically significant at the 1% level; ** Statistically significant at the 5% level; * Statistically significant at 10% level DILR -0.041 (1) (-0.85) TobinQ (2) (3) 0.429 (7.55)*** 0.478 (11.52)*** MB -0.0002 (-1.39) RMH -0.164 Size (4) -0.172 -0.135 -0.168 (5) -0.045 (-0.98) 0.160 (2.09)** 0.449 (10.08)*** -0.0001 (-0.27) -0.146 DA Profitability Constant Adjusted R Prob>chi2 Obs (-5.23)*** (-4.85)*** (-3.73)*** (-5.13)*** (-3.98)*** 3.481772 (12.97)*** 4.255 3.275 (12.94)*** 2.354 (3.91)*** 0.550 (0.94) 0.2076 0.0000 1014 2.842 (10.75)*** 2.880 (4.61)*** 0.124 (0.20) 0.2920 0.0000 1014 3.197 (13.05)*** 3.976 (6.80)*** 1.160 (2.02)** 0.1581 0.0000 1014 3.192 (11.04)*** 2.601 (3.89)*** 0.157 (0.25) 0.3012 0.0000 1014 (7.10)*** 1.084 (0.056)* 0.1627 0.0000 1014 (Source: authors’ calculations) Table 4.6 Average marginal effects on SEOs probability: This table presents results of average marginal effects on SEOs motivation The sample period is from 2007 to 2013 DILR is measured as Difference between company’s leverage ratio and average of industry’s leverage ratio; TobinQ is measured as (Market value of stock + Book value of debt)/Book value of total assets; MB is ratio of Market value/Book value; RMH indicates ratio of managerial holding include the board of directors, board of supervisor, president and CEO/Total outstanding shares; Size is Logarithm of total assets; DA indicates Total debt/Total asset; Profitability is EBIT/Total assets; t-statistics are in parentheses; *** Statistically significant at the 1% level; ** Statistically significant at the 5% level; * Statistically significant at 10% level (1) DILR (2) (3) 0.135 (8.09)*** -0.000 (-1.39) 0.044 (2.11)** 0.124 (11.45)*** -0.000 (-0.27) -0.056 (-5.33)*** 0.921 (17.82)*** 0.938 (7.27)*** -0.040 (-4.08)*** 0.883 (13.65)*** 0.719 (3.97)*** 0.134 (13.77)*** MB RMH Size -0.057 (-5.44)*** DA 0.932 (17.48)*** 0.937 (7.63)*** (5) -0.012 (-1.02) -0.038 (-0.88) TobinQ Profitability (4) -0.051 (-5.01)*** 0.903 (17.58)*** 0.739 (3.99)*** -0.038 (-3.81)*** 0.916 (13.15)*** 0.809 (4.77)*** (Source: authors’ calculations) CHAPTER MARKET’S REACTION TO COMPANY’S SEOs 5.2 Market reaction to company’s SEOs: 5.2.1 Market reaction around announcement day: Table 5.2 shows the positive reaction of the market to company’s SEOs Prices experience consecutive increase from day -11 to day +2 The most remarkable increases are observed at the period of [-7;0] and [-2;+2] The cumulative average abnormal return in the period preceding announcement day increase steadily and significantly, especially seven days before the announcement day, price increases by 2.7% and are confirmed by statistic test at the significance level of 1% In the period of two days before and two days after the announcement day, the cumulative average abnormal returns also increase by 2.8% and are testified by the significance of % In contrast to the decrease of price in the period of 14 days after ex-right day, after announcement day, price only fall dramatically in three days (day +4; day +10 and day +12), where day +4 witness the most dramatic decrease, then followed by consecutive increase from day +5 to day +9, where day +6, and +7 experience significant increase Within the period of 15 trading days after announcement day, although the cumulative average abnormal returns still increase but this increasing trend does not prolong, CAR[O;+2] = 2.0% decrease to about 0.3% in the period of [+3;+14] In five consecutive days, from day +5 to day +9, price increase continuously, CAR[+5;+9] = 1.04% and this consecutive increase is confirmed by statistic test at the significance level of 1% This period has correlation with the distance between announcement day and ex-right day, where the gap between those days is usually from to days (Figure 5.1) The AAR on announcement day recorded positive return with significance level at 1% The ratio of number of AAR increased/AAR decreased also confirm this positive trend This result is consistent with finding of Dhatt (1996) in Korean stock market where the high volume of the SEOs will reduce the level of liability in a company then reduce the cost of financial distress leading to positive reactions from investors Tsangarakis (1996) study at Athens Stock Exchange also witnessed the same results The author finds that SEOs increase the financial resources in company, increase the ownership of big investors then reduce the agency cost; Tan el al (2002) show that in Singapore capital market, company issue SEOs after a period of stock price increasing; there is a trend of information leaked before the announcement day that enable speculators to achieve high returns Table 5.2 AAR and CAR around announcement day Day (t) AAR CAR[15;t] No of AR increased/No of AR decreased Day (t) AAR CAR[15;t] No of AR increased/No of AR decreased -15 0.000 0.000 244/271 0.006*** 0.030 285/230 ** -14 0.000 -0.001 240/275 0.010*** 0.040 322/193 *** -13 0.000 -0.001 243/272 0.004** 0.043 269/246 -12 -0.001 -0.001 232/283 ** 0.000 0.043 242/273 -11 0.001 0.000 264/251 -0.004*** 0.039 204/311 *** -10 0.000 0.000 241/274 0.002 0.041 249/266 -9 0.001 0.001 255/260 0.002* 0.044 256/259 -8 0.002 0.003 248/267 0.004*** 0.048 260/255 -7 0.003** 0.006 274/241 0.002 0.049 266/249 -6 0.002 0.008 251/264 0.001 0.050 239/276 * -5 0.001 0.009 260/255 10 -0.002 0.048 232/283 ** -4 0.004*** 0.013 274/241 11 0.000 0.048 236/279 -3 0.002 0.015 255/260 12 -0.002 0.046 213/302 *** -2 0.005*** 0.020 276/239 * 13 0.001 0.047 252/263 -1 0.003** 0.023 265/250 14 0.000 0.047 253/262 * Significant at 10% level, ** Significant at 5% level, *** Significant at 1% level (Source: authors’ calculations) 5.2.2 Market reaction around ex-right day: Table 5.5 shows that the stock prices increase significantly on ex-right day and one day later (day +1) with an increase of 1.2% and 0.6% respectively with the significance at 1% Examining the number of stocks increased/the number of stocks decreased on these two days, we find that the number of stock increased outweigh the number of stock decreased 333/182 (on day 0) and 290/225 (on day +1) The cumulative returns in the period [0; +1] and [0, +2] also record significant increase by 1.8% and 2% respectively In the period of ten days before the ex-right day, market react positively to companies’ SEOs, the stock prices experience continuous increase from day -15 to day -4 and most of them are at significance level of 1% The cumulative abnormal return of the market in the period [-15; -4] is recorded at 3.8% which is totally different to that of the period [-3;-1] where day is ex-right day, the price start to decline (the most significant decreases are at day -3 and day -2, the total decrease is about -0.8% with the significance level at 1% In contrast to period after announcement day, after ex-right day, the price decline continuously from day +3 to day +14 The cumulative returns in the period [+3;+7] is -0.9% and [+3;+14] is more than -1%, both results are significant at 1% We imply that after a period of prices increasing, seasoned equities become less attractive to investors, especially after the ex-right day Table 5.5 AAR and CAR around ex-right day Day (t) AAR CAR[15;t] No of AR increased/No of AR decreased -15 0.002*** 0.002 262/253 0.012*** 0.041 333/182 *** -14 0.001 0.004 247/268 0.006*** 0.047 290/225 *** -13 0.001 0.005 247/268 0.001 0.049 258/257 -12 0.001 0.006 251/264 -0.002** 0.047 227/288 *** -11 0.003*** 0.009 273/242 -0.002** 0.045 228/287 *** -10 0.003*** 0.012 269/246 -0.001 0.044 225/290 *** -9 0.006*** 0.018 288/227 *** -0.003*** 0.041 199/316 *** -8 0.006*** 0.024 272/243 -0.001 0.040 231/284 ** -7 0.004*** 0.027 273/242 0.001 0.041 254/261 -6 0.006*** 0.034 280/235 0.000 0.041 249/266 -5 0.004*** 0.037 268/247 * 10 -0.002** 0.039 223/292 *** -4 0.000 0.038 251/264 11 -0.001 0.038 225/290 *** -3 -0.004*** 0.034 216/299 *** 12 0.000 0.038 242/273 0.030 208/307 *** 13 0.000 0.038 257/258 0.029 228/287 *** 14 0.000 0.038 240/275 -2 -1 -0.004*** -0.001 Day (t) AAR No of AR increased/No of AR decreased CAR[-15;t] * Significant at 10% level, ** Significant at 5% level, *** Significant at 1% level (Source: authors’ calculations) 5.3 Determinants of market reaction to company’s SEOs: 5.3.1 Determinants of market reaction around announcement day: In the full model (column 3), the p-value is equal to 0.0002 which is 1% inferior, we conclude that overall the explanatory variables in our model can explain the determinants of market reaction around announcement day The estimated coefficients show that Market runup (Mrunup), firm size (Firmsize), issuance method (Issuemethod) are significant while other variables show no significant statistics results The TobinQ which is proxy for growth opportunities theory shows no significant result in both column (1) and (3), suggesting that investors are not influenced by the growth opportunities of company This result is irrelevant to our expectation that TobinQ positively affects market reaction around announcement day However, in case of Vietnamese stock market, this result can be explained that investor might not see information about growth opportunities advantageous information when consider buying SEOs, or they are not fully aware of the availability of company growth opportunities before announcement day From this result, we reject the hypothesis 6.a and conclude that growth opportunity theory does not play important role on determinants of market reaction around announcement day The estimated coefficients for the proxy of Market timing theory (Mrunup) has positive sign and is significant in both column (2) and (3), suggesting that the condition of the market before announcement day influences the market reaction Investors will base on the condition of the market from to months before announcement day to make their decisions on whether to get involved in company SEOs This result is relevant to our initial expectation that the better the market condition is, the better the market react to company SEOs From the results above we can conclude that the hypothesis H7a: Mrunup has positive impact on market’s reaction on announcement day is not rejected (hypothesis no rejected) Our result is consistent with the findings of of Salamudin et al (1999) at Malaysia stock market and Balachandran et al (2008) at London Stock Exchange The estimated coefficient of equity rights has negative sign means that, on average, this method generated 1.1% less returns than SEOs by equity bonuses or dividends The difference between those two methods is also testified at the significance of 5% Table 5.8 Determinants of market reaction around SEO announcement day Determinants of market reaction around announcement day: panel data Random effects, Fixed effects estimation This table presents results of regression on cumulative average abnormal return CAR[0;+2] The sample period is from 2007 to 2013 The dependent variable is cumulative abnormal return in the period [0;+2] TobinQ is measured as (Market value of stock + Book value of debt)/Book value of total assets; Mrunup indicates Market cumulative abnormal returns (VNIndex) in the period runs from day -65 to day -16, where day is the announcement day; DA indicates Total debt/Total asset; Issuesize denotes Logarithm of the volume of stock issued; Firmsize is Logarithm of total assets; Industry effect and issue method effect are controlled by adding industry dummy (REC takes value if SEOs issued company is listed in Real estate and construction group and takes value otherwise, MAI takes value if SEOs issued company is listed in Manufacturing industry group and takes value otherwise, SER takes value if SEOs issued company is listed in Service group and takes value otherwise, FBI takes value if SEOs issued company is listed in Financial – banking – Insurance services and takes value otherwise, AFF takes value if SEOs issued company is listed in Agriculture – Fishery – Forestry group and takes value otherwise); and issue method dummies; RMH indicates ratio of managerial holding include the board of directors, board of supervisor, president and CEO/Total outstanding shares; t-statistics are in parentheses; *** Statistically significant at the 1% level; ** Statistically significant at the 5% level; * Statistically significant at 10% level CAR TobinQ (1) (2) (3) Coef Coef Coef 0.052 (4.59)*** -0.002 (-0.13) 0.001 (0.21) -0.012 (-1.79)* 0.000 (0.36) 0.052 (4.55)*** -0.002 (-0.14) 0.000 (0.15) -0.011 (-1.66)* 0.001 (0.69) Mrunup DA Issuesize Firmsize Industry -0.004 (-0.31) 0.002 (0.29) -0.011 (-1.66)* MAI SER AFF Issuemethod RMH Cons Prob > chi2 0.002 (0.39) 0.005 (0.66) 0.019 (0.97) -0.011 (-2.29)** 0.000 (0.84) 0.094 (2.48)** 0.004 (0.65) 0.005 (0.74) 0.019 (0.95) -0.010 (-2.18)** 0.000 (0.97) 0.101 (2.70)** 0.004 (0.63) 0.005 (0.75) 0.019 (0.94) -0.011 (-2.20)** 0.000 (0.99) 0.097 (2.57)** 0.1279 0.0001 0.0002 * Significant at 10% level, ** Significant at 5% level, *** Significant at 1% level (Source: authors’ calculations) 5.3.2 Determinants of market reaction around ex-right day: Table 5.9 presents the determinants of market reaction around ex-right day The results from Hausman test show that random effects model is the appropriate model (p-value > 0.05); therefore we will interpret the results and test for heteroskedasticity, serial correlation and multicollinearity based on the random effects model In the full model (column 3), the p-value is equal to 0.0002 (inferior to 1%), we conclude that overall the explanatory variables in our model can explain the determinants of market reaction around ex-right day The estimated coefficients show that TobinQ, issue size (Issuesize), firm size (Firmsize), MAI (group of companies listed in Manufacturing industry which includes mining, processing, electricity production and distribution, natural gas, boiler, steamer and air conditioner) are significant while other variables show no significantly statistics results The coefficient TobinQ which is proxy for growth opportunities in both column (1) and (3) are significant with positive signs, suggesting that the information about existence of company growth opportunities influence the market reaction This result is relevant to our expectation that TobinQ have positive relation with company’s stock abnormal return since company with more investment opportunities can attract more investors to buy it SEOs We conclude that the growth opportunities theory impact on market reaction around ex-right day; therefore, the hypothesis 6b is accepted Market runup (Mrunup) which is proxy for market timing theory show no significant result, implying that market condition before ex-right day does not influence the reaction of the market, which is irrelevant to our expectation that better the market condition is, the better the market reaction to company SEOs From this result, hypothesis 7b is rejected The issue size, which is stand for the price pressure on company stock price is expected to have negative sign on event day because SEOs can increase the possibility of company stock dilution However, our result shows positive relation between issue size and market reaction This might be explained that in case of Vietnamese stock exchange, larger issuance will increase market liquidity, which leads to positive reaction The firm size is expected to have positive correlation with SEOs market reaction however our result show contradicted sign We think that, in case of Vietnamese stock market, investors might believe that the larger the company is, the more complicated it is, therefore the capital generated from the issuance may not be used effectively Our finding is consistent with the results of Bo et al (2011) conducted at Chinese Stock market Among the industries, only the company listed in Manufacturing industry group which includes mining, processing, electricity production and distribution, natural gas, boiler, steamer and air conditioner companies is significant with a negative sign Thus, we can conclude that Industry has an impact on market’s reaction around XR day Table 5.9 Determinants of market reaction around SEOs ex-right day: Determinants of market reaction around ex-right day: panel data Random effects, Fixed effects estimation This table presents results of regression on cumulative average abnormal return on CAR[0;+2] The sample period is from 2007 to 2013 The dependent variable is cumulative abnormal return in the period [0;+2] TobinQ is measured as (Market value of stock + Book value of debt)/Book value of total assets; Mrunup indicates Market cumulative abnormal returns (VNIndex) in the period runs from day -65 to day -16, where day is the announcement day; DA indicates Total debt/Total asset; Issuesize denotes Logarithm of the volume of stock issued; Firmsize is Logarithm of total assets; Industry effect and issue method effect are controlled by adding industry dummy (REC takes value if SEOs issued company is listed in Real estate and construction group and takes value otherwise, MAI takes value if SEOs issued company is listed in Manufacturing industry group and takes value otherwise, SER takes value if SEOs issued company is listed in Service group and takes value otherwise, FBI takes value if SEOs issued company is listed in Financial – banking – Insurance services and takes value otherwise, AFF takes value if SEOs issued company is listed in Agriculture – Fishery – Forestry group and takes value otherwise); and issue method dummies; RMH indicates ratio of managerial holding include the board of directors, board of supervisor, president and CEO/Total outstanding shares; t-statistics are in parentheses; *** Statistically significant at the 1% level; ** Statistically significant at the 5% level; * Statistically significant at 10% level CAR TobinQ (1) Coef 0.003 (2.38)** 0.016 (1.04) 0.021 (3.64)*** -0.022 (-2.99)*** 0.008 (0.50) 0.016 (1.02) 0.023 (4.09)*** -0.025 (-3.52)*** (3) Coef 0.003 (2.34)** 0.005 (0.30) 0.016 (1.04) 0.021 (3.63)*** -0.022 (-2.99)*** -0.017 (-2.14)** -0.009 (-0.99) -0.011 (-0.45) 0.010 (1.56) -0.016 (-2.01)** -0.008 (-0.97) -0.005 (-0.21) 0.011 (1.61) -0.017 (-2.11)** -0.008 (-0.97) -0.011 (-0.45) 0.010 (1.56) Mrunup DA Issuesize Firmsize (2) Coef Industry MAI SER AFF Issuemethod RMH Cons Prob > chi2 -0.000 (-0.28) 0.040 (1.03) -0.000 (-0.50) 0.056 (1.45) -0.000 (-0.26) 0.040 (1.03) 0.0001 0.0008 0.0002 * Significant at 10% level, ** Significant at 5% level, *** Significant at 1% level (Source: authors’ calculations) CHAPTER 6: CONCLUSION 6.1 Conclusion: When examining company behavior to SEOs decision, we find that in comparison to non-SEOs companies, companies with higher TobinQ ratio, higher ratio of Market value/Book value, higher ratio of total debt/total assets and higher profitability are more likely to issue SEOs On contrary, companies with higher ratio of leverage relative to industry’s average leverage and larger in size are less likely to conduct SEOs When choosing issuance method, companies with lower ratio of leverage relative to industry’s average leverage, higher profitability and companies experience more favorable market condition are more likely to issue SEOs by equity bonuses or dividends than by equity rights; on contrary, companies are more likely to issue SEOs by equity rights when they have more growth opportunities Examine on market behavior, our results show that Ho Chi Minh stock market is not efficient in term of semi-strong form Before the announcement day, there is a trend of stock purchasing, which is a sign of information leakage Around announcement day, price increase significantly in both before and after that day; while after ex-right day, the increasing trend does not prolong The distance between the announcement day and the ex-right day is from to days, which affects the average abnormal returns of this period Before event day, market tends to favor companies conduct SEOs by equity bonuses or dividends than by equity rights However, investors will soon adjust their behavior by selling those stocks which already generated high profit In examining the determinants of market reaction to company’s SEOs around announcement day, our results show no evidences to support the influences of growth opportunities on market reaction around announcement day However, in case of Vietnamese stock market, this result can be explained that investor might not see information about growth opportunities advantageous information when they consider buying SEOs, or they are not fully aware of the availability of company growth opportunities Regarding to market timing theory, we find that the condition of the market before announcement day influences the market reaction Investors will base on the condition of the market from to months before announcement day to make their decisions on whether to get involved in company SEOs This result supports the influence of market timing theory on determinants of market reaction to company’s SEOs Besides, our result shows that equity rights generated less returns than equity bonuses or dividends Regarding the determinants of market reaction to company’s SEOs, TobinQ which is proxy for growth opportunities is significant with positive signs, suggesting that the information about existence of company growth opportunities influence the reaction of the market around ex-right day We conclude that growth opportunities theory impact on market reaction around ex-right day The market timing theory, on the other hand show no significant result, implying that market condition before ex-right day does not influence the reaction of the market Besides, we find positive relation between issue size and market reaction This might be explained that in case of Vietnamese stock exchange, larger issuance will increase market liquidity, which leads to positive reaction Firm size shows negative sign to market reaction around ex-right day We think that, in case of Vietnamese stock market, investors might believe that the larger the company is, the more complicated it is, therefore the capital generated from the issuance may not be used effectively 6.2 Suggestion for stakeholders: From the research findings, we then point out suggestions for relevant stakeholders to support them in their finance and investment activities In case of investors: An appropriate investment strategy on SEOs can bring certain benefit to investors, our results recommend that investors could consider following factors: The existences of growth opportunities, market condition, the magnitude of the issuance, size of company and the type of issuance methods are factors that influence company stock returns around event days Around the announcement day, companies experience favorable market condition, smaller companies and companies that choose equity bonuses/dividends as their SEOs method generate more cumulative abnormal returns than the remaining companies On contrary, around ex-right day, investors seem to favor companies with more growth opportunities, larger magnitude of SEOs issued and smaller companies About weeks before announcement day, investors might consider buying company’s SEOs, especially choose SEOs by equity bonuses/dividends of companies experience higher cumulative market returns, or from smaller companies In case investors has missed the announcement day, about weeks before the ex-right day, they could consider joining the issuance by purchasing SEOs from companies with more growth opportunities, offer larger issue size To prepare necessary financial resources to buy companies SEOs, investors might base on those characteristics of companies such as the TobinQ, ratio of Market value/Book value, ratio of total debt/total assets, profitability and ratio of leverage relative to industry’s average leverage to predict their SEOs announcement Our results show that in comparison to companies that not conduct SEO, companies with higher TobinQ ratio, higher ratio of Market value/Book value, higher ratio of total debt/total assets and higher profitability are more likely to issue SEOs On contrary, companies with higher ratio of leverage relative to industry’s average leverage and larger in size are less likely to conduct SEOs In case investor prefers SEOs by equity bonuses or dividends, we suggest investor should choose company with lower ratio of leverage relative to industry’s average leverage company, company experiences favorable market condition before announcement day and company with more profitability On contrary, companies are more likely to issue SEOs by equity rights when they have more growth opportunities In case of SEOs companies: Ho Chi Minh stock market is not efficient in term of semi-strong form Before the announcement day, there is a trend of stock purchasing, which is a sign of information leakage The market is not efficient means that 1) the information is not transparent; 2) there are information asymmetries among groups of investor 3) information is leaked before the official information are made available to public We suggest that SEOs companies should strengthen the information dissemination activities by following regulations in information dissemination of state securities commission of Vietnam in a serious, strict manner and closely monitored the compliance with information dissemination regulations to guarantee the transparency, fairness and effectiveness to deal with the situation of unbalanced information and protect individual investors To ensure the success of SEOs issuance, company should choose appropriate market timing as when the market is favorable, investors seem to care less about the fact that company equity is overvalued or the stock dilution they might encounter when purchasing seasoned equities Investors seem to favor SEOs by equity bonuses or dividends which they not have to pay more to own company equity, conducting SEOs by this method might be more appealing to investors; however, in case company wants to raise external financial resources by conducting SEOs rights issuance, choosing market timing is an optimal option company should consider Before the announcement day, company should promote the information dissemination about company activities, especially the availability of growth opportunities to draw investors’ attention to company SEOs The size of the issuance also affects SEOs investment strategy of investors Our results show that the issuances with bigger SEOs amount are more appealing to investors than smaller ones, suggesting that investors might consider big issuance a “good deal” CỘNG HÒA XÃ HỘI CHỦ NGHĨA VIỆT NAM Độc lập - Tự - Hạnh phúc TP Hồ Chí Minh, ngày 12 tháng năm 2016 TRANG THƠNG TIN VỀ NHỮNG ĐĨNG GĨP MỚI VỀ MẶT HỌC THUẬT, LÝ LUẬN CỦA LUẬN ÁN Tên luận án: PHÁT HÀNH CỔ PHIẾU BỔ SUNG (SEOs) – BẰNG CHỨNG TẠI THỊ TRƯỜNG CHỨNG KHOÁN VIỆT NAM SEASONED EQUITY OFFERINGS (SEOs) - EVIDENCE IN VIETNAMESE STOCK MARKET Chuyên ngành: Tài - Ngân hàng (Ngân hàng) Nghiên cứu sinh: Đinh Thị Thu Hà Mã số: 62340201 Khóa: 2012 Cơ sở đào tạo: Trường Đại học Kinh tế TP Hồ Chí Minh Người hướng dẫn luận án: PGS.TS Hồ Viết Tiến PGS.TS Bùi Kim Yến Nội dung ngắn gọn đóng góp mặt học thuật, lý luận, luận điểm rút từ kết nghiên cứu, khảo sát luận án; Đóng góp mặt học thuật: Chúng nghiên cứu chủ đề SEOs nhiều khía cạnh khác Thứ nhất, chúng tơi tìm hiểu SEOs sử dụng liệu từ thị trường chứng khốn Việt Nam thị trường cịn hạn chế số lượng nghiên cứu SEOs thực Chúng nghiên cứu tài liệu SEOs thị trường phát triển khác từ hình thành giả thuyết nghiên cứu sau tìm hiểu liệu kết từ thị trường có tương đồng với thị trường Việt Nam hay không Các nghiên cứu SEOs chủ yếu dựa nghiên cứu kiện nhằm đo lường biến động giá tài sản ảnh hưởng kiện Số lượng nghiên cứu vào khoảng 565 chủ đề từ năm 1974 đến 2000 năm tạp chí hàng đầu giới (Khotari Warner, 2006), nhiên số lượng nghiên này quốc gia phát triển hạn chế Bên cạnh đó, nghiên cứu cịn lấp vào khe hở nghiên cứu tăng số lượng nghiên cứu thực nghiệm thị trương - nhóm thị trường mà kết nghiên cứu trước khơng đồng cịn nhiều hạn chế, từ so sánh với kết thị trường phát triển; vậy, nghiên cứu bổ sung vào số lượng nghiên cứu thực nghiệm tìm hiểu hành vi SEOs thị trường Việt Nam, đặc biệt tìm hiểu mức độ hội nhập thị trường chứng khoán Việt Nam so với thị trường phát triển Nghiên cứu cịn tìm hiểu đặc điểm thị trường chứng khoán Việt Nam, nhà đầu tư công ty thực SEOs nhiều phương diện khác động phát hành phản ứng thị trường SEOs Đóng góp mặt thực tiễn nghiên cứu thực nghiệm SEOs Tăng vốn thông qua thực SEOs thay vay nợ thực chi trả cổ tức tiền mặt mang lại nhiều lợi ích cho cơng ty phát hành Tuy nhiên, số lượng nghiên cứu chủ đề SEOs thị trường Việt Nam cịn hạn chế, cơng ty Việt Nam thiếu tài liệu tham khảo chủ đề Nghiên cứu góp phần tăng số lượng nghiên cứu chủ đề SEOs thị trường Việt Nam Các nhà đầu tư cơng ty phát hành sư dụng nghiên cứu tài liệu tham khảo trình đầu tư, quản lý Các nhà đầu tư xem xét việc đưa chiến lược đầu tư thích hợp với cổ phiếu SEOs để tìm kiếm lợi nhuận, dự trữ nguồn tiền để “đón đầu” đợt phát hành SEOs xem kênh để kiểm tra mức độ hiệu thị trường Tính hiệu thị trường đánh giá thơng qua mức độ minh bạch thông tin, điều kiện quan trọng mà nhà tạo lập thị trường cần cân nhắc để bảo vệ quyền lợi nhà đầu tư, đặc biệt nhà đầu tư nhỏ lẻ trình điều hành thị trường Bên cạnh đó, nghiên cứu áp dụng nghiên cứu kiện để tìm hiểu phản ứng giá cổ phiếu thơng tin SEOs cơng bố Tính đến thời điểm tại, chưa có nghiên cứu thực thị trường Việt nam nhằm tìm hiểu việc công ty sử dụng phương pháp phát hành khác tăng vốn thông qua phát hành quyền mua chi trả cổ tức cổ phiếu Việc so sánh phương pháp cung cấp nhiều chứng thực nghiệm SEOs Việt Nam, đồng thời sử dụng chúng tài liệu học tập cho sinh viên, học viên Contribution to SEOs literature: Our research covers different aspects from previous research regarding SEOs area Firstly, we investigate SEOs using data from Vietnamese market which has not been examined yet We refer to SEOs literature in both developed and other emerging markets to form the research hypotheses then examine whether the results of those markets can be carried over to Vietnam Conducting research on SEOs is mainly based on Event study; its objective is to measure the financial assets value fluctuation, which is resulted from particular event The number of research applying this method is approximate 565 topics from 1974 to 2000 in top five journals of business and finance (Khotari and Warner, 2006), however there are few studies on SEOs in developing countries In addition to the out-of-sample tests, this research also fills the gap and enriches the literature on cases of emerging market where the results are inclusive and very limited, from then to draw an overall picture in comparison to developed markets, which have been wildly discovered; therefore the research findings enrich existing literature with Vietnamese SEOs behaviors, especially to discover how much Vietnamese stock market can catch up with mature market This research also examines Vietnamese stock market characteristics, Vietnamese investors and SEOs companies on many aspects: SEOs motivations and market reaction Contribution to empirical study: Raising capital through conducting SEOs brings certain benefits to issuing companies in comparison to debt borrowing or cash dividends However, there are very few research about this topic be conducted at Vietnamese stock exchange, Vietnamese listed companies, therefore lack of necessary references With this research, we fill the gap about SEOs research and contribute an empirical study since it enrich existing literature of SEOs in Vietnam Investors, SEOs companies can use this research as a reference material in their trading, investment and management activities toward information management, making trading decisions Investors could consider trading stocks of SEOs companies to earn profits, reserve money in advance to “catch the issuance”, or to have relevant actions toward these kind of SEOs SEOs is also considered a way to test the efficiency level of the market Furthermore, the level of efficiency of market can be reflected through the transparency of information, which is one of the most crucial elements that market legislators should ensure to the investors, especially the minor ones Market legislators can consider using this research as a way to test the level of information transparency in the market to take relevant actions toward the current market situation Applying a well-known Event study method to investigate how does market react to different issuing method such as to increase company capital by equity rights or to pay bonuses/dividends, we compare stock price reaction to those two methods to provide more evidence in the field of SEOs in Vietnam, which can be used as reference or studying material for students Đinh Thị Thu Hà ...MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY DINH THI THU HA SEASONED EQUITY OFFERINGS EVIDENCE IN VIETNAMESE STOCK MARKET Specialization: Finance – Banking... sources of funding While the former mainly refer to profit or retained earnings, the latter mention the concept of debt financing as well as equity financing To estimate company’s financing decisions... However, in the real market, tax is deducted from interest expenditure Nevertheless, debt financing pressure may discourage firms to entirely use debt financing instead of equity financing (Huang,