(Luận văn) bank credit appraisal criteria for borrowing firms in vietnam

i UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS ng • hi ep VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS w n lo ad ju y th yi BANK CREDIT APPRAISAL CRITERIA pl n ua al FOR BORROWING FIRMS IN VIETNAM n va ll fu A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS oi m t at nh z z k jm LE DiNH THUY NGAN ht vb By om l.c Asso.Prof.TRUONG QUANG THONG gm Academic Supervisor: n a Lu n va y te re HO CHI MINH CITY, DECEMBER 2010 - -~ ng CERTIFICATION i hi ep I hereby certify that the substance of this thesis has not been submitted for any • w n degrees and is not being currently submitted for any other degrees lo ad y th I also certify that, to the best of my knowledge, and any help received in ju preparing the thesis and all sources used have been acknowledged in the thesis yi pl ua al n n va Signature ll fu m oi ' nh LeDinh Thuy Ngan at z Date: December, 2010 z k jm ht vb om l.c gm n a Lu n va te re • · ~ _- ng ACKNOWLEDGEMENT hi ep • This research 1s impossibly completed without the valuable guidance, w n encouragement and advice from numerous individuals including Vietnam- lo ad Netherlands program lecturers, friends and my family members I am really ju y th indebted and grateful to what they have done for my thesis completion yi First of all, I would like to send my deepest gratitude to my supervisor, Professor pl Truang Quang Thong who always gives advice and comments during my al n ua completion of the thesis n va I am grateful for Professor Nguy~n TrQng Hoai and Professor Peter Calkins for oi • m thesis ll fu their precious advice and comments from the initial ideas of the theme for my at nh Many especially respectful thanks are sent to my family for encouraging and providing me with an opportunity to pursue my desires in higher learning and for z z their love, affection and sympathy that have helped me to gain more strength and k jm ht vb motive to complete this thesis om l.c gm n a Lu n va te re LIST OFT ABLES ng hi ep w II Table 2.2: Weighted points of non-financial criteria 14 Table 2.3: Weighted points of financial ratios and non-financial criteria 15 n Table 2.1: Rating symbols long-term and short-term debt lo ad 15 Table 2.4: Weighted points of financial ratios and non-financial criteria y th Table 2.5: Rating symbols ofVCB 16 ju Table 2.6: Profit and tax with two different capital structure 18 yi 25 Table 3.2: Business structure has ability to repay 26 pl Table 3.1: Sort credit rating business ua al Table 4.1: Following explain the meaning of variables (see appendix 1) 31 n 37 Table 4.3: Points of management quality factor 38 n va Table 4.2: Points of cash flow factor fu 39 Table 4.5: Points of business environment factor 40 ll Table 4.4: Points of relations with banks factor (see appendix 3) oi m z 48 l.c Table 5.8: Standardized residual graph 48 gm Table 5.7: Spearman rank correlation 46 k Table 5.6: Distribution graph jm Table 5.5: Coefficients of models (see appendix 6) 46 ht Table 5.4: Anova 46 vb Table 5.3: Model summary (see appendix 5) 45 z Table 5.2: Correlations (see appendix 4) 44 at Table 5.1: Descriptive Statistics 41 nh Table 4.6: Points of other activities factor 49 om an Lu n va ey t re ABBREVIATIONS ng hi ep BIDV: Bank for Investment and Development of Vietnam w n CIC: Credit information center lo ad EBIT: Earning before tax and interest rate y th ju EU: Europe yi pl FDI: Foreign Direct Investment ua al n GDP: Gross Domestic Products va n GSO: General Statistics Office ofVietnam ll fu oi m MM: Modiglian Miller z SMEs: Small Medium Enterprises at nh SBV: State Bank of Vietnam z k jm ht vb U.S.: United States VCB (Vietcombank): Bank for Foreign Trade of Vietnam om l.c gm WACC: Weighted average cost of capital n a Lu n va te re ABSTRACT ng hi ep Capital credit is very important in business activities of enterprises The w n ability to repay loans model in this thesis shows an important role when the lo ad bank make a lending decision This study examines and analyses credit y th rating criteria affecting borrowing firms on bank credit appraisal in ju yi Vietnam through applying cross-section data from Credit Information pl Center which concentrate on forty firms including the medium-sized al n ua enterprises that has equity capital more than five billions Vietnam dong or va number labor more than two hundred people in leather-footwear industry n The regression model is estimated based on the multiple linear regression fu ll function The ability to repay loans is dependent variable in the thesis m oi model, and independent variables are current ratio, quick ratio, inventory nh at turnover, receivable turnover, total asset turnover, debt to equity ratio, z debt to total asset ratio, return on asset, return on common equity ratio, net z ht vb profit margin ratio, delinquency ratio, cash flow, management quality, the jm relations with banks, business environment, other activities and corporate k income tax (new added) As results, corporate income tax factor affecting gm l.c Vietnam Moreover, the results seem to be appropriate to answer questions of the research, borrowing firms are perceived to be information on the om lending decision at banks in an Lu n va e t re TABLE OF CONTENTS LIST OF TABLES ng hi ABBREVIATIONS ep ABSTRACT INTRODUCTION w n 1.2 Research objective lo 1.1 Problem statement ad CHAPTER 1: 1.3 Research questions y th 1.4 Methodology ju 1.5 The structure ofthesis yi pl CHAPTER 2: LITERATURE REVIEW 2.1 Theory background al ua 2.1.1 Credit appraisal n ; va n 2.1.2 The definition of credit rating fu 2.1.3 Objective of credit rating ll oi at 2.1.6 Credit rating model nh 2.1.5 Principle credit rating m 2.1.4 Role of credit rating z z 2.1 The basic elements of credit rating 10 2.2.2 Z-score model of Altman 13 13 2.3.2 MM proposition I (corporate taxes)- The value of levered firm 17 2.3.3 Optimal capital structure theory 20 te re 17 n 2.3.1 Assumptions and proposition ofM&M theory va 17 n 2.3 Corporate income tax 12 a Lu 2.2.4 Credit rating VCB 10 om 2.2.3 Credit rating of credit information center l.c gm 2.2.1 Moody's rating analysis 10 k jm 2.2 Some model of credit rating ht 2.1 7.2 Scale of criteria vb 2.1 7.1 The number ranks of credit rating 2.4 Summary 21 CHAPTER 3: OVERVIEW OF LEATHER - FOOTWEAR INDUSTRY IN VIETNAM 23 ng hi ep Reasons of using data in Vietnam's leather - footwear industry 23 3.2 Overview ofleather- footwear industry in Vietnam 23 3.3 Credit ratings data ofthe leather-footwear industry in year 2008 24 3.4 Summary 27 4.1 The econometric design 28 4.2 Suggested research model 29 4.3 The conceptual design 32 yi 32 n 28 lo w CHAPTER 4: METHODOLOGY ad ju y th 4.3.1 Criteria that banks use to appraise pl 32 ua al 4.3.1.1 Current ratio- CR 4.3.1.2 Quick ratio- QR n 4.3.1.3 Inventory turnover- IA n va ' 33 34 ll fu 4.3.1.4 Receivable turnover- RT 34 m 4.3.1.5 Total asset turnover- TAT oi 35 4.3.1.6 Debt to total asset ratio - DA nh 36 z 4.3.1.8 Net Profit margin- NPM 35 at 4.3.1.7 Debt to equity ratio- DE z 41 42 42 n va 4.3.2 Corporate income tax (new factor)- CIT 39 an Lu 4.3.1.16 Delinquency ratio- DR 39 om 4.3.1.15 Other activities- OA ) l.c 4.3.1.14 Business environment- BE , g1-'l J gm 4.3.1.13 Relations with banks- RB 37 k 4.3.1.12 Management quality- MQ 36 jm 4.3.1.11 Cash flow- CF ht 4.3.1.10 Return on Equity- ROE 36 vb 4.3.1.9 Return on assets - ROA 4.5 Summary 43 ey 43 t re 4.4 Data collection method CHAPTER 5: DATA PROCESSING AND EMPIRICAL RESULTS 5.1 Descriptive statistics 44 44 ng 5.2 Regression and hypothesis testing 45 45 5.2.2 Evaluating the reliability of multiple linear regression model 45 5.2.3 Test the relevance of the overall regression model 46 5.2.4 Test the significance of partial regression coefficients 46 hi 5.2.1 Correlation analysis ep w n lo ad 5.2.5 Assumption of multiple linear regression model 47 y th 5.2.5.1 Linearity Assumption 47 ju 5.2.5.2 Homoscedasticity 48 yi 49 pl 5.2.5.3 Distribution standard of residual al 49 5.2.5.5 Collinearity diagnostic 50 n ua 5.2.5.4 No-serial correlation va 50 n 5.3 Summary ll fu 51 oi m CHAPTER 6: CONCLUSION v vb V111 ht ix k jm X gm APPENDIX4 APPENDIX APPENDIX6 z APPENDIX3 iv z APPENDIX2 at APPENDIX nh REFERENCE Xl om l.c an Lu n va e t re CHAPTER 1: INTRODUCTION ng This chapter starts with introduction to problem statement It then presents hi ep research objectives, questions and methodology in sections: 1.2, 1.3 and 1.4, respectively Finally, this chapter show thesis structure in section 1.5 w n 1.1 Problem statement lo ad The world economy is currently undergoing a severe crisis The cause of the y th crisis is following: ju yi pl - Objectively, on the theory, growth and development economic generally ua al follows cycle After a period of extreme development, it will reach the top, n followed by a recession cycle With this perspective, the world economy va developed rapidly in last years of previous century and peaked during the period n ll fu 2001-2007 m oi - Subjectively, these are the errors in the management economy of at nh economic times "digital" - "virtual economy", particularly in management of financial system, money and banks, namely approximately six percents of all z z mortgage loans in United States were in default in 2008 Historically, defaults k jm ht vb were less than one-third of that, i.e., from 0.25% to 2% The crisis began with the collapse of Bank Lehman Brother Investment, one gm ofthe largest banks in the United States, on June 2008 (BBC News, 2008) As om l.c year progressed, the United States banking and financial system, followed by the EU and Japan, were all shaken by the crash of multiple banking, corporate n a Lu finance-insurance institutions te re percent Trade turnover reduced strong (export of Eastern Asia reduced 30%, n GDP growth in most of developed countries dropped to around negative 2.2 va In the first three months of 2009, the situation continued to deteriorate, with CHAPTER6: CONCLUSION ng According to government's orientations, banks must achieve credit growth hi ep but ensure credit quality Hence, this thesis studies the affect of corporate income tax factor to ability to repay loans of enterprises If new factors that affect ability w n to repay loans, banks can be credit appraisal to increase lending in but still safe lo ad credit y th Present, factors are used to evaluate credit rating in credit appraisal of ju yi banks in Vietnam not include corporate income tax factor in credit rating pl results Data is chosen in this thesis is credit rating criteria data of enterprises in al n ua Vietnam leather - footwear industry is being used at banks, including new added n va corporate income tax factor ll fu Multiple linear regression model is used in the thesis is to determine: Does oi m enterprise income tax factor affect ability to repay loans of borrowers? And the nh results study has proved that new factor is corporate income tax factor affect at ability to repay loans of borrowers after running SPSS software Corporate z z income tax will affect the evaluation of increasing ability to repay loans This vb jm ht thing will lead to bank's credibility with the borrowers will increase Thus, banks may increase limit loans for enterprises to increase outstanding loans but k l.c gm ensuring credit quality Therefore, banks will improve business performance, credit growth, but an Lu With banks: om ensuring credit quality n va According to the thesis, corporate income tax of enterprises affects the ey t re decision lending by banks in credit appraisal It increases limit loans at banks, but ensuring credit quality 51 However, limited data of thesis only study the impact of corporate income tax factor in credit rating for medium size enterprises in leather and footwear industry of Vietnam In order to apply new corporate income tax factor ng conjunction with factors are used at banks to evaluate repayment ability of hi borrowers in credit appraisal, author recommends banks as follow: ep • Make research in the broad about influence of corporate income tax w n factor to access credit for enterprises in many sectors with different scale lo ad enterprises y th • Must build experimental model have corporate income tax factor for ju yi enterprises to consider ability to repay loans of borrowers before and after pl application corporate income tax factor Thus, banks in credit rating will test the al n ua model by adding points for enterprise and its number depends on total corporate va income tax of each enterprises Banks can increase the limit loan for enterprises n following the number of adding points After some time monitoring the fu ll repayment of the enterprises, if enterprises have ability to repay loan well by oi m increasing limit loan following level of corporate income tax, prove that the real nh at impact of corporate income tax factor in credit rating relevant with the content of z vb Study to build credit point table which has new factor is corporate k jm ht • z the thesis income tax for using in banks Thus, the bank established credit rating system for gm borrowers, in which corporate income tax factor will be established by a weight y te re investment will bring profit for enterprises When enterprises use contributed n they will use a part of contributed capital to other investment and the other va In case, if enterprises have capital structure to save corporate income tax, n a Lu With enterprises om research l.c that follow the affecting level of corporate income tax is calculated by further 52 capital for other investment, they need to add bank loans to produce business Consequently, need for bank loans of enterprises increase and it made an increase interest loans expenses, they will be reduced corporate income tax, leading saving corporate income tax ng hi Thus, when enterprises represent the optimal capital structure to saving ep the corporate income tax, means that enterprises have to pay much corporate income tax Therefore, enterprises increase using debt to saving the corporate w n income tax And banks base on the corporate income tax before businesses have lo ad optimal capital structure, to increase reliability in the credit appraisal by banks y th with enterprises have to pay much corporate income tax Since then, banks can ju increase limit loan for enterprises yi pl The limitations ofthe research: Although there have been attempts, but al va Sampling method has only been a sector and a group enterprise n • n thesis, such as: ua the author acknowledges that the thesis remains limitation in the processing fu ll Therefore, it can affect the research results oi m • The specific direction: because of limit time, enterprises not be nh at directly interviewed by author Consequently, data is used to processing and z calculating in this thesis is data which is collected by Credit Information Center z k jm ht vb about credit rating of enterprises om l.c gm an Lu n va e t re 53 REFERENCE ng 1) Altman, E.l., (1993), "Corporate Financial Distress and Bankruptcy", New hi ep York: John Wiley & Sons, Chapter 2) Andre, P.H., (2009), "Advanced risk management for financials", JFPS w Group, Singapore n lo ad 3) Bhattacharya, H., (1998), "Banking strategy, Credit appraisal and lending ju y th decisions", Oxford University Press 4) Cortes, C., and Berggren, A., (2001), "Financing growth of Vietnamese yi pl firms", Discussion papers, Central institute for economic management of ua al Vietnam n 5) Credit information center - The state bank of Vietnam (2008), "Credit va n rating enterprises", Labor publisher fu ll 6) Dan Meng, Xu Yang, (2007), "SMEs Credit Rating Method with m oi Heterogeneous Information: a Chinese Case", Research paper nh at 7) Decision No 57/2000/QD-NHNN, dated on 24 Jan 2002, issued by State z Bank, "Guide and implement credit rating for enterprises" z vb 8) Frank, M.Z., and Goyal, V.K., (2003), "Capital structure decisions", ht k of Science & Technology jm Working paper, University of British Columbia & Hong Kong University gm l.c 9) Fitchrating, (2006), "International Issuer and Credit Rating Scales" m?rd file=ltr, accessed on September, 2009 om http://www.fitchratings.com/creditdesk/public/ratings defintions/index.cf an Lu lO)Hoang Trong, Chu Nguyen Mong Ngoc (2008), "Analysis research data n va with SPSS ",The statistic publisher ey t re 11)Jonathan Golin, (2001), "The bank credit analysis handbook: A guide for analysts, bankers and investors", Singapore: John Wiley & Sons, 2001, Chapter ng 12)J.P Morgan, (2004), "Determining optimal capital structure", Research hi ep paper 13)Karel Jansen, (2008), "Money & Banking" Course w n 14)Le Thi Thanh Ha and Le Hoang Vinh, (2008), "Building optimal capital lo ad structure model for enterprises in Vietnam", Master thesis, University of y th Economics Ho Chi Minh City ju yi 15)Lee, Y.C., (2007), "Application of support vector machines to corporate pl credit rating prediction", Pergamon Press, Inc, Tarrytown, NY, USA, al n ua Volume 33, Issue va 16)Limsombunchai, V., C Gan and M Lee, (2005), "Lending decision model n for agricultural sector in Thailand", Research paper, Lincoln University, ll fu New Zealand (2004), oi m 17)Moody's, "Moody's rating symbols & Definitions", nh at http://www.moodys.com, accessed on September, 2009 z z 18)Michel Crouhy, Robert Mark, Dan Galai, (2000), "Risk Management", 1st k jm ht vb Edition, McGraw-Hill, Chapter 19)Nguyen Dang Hung, (2009), "The process of international economic l.c Ministry of Foreign Affairs Vietnam gm integration of Vietnam in the backround of a new world economy", NJ: om 20)Nguyen Minh Kieu, (2008), "Credit apprisal", The statistic publisher n University of Economics Ho Chi Minh City va 22)Nguyen Thanh Huyen (2008), "Credit rating system", Master thesis, n a Lu 21)Nguyen Trong Hoai, (2008), "Econometrics", Course y te re 11 23)Nguyen Van Cong (2006), "Determinants of capital structure of manufacturing small and medium enterprises in Dong Nai", MA thesis in Economics, Vietnam-Netherlands program ng 24)No 60/2005/QHll dated on 12 Sep 2000, "Enterprise Law", Vietnam hi ep 25)Ross, S.A., Westerfield, R.W., Jaffe, J.F., (2005), "Corporate Finance", ih Edition, McGraw-Hill and Irwin, Chapter and Chapter 15 w n lo 26)Standard Poor's, & (2006), "Corporate rating criteria 2006", ad www.corporatecriteria.standardandpoors.com , accessed on September, y th 2009 ju yi 27)Steven M Sheffrin (2003), "Economics: Principles in action", Prentice pl hall, Chapter ua al 28)Tran Ngoc Tho (2007), "Corporate finance", The statistic publisher, n n va Chapter 15 ll fu 29)United Nations, (2008), "Credit rating agencies and their potential impact oi m on development countries", Discussion papers nh 30)Vietcombank, Ernst & Young (2008), "Credit handbook", Joint stock at commercial for foreign trade inVietnam z z 31)Zan Huang, Hsinchun Chen, Chia-Jung Hsu, Wun-Hwa Chen, Soushan vb k jm ht Wu, (2004), "Credit rating analysis with support vector machines and neural networks: a market comparative study", Decision Support Systems om l.c gm 37 n a Lu n va te re iii APPENDIX Table 4.1: Explain the meaning of variables ng Definition ofvariables Variables Odd Current ratio = Current assets/ Current liabilities QR Quick ratio= (Current assets- Inventories)/Current liabilities ep CR hi I w n Inventory turnover = Cost of goods sold/Average inventories IT lo ad Receivable turnover = Accounts Receivable/Annual credit sales/365 RT TAT DE Debt to equity ratio= Total debt/Total assets DA Debt to total asset= Total debt/Total equity ROA Return on asset= Net income/Total asset ROE Return on common equity= Net income/Shareholder's equity 10 NPM Net profit margin= Net profit after tax/Sales 11 DR Delinquency ratio= Delinquency/ Outstanding debts 12 CF Cash flow measures the ability of the borrower to repay loan form the cash flow 13 MQ 14 RB 15 BE ju y th Total asset turnover= Net sales/Total asset yi pl n ua al n va ll fu oi m at nh z z vb managing the business k jm ht Management quality measure the top management team's capability in controlling and gm The relations with banks measure credit relationship with banks l.c Business environment measure the percentage of sales made to the single largest om customer, purchase sourced form the single largest supplier and environment risk 16 OA a Lu Other activities measure diversification of activities by industry, market, position; income from export activities; dependence on partners; profit of companies in recent n va years; status of enterprises Corporate income tax ratio = corporate income tax cost I earnings before interest and n CIT te re 17 taxes y IV y th ju • yi pl ua al n APPENDIX2 va to Current Quick Inventory Receivable Total asset repay ratio ratio turnover turnover turnover loans m ll fu No The n Ability Debito total asset Debito Delinquency Net profit Return on equity ratio ratio margin asset Return on common equity Cash Management relations Business Other flow quality with environment activities 0.072 0.169 0.316 100 80 100 80 100 0.125 0.055 0.124 0.173 0.183 100 100 80 80 80 0.216 0.913 0.119 0.217 0.416 100 80 80 80 80 0.173 0.130 0.143 0.167 100 100 100 80 80 0.181 0.021 0.062 0.199 100 100 100 100 80 0.134 0.070 0.040 0.051 100 100 100 100 100 0.211 0.083 0.193 100 80 80 80 80 0.16 0.044 0.110 100 80 100 100 100 0.101 0.718 100 100 80 80 100 0.316 0.222 100 60 80 60 60 0.124 re 20 60 60 60 80 0.043 100 80 100 60 60 0.1 80 80 80 60 0.032 0.9 10.3 55.4 2.400 93.2 10.6 10.6 135.8 1.400 92.6 1.7 1.5 10.3 78.8 1.800 0.477 93.8 2.4 1.4 5.4 24.8 1.100 0.147 0.173 85.4 1.1 0.8 18.4 39.8 2.900 0.688 2.200 91.8 1.4 I 60.4 0.600 0.213 0.271 90.2 1.1 0.6 6.5 52.2 2.100 0.568 0.031 88 1.5 1.4 24.5 61 1.200 0.605 1.529 91.2 1.5 1.2 11.4 145.5 1.900 0.647 1.833 0.130 10 80.2 1.1 0.2 6.7 16.4 2.800 0.838 5.185 O.oJ3 0.036 II 80 1.6 1.5 19.5 79.9 0.500 0.127 0.145 (0.086) (0.040) 12 82.4 1.3 0.7 5.4 52 1.600 0.509 1.038 0.013 0.021 13 84.3 1.2 0.9 14.3 34.1 4.800 0.787 3.699 0.009 0.041 0.192 at nh 1.4 an 92.4 om 0.873 I 0.052 income taxes banks oi 0.466 Corporate z z k jm ht vb gm l.c 0.039 0.036 Lu 0.253 va n (0.051) y te ac th 100 si cd eg v I jg hg y th - ju II! yi pl 1.511 0.001 0.003 0.007 100 80 80 80 60 0.007 1.700 0.563 1.290 0.013 0.023 0.052 100 80 80 60 60 0.069 2.000 0.624 1.662 0.001 0.001 0.004 100 80 80 60 80 0.011 oi 0.523 1.098 0.079 0.062 0.130 40 60 80 80 100 0.296 1.078 0.002 0.004 0.008 40 80 80 60 80 0.021 9.502 0.002 0.004 0.004 100 100 80 80 80 0.014 0.007 0.007 0.023 40 100 100 80 80 0.058 (0.036) (0.032) (0.060) 20 80 80 80 40 0.075 0.036 0.087 100 80 100 60 60 0.251 0.024 0.038 0.094 100 60 60 80 80 0.072 om (0.019) (0.035) 20 60 100 60 20 1.216 (0.156) (0.486) 20 60 100 80 40 0.991 110.334 0.014 0.033 3.659 40 80 80 60 80 0.055 0.600 0.710 2.446 0.014 0.009 0.030 re 100 80 80 80 80 0.046 708.3 0.300 0.631 1.707 0.007 0.002 0.005 80 80 80 60 80 0.016 93.4 1.400 0.695 2.277 0.004 0.006 0.019 60 80 60 60 0.015 1.2 0.5 5.9 15 83 1.4 0.9 8.1 16 84.6 1.3 1.1 15 94.3 17 83.5 0.8 0.5 5.6 101.7 0.800 18 79.8 0.5 0.4 29.7 16.6 1.700 at 0.602 81.1 n n ua al 2.400 14 19 72.5 I 0.2 5.4 16.7 2.400 0.905 20 76.7 0.8 0.8 143.1 15.6 1.000 0.687 21 70.9 1.5 1.4 40.7 114.1 0.900 0.462 0.859 22 75.4 1.1 0.3 1.1 109.9 0.500 0.589 0.431 23 73.2 1.2 0.7 4.7 63.1 1.600 0.595 1.468 I 24 69.9 I 0.4 3.2 56 0.900 0.447 0.808 25 71.9 0.6 0.4 Ill 39.3 1.400 0.549 26 74.8 0.8 0.3 4.5 39.8 2.300 27 77.0 3.6 3.2 293.7 28 69.1 I I 3.6 29 65.8 II 0.6 5.9 31.6 va 39.7 m ll fu nh 0.519 z z vb k jm ht 2.197 gm l.c (0.022) Lu an (0.219) va n y te ac th 80 si cd eg VI jg hg y th ju • yi pl 2.017 (0.747) (0.378) (l.J41) 20 60 60 80 60 0.300 0.469 0.884 0.024 0.008 0.016 80 80 80 80 80 0.047 0.100 0.676 2.086 (0.442) (0.025) (0.078) 20 80 40 60 60 0.622 1.649 (0.013) (0.017) (0.046) 20 80 40 60 60 1.455 (0.004) (0.004) (0.009) 20 60 60 60 40 (5.402) (0 005) (0.009) (0.038) 20 80 80 60 60 ht 0.010 0.007 0.061 20 80 80 60 60 0.028 1.910 0.004 0.003 0.009 80 80 60 60 80 0.011 0.007 0.004 0.013 20 60 60 60 60 0.007 0.150 0.013 0.043 20 60 40 60 60 (0.278) (0.207) 20 60 20 60 60 67.2 1.2 0.5 5.8 31 64.3 1.3 0.5 0.9 32 62.5 2.1 2.1 6.6 I 132.6 33 68.7 1.2 0.7 8.8 121.1 34 62 0.9 0.3 2.4 62.8 0.900 at 0.669 oi n ua al 0.500 30 35 67.8 2.8 0.1 2.2 1.3 1.800 1.227 36 66.9 0.9 0.2 1.4 64 0.700 0.888 37 56.9 l.J 0.5 1.7 106.2 0.700 0.656 38 59.8 0.8 0.2 1.3 65.1 0.600 0.675 2.079 39 52.8 0.6 0.5 1.5 1302.8 0.100 0.700 2.331 40 46.5 0.2 0.1 1.9 26 1.000 2.344 (1.744) 35.9 n va 189.8 m ll fu 1.300 nh 0.593 z z vb 7.926 k jm gm om I l.c I (0.277) an Lu I va n y te re ac th si cd eg Vll jg hg y th ju • yi pl ua al n APPENDIX3 va Points n fu Criteria 100 >36 No information (new Non-pay debt on time times in past 12 months times in past 12 months ~ times overdue under 30 times overdue under 30 times overdue under 30 days under 30 days for days for the past 12 months; ht days for the past 12 months; for the past 12 months; or the past 36 or times overdue under 30 or times overdue under 90 times overdue under 90 days for months days for the past 36 months days for the past 36 months the past 36 months Solvency in past Solvency in past 12 month Insolvency in the past 24 Insolvency in the past 12 months times in past times in past 12 months z 36 months debt 20 borrowers) at None 1- 12 months nh The times of the extension 12-36 months oi months 40 60 m ll Repayment schedule 80 z l.c months om credit, guarantee or other 24 month incapacity payment (letter of gm Never k Total commitments None jm Overdue debt in the past vb times overdue past 36 month requirement of banks month borrowers) ac th Source: VCB, Ernst & Young (2008) None y te sufficient according to No information (new re Yes, in past 12-36 Yes, in past :S 12 month n Yes, in va Information is provided an Lu commitments) si cd eg viii jg hg APPENDIX4 • Table 5.2: Correlations ng hi ep Ability to repay loans 0.331' Pearson Correlation Current ratio 0.037 Sig (2-tailed) w Pearson Correlation n Quick ratio lo ad Inventory turnover 0.343' Sig (2-tailed) 0.030 Pearson Correlation 0.142 y th Sig (2-tailed) Pearson Correlation ju Receivable turnover yi Sig (2-tailed) 0.020 0.462 Pearson Correlation pl Total asset turnover 0.382 -0.366 0.003 al Sig (2-tailed) -0.561' Pearson Correlation ua Debt to equity ratio 0.000 n Sig (2-tailed) va Pearson Correlation -0.019 n Debt to total asset ratio Sig (2-tailed) 0.907 fu Pearson Correlation ll Net profit margin Sig (2-tailed) Pearson Correlation Pearson Correlation Pearson Correlation Sig (2-tailed) Pearson Correlation 0.000 0.674 va 0.000 n Sig (2-tailed) 0.000 0.530 n Corporate income tax 0.556 a Lu Other activities 0.000 om Sig (2-tailed) 0.669 l.c Business environment 0.000 Sig (2-tailed) 0.536 gm Relations with bank k jm Pearson Correlation 0.000 ht Management quality 0.624 vb Sig (2-tailed) 0.248 z Pearson Correlation 0.187 z Cash flow 0.000 at Sig (2-tailed) 0.628 nh Pearson Correlation oi Pearson Correlation Sig (2-tailed) Return on common equity 0.009 m Sig (2-tailed) Return on asset 0.409 • te re *.Correlation is significant at the 0.05 level (2-tailed) ** Correlation is significant at the 0.01 level (2-tailed) y lX I! APPENDIXS ng hi ep Table 5.3: Model summary Std Error Durbin- of the Estimate Watson R Square Adjusted R Square R w Model n lo 0.796b ju 0.454 0.440 8.9029 0.633 0.613 7.3960 0.738 0.716 6.3381 0.859c 0.884d 0.919e 0.932( 0.869 yi 1.990 0.782 0.757 5.8592 0.845 0.822 5.0214 0.846 4.6752 n ua al pl n va fu 0.674 y th ad ll a Predictors: (Constant), Corporate income tax m oi b Predictors: (Constant), Corporate income tax, Relations with bank nh at c Predictors: (Constant), Corporate income tax, Relations with bank, Cash flow z d Predictors: (Constant), Corporate income tax, Relations with bank, Cash flow, z ht vb Total asset turnover Total asset turnover, Debt to equity ratio k jm e Predictors: (Constant), Corporate income tax, Relations with bank, Cash flow, gm n a Lu g Dependent Variable: Ability to repay loans om Total asset turnover, Debt to equity ratio, Other activities l.c f Predictors: (Constant), Corporate income tax, Relations with bank, Cash flow, n va y te re X APPENDIX6 ng hi Table 5.5: Coefficients of models ep Coefficients w U nstandardized Standardized Coefficients Coefficients n lo Model ad Std Error B y th Corporate income tax 89.473 (Constant) 48.875 yi Tolerance 1.819 15.908 0.674 al 5.032 38.08 0.000 5.624 0.000 9.713 0.000 4.325 4.250 VIF 1.000 1.00 0.000 0.820 1.22 0.000 0.820 1.22 0.777 1.28 0.770 1.299 n ua 14.596 0.476 n va Corporate 63.135 income tax Sig t Beta pl 69.272 ju (Constant) Collinearity Statistics 0.288 0.068 (Constant) 43.251 4.560 Corporate income tax 52.078 12.844 0.392 4.055 Relations with bank 0.232 0.060 0.376 3.869 0.000 Cash flow 0.140 0.037 0.355 3.792 0.001 (Constant) 43.355 4.216 10.284 0.000 gm fu Relations with bank Corporate income tax 54.555 11.910 0.411 4.581 0.000 0.773 Relations with bank 0.203 0.056 0.330 3.600 0.001 0.742 1.348 Cash flow 0.113 0.036 0.287 3.181 0.003 0.762 1.312 2.912 1.091 0.228 2.669 0.011 0.850 1.176 ll oi m 9.485 0.000 at nh 0.000 z z 0.467 k jm ht vb 0.828 1.207 om l.c 1.294 n va xi te re turnover n a Lu Total asset • ) · J / /,/ ng hi ep (Constant) 58.316 5.426 Corporate income tax 52.250 10.226 Relations with bank 0.119 Cash flow w Total asset turnover 10.747 0.000 0.394 5.110 0.000 0.770 1.299 0.053 0.194 2.232 0.032 0.608 1.645 0.069 0.033 0.176 2.116 0.042 0.662 1.511 4.413 1.019 0.346 4.330 0.000 0.715 1.398 2.936 -0.322 -3.695 0.001 0.603 1.657 8.553 0.000 0.287 3.428 0.002 0.567 1.764 0.210 2.598 0.014 0.604 1.657 1.795 0.082 0.641 1.560 4.701 0.000 0.715 1.399 0.000 0.603 1.658 0.653 1.531 J I n lo - ad Debt to equity ratio 50.625 ju 5.919 Corporate income tax 38.036 Relations with bank 0.130 0.050 Cash flow 0.056 0.031 Total asset turnover 4.462 0.949 0.350 2.734 -0.326 -4.023 0.051 0.194 2.494 n ua al va 0.141 n ll fu 0.018 z k jm ht vb Dependent Variable: Ability to repay loans z 0.128 at 11.002 nh - oi m Other activities 11.096 pl Debt to equity ratio yi y th (Constant) 10.850 om l.c gm an Lu n va re 1':' xu ' '•