Finance disertation on the factors that impact the performance of listed companies on viet nam stock exchange

FINANCE DISERTATION ON THE FACTORS THAT IMPACT THE PERFORMANCE OF LISTED COMPANIES ON VIETNAM STOCK EXCHANGE NGUYEN VIET LONG ID No: 21071810 Intake Supervisor: Assoc Prof., PhD Tran Thi Xuan Anh Tai ngay!!! Ban co the xoa dong chu nay!!! 17014126232651000000 Executive Summary The goal of this dissertation is to examine factors that have possible impacts on the performances of listed companies on the Vietnam Stock Exchange The research is conducted on 370 companies listed on the Ho Chi Minh Stock Exchange in the period from 2010 to 2020 The author uses regression models with fixed and random models for panel data of enterprises The factors concerned in this thesis include internal factors, which are size of the business, revenue growth, financial leverage level, tangibility and liquidity, and external factors which are Gross Domestic Product (GDP), Consumer Price Index (CPI), and interest rate The multiple regression analysis is applied to demonstrate the relationship between the performances of the listed companies, which are measured by ROE and ROA, with the above internal and external factors The study's findings indicate a relationship between a collection of good internal and external elements and the enterprise's financial performance In which the success of the company is directly attributable to the collection of internal criteria that includes business size, revenue growth, financial leverage, asset structure Business liquidity, on the other hand, has no irrelevant to the performance of a listed company The author employs a set of variables related to economic growth, inflation, and interest rates for the category of external factors However, the research model will eliminate of variables from the regression because of the strong correlation between inflation and interest rates The findings of the study demonstrate that the performance of businesses is positively impacted by economic growth, CPI, and rate of interest Acknowledgement I'd like to express my heartfelt gratitude to everyone who has helped me so far to finish this thesis as well as my studies at the University of the West of England and Banking Academy First and foremost, I'd like to thank my supervisor, Associate Professor Tran Thi Xuan Anh, for your enthusiastic and substantial support This thesis would not have been possible without your invaluable advice and feedback I am also grateful to all of my professors and classmates from the Finance (MSc) course at The University of the West of England and the Banking Academy Last but not least, I'd like to thank my family and close friends who have been supportive during this course Contents Executive Summary Acknowledgement Chapter 1: Introduction Background of the dissertation Purpose of the dissertation .8 Scope and Methodology Research Questions Thesis Structure Chapter 2: Literature Review 12 2.1 The measurement of firm performance 12 2.2 Empirical Reseach 14 2.2.1 Internal Factors that impact firm performance 14 Size of the business 14 Revenue growth 17 Financial leverage 18 Tangibility 20 Liquidity 21 2.2.2 External Factors that impact firm performance 23 GDP 23 CPI 25 Interest Rate 26 A whole market perspective 27 Chapter 3: Data and Research methodology 28 3.1 Variables description 28 3.1.1 Dependent variables 28 3.1.2 Independent variables 28 3.1.2.2 External factors variables 31 3.2 Characteristics of research data 33 3.3 Description of data statistics 34 3.4 Methodology 45 3.4.1 Research models 45 3.4.2 The research process 47 Chapter 4: Result and discussion 49 4.1 Checking for multicollinearity 49 4.2 Impact of financial factor on firm performance 50 4.2.1 Regression with REM model 51 4.2.2 Regression with FEM model 52 4.2.3 Hausman test with dependent variables 56 Chapter 5: Recommendation 57 5.1 Conclusion 57 5.2 Recommendation 57 5.2.1 For corporations 57 5.2.2 For investors 58 5.2.3 For intermediary institutions 58 5.2.4 For government 59 5.3 Limitation: 59 Table Expectation of research results 32 Table Statistics Summary 34 Table Correlation Matrix 36 Table Results of full-variable model regression by FEM and REM methods 49 Table Results of test of variance magnification factor VIF 50 Table Model regression results by REM method 51 Table Model regression results by FEM method 52 Table Results of Hausman test 56 Chapter 1: Introduction Background of the dissertation The stock market plays a vital role in the Vietnamese economy because it directly affects the government, the listed companies, and the investors In the national economy, the stock market helps to mobilize and use capital efficiently (Dung, 2020) Government capital is raised through the sale of bonds to invest in state projects The stock market helps promote the equitization process of state-owned enterprises (state-owned enterprises) The stock market also helps the government to implement effective monetary policies by buying and selling bonds to adjust the rise and fall of market interest rates Lastly, the listed companies are able to sell shares abroad, helping to attract foreign investment into Vietnam The time period from 2020 to 2022 are challenging years for the economy as a result of the phenomenal Covid-19 Pandemic In general, the epidemic has affected on a global scale, disrupting the supply chains of many products and goods in the world, and stalling in production and business; temporary decline in demand from China for goods and services, affecting global growth (Nguyen, 2013) Vietnam has a relatively large economic border and is geographically located close to China, so the epidemic will comprehensively affect all socio-economic fields of Vietnam and people's psychology and production - business, trade and tourism activities, thereby affecting Vietnam's economic growth and indirectly affecting the state budget situation The survival and stability of major public companies are essential elements to sustain a healthy economy as well as to prepare the path for its growth after the pandemic is over Therefore, assessing factors that affect firms’ performance is crucial to determine which areas should be closely monitored to maintain healthy profitability With this purpose in mind, this dissertation aims to examine potential internal and external factors that may have effects on the profitability of public companies in the Vietnam Stock Exchange This thesis looks over more than 370 public companies currently listed on Ho Chi Minh City Stock Exchange (HOSE) throughout the period from 2010 to 2020 From these data, we can investigate the direction, as well as, the extent to which a factor could impact firms’ profitability This dissertation collects data and examines internal and external factors that have impacts on firms’ performance Return-on-Assets (ROA) and Return-on-Equity (ROE) are measurements for the ability to generate profits of public companies These two indexes are also common to determine the profitability of a firm The higher the ROA and ROE, the higher performance of the firms The internal factors of firms are their size, sales growth, financial leverage, tangibility, and liquidity These internal factors are commonly monitored and vary depending on a firm’s financial strategy On the other hand, the external factors are GDP, inflation, and lending interest rate These are the popular indexes that affect the Vietnamese economy in which the listed companies operate Purpose of the dissertation Taking into account the crucial importance of maintaining a healthy business performance in regard to the wellbeing of the economy, the assessment of internal and external factors is essential to ensure stable operation Therefore, this thesis examines the impacts of those factors upon key profitability ratios, which are ROA and ROE The dissertation expects to determine the relationship as well as the possible correlation between these factors and the performance of the listed firms The relationship includes the direction and the extent of the effects made by these factors The result could be used for firms’ management to reassess their financial strategy, identify possible risks, and to make changes in areas where improvement is possible Scope and Methodology Although there are many possible factors impacting profitability of a firm, this thesis limits to investigate major internal factors such as revenue growth, financial leverage, tangibility and liquidity ratio The external factors, on the other hand, include macro-economic factors that affect the market as a whole such as GDP growth rate, CPI, and central bank’s discount rate Examples of other factors, that may have effect on performance but not included in the scope of the research, are political factors, social factors and technological advance Research Questions Overall, this thesis aims at examining factors that may have effects on profitability of listed companies on Vietnam Stock Exchange The research questions are: What are the main internal and external factors that have a significant impact on profitability of listed companies on Vietnam Stock Exchange? What are these effects’ directions and to what extent these variables affect these firms’ profitability? What are implications concluded in order for firm’s management to consider based on the study’s result? Thesis Structure Chapter 1: Introduction This chapter presents the background that motivates the author to write the dissertation as well as the purpose of writing the dissertation After discussing the background of the dissertation, the author announces the purpose of the dissertation as well as the scope and methodology of the research Before moving on the second chapter, the author lists out the research questions and explains the structure of the thesis Chapter 2: Literature Reviews This chapter reviews and summaries that are relevant, including researches and studies conducted that are related to the topics The researches collected are from Vietnam and international institutions which shares the similar factors that are studied in this thesis The first part of this chapter describes how the thesis will assess the performances of listed companies through return-on-equity (ROE) and returnon-assets (ROA) Secondly, the author describes the internal factors that may have an impact on firms as well as showcases some relevant researches The internal factors include size of the business, revenue growth, financial leverage, tangibility, and liquidity Finally, GDP, CPI, Interest Rate are discussed at the end of the chapter with literatures that have examined the relationship between these factors and performance of firms Chapter 3: Data and Research Methodology This chapter demonstrate the methods of conducting the research, including describes the dependent variables and the independent variables The method of data collection will also be mentioned in this chapter, in addition to the regression model 10