Factors affecting stock price changes of companies supplying electricity from renewable energy resources listed on the vietnam stock exchange

UNIVERSITY GRADUATION THESIS FACTORS AFFECTING STOCK PRICE CHANGES OF COMPANIES SUPPLYING ELECTRICITY FROM RENEWABLE ENERGY RESOURCES LISTED ON THE VIETNAM STOCK EXCHANGE Major: Finance

UNIVERSITY GRADUATION THESIS

FACTORS AFFECTING STOCK PRICE CHANGES OF COMPANIES SUPPLYING ELECTRICITY FROM RENEWABLE ENERGY RESOURCES

LISTED ON THE VIETNAM STOCK EXCHANGE

Major: Finance – Banking ID Code: 7 34 02 01

NGUYEN THI VAN ANH

HO CHI MINH CITY, 2023

UNIVERSITY GRADUATION THESIS

FACTORS AFFECTING STOCK PRICE CHANGES OF COMPANIES SUPPLYING ELECTRICITY FROM RENEWABLE ENERGY RESOURCES

LISTED ON THE VIETNAM STOCK EXCHANGE Major: Finance – Banking Dr LUU THU QUANG HO CHI MINH CITY, 2023

HO CHI MINH UNIVERSITY OF BANKING

High-Quality Program of Banking and Finance

ABSTRACT

Title Factors affecting stock price changes of companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange

Scientific Instructor Dr QUANG, Thu LUU

The main content of the graduation thesis: “Factors affecting stock price changes of companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange” is to research factors affecting stock price changes At

the same time, the study also evaluates current status of using and measuring the accuracy between Pooled OLS model, FEM, and REM

Based on financial data and stock prices of 39 companies providing electricity from renewable energy resources listed on the Vietnam Stock Market during the period between 2016 and 2022, the author conducted multiple regression analyses of

variables using the Feasible Generalized Least Squares (FGLS) to test the factors

affecting stock price changes in the Vietnam Stock Market Research results show that there are seven statistically significant impact variables to each model, which are: Company size (SIZE), dividends per share (DPS), earnings per share (EPS), financial leverage (LEV), price-earnings ratio (PE), gross domestic product growth rate (GDPG), and inflation rate (INF) In particular, company size (SIZE), dividends per share (DPS), earnings per share (EPS), and price-earnings ratio (PE) have the same effect, and the remaining variables have the opposite effect Specially, the

exchange rate variable (EXC) has a negative regression coefficient for stock price changes, but this variable is not statistically significant in the model

Combining the results of the quantitative research method, the author provided suggestions and recommendations for investors and analysts on choosing and using models to make investment decisions in the Vietnam Stock Market, as well as advices for management agencies and businesses to improve the effectiveness of analyzing stock price fluctuations to increase corporate value sustainably Simultaneously, the author also provided some limitations that the graduation thesis has not been able to resolve, then came up with directions for further research

Keywords: Stock price, changes, company size, dividends per share, earnings per

share, financial leverage, price-earnings ratio, exchange rate, gross domestic

product growth rate, inflation rate, electricity, renewable energy resources

DECLARATION OF AUTHENTICITY

My name is Nguyen Thi Van Anh, class HQ8-GE05 under the guidance of lecturer

Dr Luu Thu Quang with graduation thesis topic “Factors affecting stock price changes of companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange.”

The thesis is the author’s research work The research results are honest, including no previously published content or content done by others except for fully cited citations in the thesis

I hereby declare and take full responsibility if any of the above is untrue!

Ho Chi Minh, October 10th, 2023

Student

Nguyen Thi Van Anh

ACKNOWLEDGEMENT

To complete this graduation thesis, I received the attention and help of Dr Luu Thu Quang

First of all, I would like to genuinely express my deep gratitude of Dr Luu Thu Quang of Ho Chi Minh University of Banking in particular and to teachers from the Faculty of Banking and Finance in general for creating favorable conditions for me to carry out this research topic as well as enthusiastically imparting valuable knowledge helped me apply the theories I have learned into practice With that valuable knowledge, I have presently completed my graduation thesis with the topic

“Factors affecting stock price changes of companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange.”

Although I tried my best to study and research subjects in the Department of Banking and Finance, due to many restrictions in knowledge together with limited time to complete the topic, the graduation thesis was difficult to avoid shortcomings I hope that Dr Luu Thu Quang can contribute more ideas to improve and enhance the graduation thesis

Finally, I want to wish Dr Luu Thu Quang and the teachers of the Faculty of Banking and Finance more good health and much success in your work

I sincerely thank you!

Ho Chi Minh, October 10th, 2023

Student

Nguyen Thi Van Anh

TABLE OF CONTENTS

LIST OF ABBREVIATIONS x

LIST OF TABLES xi

LIST OF FIGURES xii

CHAPTER 1 INTRODUCTION ABOUT RESEARCH 1

1.1 Set research problem 1

2.1.1 Concept of stock 10

2.1.2 Par value of stock 10

2.1.3 Book value of stock 10

2.1.4 Intrinsic value of stock 11

2.1.5 Market value of stock 11

2.2 Related theories 12

2.2.1 Bird-In-Hand theory 12

2.2.2 Efficient market hypothesis (EMH) 13

2.2.3 Miller and Modigliani theory (1958) (M-M theory) 14

2.2.4 Random walk theory 14

2.2.5 Signaling theory 15

2.3 Factors affecting stock price changes of companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange 15

2.3.1 Company size 16

2.3.2 Dividends per share 16

2.3.3 Earnings per share 17

2.4 Related experimental studies 19

2.4.1 Overseas experimental studies 20

2.4.2 Vietnam experimental studies 22

CHAPTER 4 RESEARCH RESULTS AND DISCUSSION OF RESULTS 37

4.1 General situation of supplying electricity from renewable energy resources 37 4.1.1 Renewable energy 37

4.1.2 Trends in electricity using renewable energy resources 38

4.2 Descriptive statistics of study sample 48

4.3 Research results 50

4.3.1 Regression matrix 50

4.3.2 Test for autocorrelation, heteroscedasticity and perform regression using the FGLS method to overcome detects 57

5.3 Limitations of thesis and new approaches in the future 66

Appendix 2 Year-end (December 31st) stock price changes of 39 companies supplying electricity from renewable energy resources over the 7-year period between 2016 and 2022 for research 91

Appendix 3 Size of 39 companies supplying electricity from renewable energy resources over the 7-year period between 2016 and 2022 for research 94

Appendix 4 Dividends per share of 39 companies supplying electricity from renewable energy resources over the 7-year period between 2016 and 2022 for research 97

Appendix 5 Earnings per share of 39 companies supplying electricity from renewable energy resources over the 7-year period between 2016 and 2022 for research 100

Appendix 6 Financial leverage of 39 companies supplying electricity from renewable energy resources over the 7-year period between 2016 and 2022 for research 103

Appendix 7 Price-earnings ratio of 39 companies supplying electricity from renewable energy resources over the 7-year period between 2016 and 2022 for research 106

Appendix 8 Vietnam's exchange rate during the period of 2016-2022 109

Appendix 9 Vietnam's gross domestic product growth rate during the period of 2016-2022 110

Appendix 10 Vietnam's inflation rate during the period of 2016-2022 111

Appendix 11 Descriptive statistics of study sample 112

Appendix 12 Correlation between variables 113

Appendix 13 Pooled Ordinary Least Squares Model (Pooled OLS Model) 114

Appendix 14 Test for multicollinearity Variance Inflation Factor (VIF) among independent variables 115

Appendix 15 Fixed Effects Model (FEM) 116

Appendix 16 Random-Effects Model (REM) 117

Appendix 17 Model Estimation Result between Pooled OLS Model, FEM and

Appendix 20 Breusch and Pagan Lagrangian multiplier test for random effects to choose between 02 models: REM and Pooled OLS Model 121

Appendix 21 Wooldridge test for autocorrelation in panel data 122

Appendix 22 Modified Wald test for groupwise heteroskedasticity in fixed effect regression model 123

Appendix 23 Feasible Generalized Least Squares (FGLS) 124

LIST OF ABBREVIATIONS

1 ESOP Employee Stock Ownership Plan 2 GDP Gross domestic product

4 HNX Hanoi Stock Exchange

5 HOSE/HSX Ho Chi Minh Stock Exchange

6 IPO Initial Public Offering

LIST OF TABLES

Table 2.1 Summary of related overseas experimental studies 20

Table 2.2 Summary of related Vietnam experimental studies 22

Table 3.1 Explain variables 35

Table 4.1 Trends in electricity using hydroelectric energy 40

Table 4.2 Trends in electricity using solar energy 42

Table 4.3 Trends in electricity using wind energy 44

Table 4.4 Trends in electricity using other renewable energy, including biomass energy 47

Table 4.5 Descriptive statistics of study sample 48

Table 4.6 Correlation between variables 51

Table 4.7 Test for multicollinearity VIF among independent variables 53

Table 4.8 Model estimation result between Pooled OLS Model, FEM and REM 54

Table 4.9 Fisher's exact test 56

Table 4.10 Hausman fixed random test 56

Table 4.11 Breusch and Pagan Langrangian multiplier test 57

Table 4.12 Wooldridge test for autocorrelation in panel data 57

Table 4.13 Modified Wald test for groupwise heteroskedasticity in fixed effect regression model 58

Table 4.14 Feasible Generalized Least Squares (FGLS) 58

LIST OF FIGURES

Figure 3.1 Research process 25 Figure 3.2 Research hypotheses 31 Figure 4.1 Share of primary energy and electricity production from renewable resources in Vietnam from 2016 to 2022 38

CHAPTER 1 INTRODUCTION ABOUT RESEARCH 1.1 Set research problem

At the end of July 2000, there were only two stock symbols listed and traded on the Ho Chi Minh City Stock Exchange Center The period 2000-2005 was a period of gradual promotion of Vietnam Stock Market when market capitalization during this period only fluctuated around 1% of GDP After that, statistics in 2006 showed a strong boom year when the number of listed businesses grew continuously, and under that influence, at the beginning of 2007, Vietnam Stock Market reached a scale of up to 43% of GDP However, in 2008, the market started to get worse when uncontrolled US subprime mortgage lending activities affected the world After that, the market gradually recovered slightly in the period between 2009 and 2010 when market capitalization reached 48% of GDP The period from 2011 to 2016 was a period of outstanding development of the stock market, beginning with a series of state-owned enterprises conducting initial public share auctions Then, Vietnam‟s derivatives market was officially put into operation on August 10th, 2017 In 2018, while the Vietnam Stock Market was one of the fastest-growing stock markets in the world, the Vietnam Market became the market with the sharpest decline In 2019, the Vietnam Stock Market continued to return with positive signs, but in 2020, when the COVID-19 pandemic occurred, the world stock market in general and Vietnam in particular faced an unprecedented decline (Le Hoai An, 2020) After 2020, the COVID-19 pandemic showed signs of drop, and the Vietnam Stock Market still has a positive direction Accordingly, the development of renewable energy in the electricity industry has been a new signal and been forecasted to be a promising industry group that will make the stock market more diverse and change for the better

The research problem is that despite playing an important role in the country‟s financial market, the unpredictable fluctuations of the Vietnam Stock Market since its inception have also posed many challenges for investors having difficulty in choosing investment stocks, especially in emerging industries such as renewable

energy In that crisis, forecasting and measuring factors affecting stock prices has become necessary

In the world, there were many quantitative research articles on factors affecting stock prices However, with differences in geography, culture, and the characteristics of each country‟s stock market, such studies were difficult to apply in Vietnam

In Vietnam, there were also a lot of studies on factors affecting stock prices These studies focused on many various businesses with industry groups such as real estate enterprises, banks, securities companies, oil and gas companies, tourism companies, and electricity companies in general including coal power, thermal power, etc., however, the power industry group that only focuses on renewable energy currently has not done yet

1.2 Rationale of research

Analyzing factors affecting stock price changes to make comments and recommendations is necessary to help stock investment become more efficient, especially for stocks in the electricity sector from renewable energy resources, which have increasingly new potential On May 15th, 2023, Electricity Planning VIII, also known as the National Electricity Development Plan for the period 2021-2030, with a vision to 2050, was approved by the Prime Minister in Decision No.500/QD-TTg opened a new year for promoting renewable energy resources on a large scale, meeting the need for safe and stable operation of the power system, minimizing environmental pollution and the greenhouse effect, limiting pollution in environment, and electricity is made from fuels, coal, petroleum, crude oil, etc In particular, then to the plan is that by 2030, renewable energy will reach about 47%, and by 2050, the proportion of renewable energy will be up to 67,5% - 71,5% However, according to a report by Dang Linh (2023), although the renewable energy industry is showing quite positive signs, this industry is also facing many serious challenges and risks, typically three threats that the report is summarized as

follows: Firstly, companies that are promoting investment in developing renewable energy projects are facing solvency risks arising from high financial leverage Secondly, dealing with policy risks if adverse changes occur Thirdly, the risk of economic recession in the country is becoming distinctly and more serious

Stemming from the above reasons, the author decided to choose the topic: “Factors affecting stock price changes of companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange” as a research topic, with

the quantitative research method to make the thesis more objective and specific, thereby adding more empirical evidence on the impact of factors on stock prices, and contributing more reference materials for policymakers, businesses and investors to be more proactive in analyzing stock price changes during this challenging period of international integration

1.3.Research objective and questions 1.3.1 Research objective

1.3.1.1 General research objective

The general research objective of the graduation thesis is to identify factors affecting the stock market prices of companies providing electricity from renewable energy resources in Vietnam On that basis, the author will propose policy implications to help relevant entities make the most appropriate, positive, and correct decisions

1.3.1.2 Specific research objective

Based on the above general research objective, the study is determined to focus on solving three specific research objectives as follows:

The first objective, the graduation study identifies factors affecting stock prices and

builds linear regression models to measure the influence of those factors on the stock prices of companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange

The second objective, the thesis describes current situation of stock price

fluctuations of the electricity industry group when using renewable energy resources as one of the core resources of provision compared to the stock price movements of other industry groups in the market and the potential of renewable energies in Vietnam

The third objective, based on the research results of the models, the author will

propose some suggestions for investors to assess the stock in perspective of the electricity industry group using renewable energy resources

1.3.2 Research questions

To complete the proposed research objectives, the scientific topic answers the following six questions as follows:

The first question is, how is the graduation thesis based on a scientific and practical

theoretical basis about the changes in stock prices of listed companies providing electricity from renewable energy resources?

The second question is, which model will be used to measure the impact of factors

on stock price changes of companies supplying electricity from renewable energy resources listed on HNX, HOSE, and UPCOM in Vietnam?

The third question is, what factors will have actual impacts on the stock prices of

companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange through empirical evidence on the determinants? In previous studies from foreign countries and from Vietnam, what is the trend and level of influence?

For the fourth question, the author will identify the study period of the topic and

explain why to choose that study period

The fifth question, from analyzing and evaluating data through research results,

which policy suggestions and recommendations to the author accommodate for

investors and stocks in this industry to improve the value of stocks, and investment efficiency in Vietnam?

In the sixth question, the author will outline, give ideas on the limitations of the

thesis, and present encompassing research directions for future research topics

1.4 Subject and Scope of research 1.4.1 Subject of research

In this graduation thesis, the author‟s research subjects are factors affecting the changes in stock prices of companies providing electricity from renewable energy resources listed on the Vietnam Stock Exchange in 7 years from the end of 2016 to the end of 2022 Specifically, potentially influencing factors include Company size, Dividends per share, Earnings per share, Financial leverage, Price-earnings ratio, Exchange rate, Gross domestic product growth rate, and Inflation rate From there, through fact data and testing, the author will analyze the relationship between these factors and the fluctuation of market stock prices of the electricity sector from renewable energy resources

1.4.2 Scope of research

Scope of research in terms of space: The author will limit the range of the topic to

volatilities in factors affecting the stock prices of companies providing electricity from renewable energy resources listed on the Vietnam Stock Market, specifically 39 companies with investment projects in this industry group are listed on popular Stock Exchanges such as HNX, HOSE, and UPCOM (According to the author‟s synthesis at present, up to as of December 31st, 2016, and later, there are only 39 companies supplying electricity from renewable energy resources listed on the Vietnam Stock Market)

Scope of research in terms of time: Secondary data is used for the thesis over seven

years, from the end of the trading year 2016 to the end of the trading year 2022 The author chose this time point for the scope of the research for the following reasons: (1) With the strategy of maximizing the potential of renewable energy resources in

daily life, effectively using energy resources, protecting the environment, and adapting to changes in climate On November 25th, 2015, the Prime Minister issued Decision No 2068/QD-TTg approving Vietnam‟s renewable energy development strategy to 2030, vision to 2050 (Nguyen Quoc Viet, 2021) By that means, the author found that since the end of 2015, renewable energy has begun to receive attention, been encouraged, and been developed widely in Vietnam (2) In 2016, when the Paris Agreement took effect, Vietnam was required to implement its commitment to combating climate change The Prime Minister released Decision No 2053/QD-TTg endorsing, which assigns the State Bank to coordinate with ministries and branches to “Accelerate the application of financial instruments such as green credit programs, green bonds, green investment fund and accordingly a set of criteria for green projects” (Nguyen Quoc Viet, 2021) Thus, since 2016, renewable energy projects have been promoted in companies, and banks and applied to many dissimilar fields, in which the electricity industry has been quite popular in investment Data sources used in the graduation thesis are quoted and compiled from the websites such as finance.vietstock.vn, www.worldbank.org

1.5 Research methodology 1.5.1 Research data

Input data for later research and data processing:

- Closing prices of stocks of companies providing electricity from renewable energy resources listed on the Vietnam Stock Exchange (Unit: VND/stock): Get data from finance.vietstock.vn

- Total assets (Unit: VND): Get data from Consolidated Financial Report - Number of outstanding shares: Get data from Consolidated Financial Report - Stock dividends (Unit: VND): Get data from Consolidated Financial Report

- Earnings per share (Unit: VND/stock): Get data from Consolidated Financial Report

- Equities (VND): Get data from Consolidated Financial Report

- Exchange rate (Unit: USD/VND): Get data from www.worldbank.org

- Gross domestic product growth rate (Unit: Percentage): Get data from www.worldbank.org

- Inflation rate (Unit: Percentage): Get data from www.worldbank.org

1.5.2 Research method

The primary research method used for the topic is the quantitative research method This method is more objective and accurate than qualitative research method in determining factors affecting stock price changes, and the level of the influence of each determinant on stock prices in the market (Hoang Ngoc Hai Yen, 2021) Specifically, the quantitative research method involves making measurements, assuming that the phenomenon under study can be measured, applying analytical methods, and drawing conclusions (Watson, 2015)

1.5.2.1 Data collection method

Secondary data includes data on 39 companies supplying electricity from renewable energy resources listed on the Vietnam Stock Market from the end of 2016 to the end of 2022 Data is collected and calculated based on Consolidated Financial Reports of companies listed on the Vietnam Stock Exchange, a few macroeconomic indicators such as exchange rate, gross domestic product growth rate, and inflation

rate collected from the website of www.worldbank.org, and stock prices are taken

from data at the end of each year during the research period from the website

finance.vietstock.vn Then, the author will use Microsoft Excel 2019 software to

minimize the data converted into million VND and decimals

1.5.2.2 Data processing method

To perform models, the author will operate Stata/MP 17.0 software First of all, the author will use descriptive statistics so that the data could be seen clearly and helped to better understand the research study In other words, the study will use

conventional data analysis that previous researchers often used, consisting of Pooled Ordinary Least Squares Model (Pooled OLS Model), Fixed Effects Model (FEM), and Random-Effects Model (REM) Based on the panel data regression model, the author will conduct tests such as Fisher‟s exact test, Hausman fixed random test, and Breusch and Pagan Lagrangian test to select the most suitable model In addition, the author will also check the model‟s defects as heteroskedasticity and aucorrelation Since then, when confirming the model for detects, the author will proceed to fix them by using the Feasible Generalized Least Squares (FGLS)

1.6 Justification of the study 1.6.1 Scientific justification

The research topic of the graduation thesis will provide additional empirical evidence on the impact of five micro factors and three macro factors on stock prices in the electricity industry using renewable energy resources listed on the Vietnam Stock Market along with evaluating the tendency of those factors Although research about factors affecting stock prices has been conducted in many countries around the world, including Vietnam, the focus on testing companies that supply electricity from renewable energy resources is very new Stock price movements of this industry group are still big questions for investors The author will rely on factors affecting stock prices in the study, comprising company size, dividends per share, earnings per share, financial leverage, price-earnings ratio, exchange rate, gross domestic product growth rate, and inflation rate

1.6.2 Practical justification

The research results will provide beneficial information to help investors more proactive in analyzing and evaluating the benefits and correlation between the above factors, thereby selecting strategies and building appropriate investment methods At the same time, based on the research results, the graduation thesis will propose solutions for policymakers in efficiently operating the market, avoiding the

phenomenon of price manipulation, and helping the stock market become a supply channel and capital effective for businesses in the economy On the other hand, the field will also contribute additional research documents for students and postgraduates in academic scientific research to enhance the richness of the topic and improve other limitations that the author did not identify at all

1.7 Structure of thesis

The layout of the topic includes 5 chapters with the following basic contents: Chapter 1 Introduction about research

Chapter 2 Theoretical basis and related experimental studies Chapter 3 Research method and data analysis

Chapter 4 Research results and discussion of results Chapter 5 Conclusion and policy implications

SUMMARY OF CHAPTER 1

Nowadays, the electricity industry from renewable energy resources has been constantly developing, leading companies in this industry group on the stock exchange to become more vibrant

Chapter 1 sets the research problem, and presents the rationale of research, research objectives (including general research objective and specific research objective), and research questions At the same time, chapter 1 identifies the subject of research and scope of research (In terms of space and time) Through quantitative research method with Pooled OLS model, FEM, and REM statistical models, the author will show the level of impact of factors on stock price changes of companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange In addition, in this chapter, the author also highlighted the justification of the study in science and practice From there, the graduation thesis helps generalize all of the writer‟s initial ideas about the research problem

CHAPTER 2 THEORETICAL BASIS AND RELATED EXPERIMENTAL STUDIES 2.1 Theoretical basis

2.1.1 Concept of stock

Stocks (also called capital securities or common stocks or ordinary shares) are stock certificates, confirming shareholder ownership of joint stock companies The person who is buying common stocks becomes an ordinary shareholder or a common stockholder Shareholders holding common stocks are the business owners, so they are the direct beneficiaries of production and business risks (Bui Kim Yen, 2008) Bach Duc Hien (2009) pointed out the two most oustanding characteristics of stocks Firstly, dividends on common stocks are not fixed, depending on the company‟s annual after-tax profit and dividend policy Secondly, the company‟s ordinary shares do not have a repayment period because they are not debt to the company

2.1.2 Par value of stock

Par value (also called face value or nominal value) of stock is the value that a joint stock company assigns to a share, written on each stock While issuing shares, the par value is the standard price of the shares at the time the company is issuing stocks when it first raises capital to establish the company With common stocks, the par value is mainly nominal as the value of the stock which is determined by the market With preferred shares, the par value is closer to the actual value as dividends are calculated according to a certain percentage of the par value Nowadays, Vietnamese law has stipulated that the recorded value of shares for the first issuance of a company is 10.000 VND

2.1.3.Book value of stock

The Book value of a stock is the actual value of a company determined based on accounting records for any assets This accounting book describes the company‟s

financial reports by month, quarter, half-year, or year Therefore, the oscillation frequency of the book value is irregular, i.e at periodic intervals

2.1.4 Intrinsic value of stock

The Intrinsic value of stock is the actual value, the internal value of a stock symbol, completely unaffected by external market factors, exists objectively, and cannot be imposed by anyone, including the owners Intrinsic value is crucial because it allows investors to take advatage of stock fluctuations so that they know whether the company can grow in the future, bring high profits, or it is stable Thus, an analyst or investor can estimate the intrinsic vallue of an investment, asset, project, or company through the use of fundamental analysis and technical analysis

2.1.5 Market value of stock

The Market value of stock is the value of buying and selling stocks at a specific time, carried out through transactions on the stock market Besides, the market value of stocks will fluctuate over time and depend on many impacts like the macroeconomic situation, the growth or decline of joint stock companies, market interest rates, the political circumstances, etc Volatility in the market value of a stock is understood as the uncertainty of changes in the price of it around the average value of itself A stock is said to have high volatility when it has a large deviation by comparison with its average value during the research period Similarly, a stock is considered to have low volatility when its price over the research period has not deviated significantly from its average value Because the return on common stocks is not fixed, it will be based on the level of profits earned from the company and dividend policy, making it a high-risk security Depending on the relationship between supply and demand in the market, if the market value of a stock is greater than the book value of a stock, that stock is highly appreciated by investors in the market and vice versa

In this graduation thesis, the author will mainly focus on the market value of common stocks of companies supplying electricity from renewable energy

resources listed on the Vietnam Stock Market to analyze, evaluate, and measure the influence of factors

2.2 Related theories

2.2.1 Bird-In-Hand theory

The Bird-In-Hand theory (also called Gordon growth model or dividend discount model) of dividend policy developed by Myron Jules Gordon (1961) and John Lintner (1962) emphasizes that dividend policy has no impact on the value of a company or its capital structure which affects stock prices and investor behavior This theory is derived from the following assumptions: (1) The company is only financed with equity, that is, no debt is used, (2) The only source of finance is retained profits, not is there any other source of financing, (3) The retention rate is constant, i.e there is a constant growth rate of earnings, (4) The company‟s cost of capital is constant and greater than the growth rate, (5) There is no income tax In an imperfect market with asymmetric information, investors often prefer to choose companies with high dividend policies in the past These types of investors are not willing to sell the high dividend stocks they hold, even when the market declines, they are still ready to buy these securities simply because of the decent dividend income stream stable in which stock prices fall This theory is expressed by the formula below (see Formula 1):

D0: Current year dividend g: The growth rate of dividend r: Discount rate

D1: Expected year dividend

With the formula, the author believed that investors do not care whether their profits from holding stocks come from dividends of capital gains, but stocks with high dividend payouts are chosen by investors to seek, and therefore that stock price will have a higher market value

2.2.2 Efficient market hypothesis (EMH)

The Efficient market hypothesis (EMH) was developed independently by Paul Anthony Samuelson and Eugene Francis “Gene” Fama in the 1960s, in the Doctor of Philosophy thesis, at the University of Chicago Booth School of Business This theory holds that the more efficient a market is, the more random the series of stock price changes it produces and that the most efficient market is one in which stock price changes are completely random and unpredictable (Andrew Wen-Chuan Lo, 2007) Nevertheless, opportunities for abnormal profits are both rare and fleeting because they result from temporary imbalances in the market and are quickly eliminated by the actions of informed traders Thus, the following formula of EMH explains the above arguments (see Formula 2):

𝐒𝐭𝐨𝐜𝐤 𝐩𝐫𝐢𝐜𝐞 = ∑ 𝐏𝐬 ∗(𝐬)𝛑(𝐬|Ω𝐭) (2) Where:

s: (1,2,3, …, N): N possible states of the world to each of which a number P*(s): The fundamental value

π: Archimedes‟s constant/The number pi t: time

Ωt: the probability of occurrence

Therefore, EMH encourages a wholesome skepticism in investment decisions Skepticism about “beating the market” strategies has led to the popularity of index funds, which allow investors to hold “the market” without worrying about individual stocks (Peter Fortune, 1991)

2.2.3 Miller and Modigliani theory (1958) (M-M theory)

As the name suggests Miller and Modigliani theory, was developed by Merton Miller and Franco Modigliani in 1958 As the average cost of capital does not depend on the volume and structure of debt, and it is equal to the profit that the investors require for companies of the same “risk kind”, increasing financial leverage does not reduce the company‟s average cost of capital because its effect will be exactly offset by the bigger cost of equity The conditions for the average cost of capital to be independent of the volume and structure of debt are filled as follows: (1) No taxes, (2) Bankruptcy but without causing any fact liquidation costs to the company as well as any reputational costs to the companies‟ directors, (3) Financial markets are competitive, frictionless and free of any information asymmetry (Marco Pagano, 2005) The formula below will explain the specific meaning of this theory as follows (see Formula 3):

𝐒𝐭𝐨𝐜𝐤 𝐩𝐫𝐢𝐜𝐞 = 𝐄 + 𝐃 (3) Where:

E: Equities D: Debts

2.2.4 Random walk theory

Random walk (also called drunkard‟s walk or probability) theory was developed by Maurice Kendall in 1953 This theory states that stock price fluctuations are not reliable indicators for predicting future trends Moreover, all information related to companies such as revenues, profits, liabilities, equities, capital structure, etc has been thoroughly captured and analyzed by market participants As a result, the market value of stocks always fully reflects that information (Burton Gordon Malkiel, 2006) As a consequence, this theory leads to the formation of a formula as follows (see Formula 4):

𝐒𝐭𝐨𝐜𝐤 𝐩𝐫𝐢𝐜𝐞𝐭 = 𝐒𝐭𝐨𝐜𝐤 𝐩𝐫𝐢𝐜𝐞𝐭−𝟏+ ∈𝐭 (4)

Where:

t: time

∈: error term/whiter noise (a normal variable with zero mean and variance one)

2.2.5 Signaling theory

Signaling theory was developed by Spench (1974), Leland and Pyle (1977), Miller and Rock (1985), etc This theory is concerned with reducing information asymmetry between companies and investors by using information signals Below is the formula of signaling theory (see Formula 5):

𝐒𝐭𝐨𝐜𝐤 𝐩𝐫𝐢𝐜𝐞 =[𝛍(∝)−𝛌(𝛂)]

(𝟏+𝐫) (5) Where:

μ: the expected cash flow of the company r: the riskless interest rate

λ: the market adjustment for risk

α: the percentage of stocks (and not the proportion of company value) held by the entrepreneur

Therefore, investors require reliable signals of venture capital activities to reduce uncertainty in investment decisions (Alsos and Ljunggren, 2017) Besides, signaling theory also implies that better companies will have lower valuations, get higher earnings, pay dividends sooner, give higher payout ratios, and react more favorably to the market when there is a dividend announcement (Michaely and Shaw, 1994)

2.3 Factors affecting stock price changes of companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange

Hoang Ngoc Hai Yen (2021) showed ways to choose factors that affect stock prices listed on the Vietnam Stock Exchange as follows: (1) Effects of factors on stock prices must be reflected in the long-term and throughout Short-term fluctuations in

stock prices due to unexpected volatilities in politics, natural disasters, war, etc can be ignored (2) The factors selected in the models are quantifiable factors, including determinants representing internal factors and external factors of the companies (3) There is relative independence between factors to avoid reducing the appropriateness of the regression model (4) The selection of factors to put in the model must be based on several previous studies, the actual situation in Vietnam as well as the ability to collect data

From the above criteria, the author has decided to choose eight factors affecting the changes in stock prices of companies supplying electricity from renewable energy resources listed on the Vietnam Stock Exchange (of which five are micro factors and three macro factors), specifically: Company size, dividends per share, earnings per share, financial leverage, price-earnings ratio, exchange rate, gross domestic product growth rate, and inflation rate

2.3.1 Company size

Company size is a basic and important characteristic of a company (Dang et al.,

2017) This is the division of companies into large ones, medium ones, and small ones The choice of size when establishing a company depends on factors such as Capital, ability, interests, experience, etc of the investor The size of the company has a direct impact on the organizational structure of the company‟s management apparatus The larger the company, the more complex the organizational structure, requiring the formation of more levels of government, and each level also includes more workplaces and procedures than small-sized companies

2.3.2 Dividends per share

Dividends per share is the company‟s distribution to shareholders in proportion to the number of shares owned Companies with larger and more stable dividends than similar companies will certainly be more attractive to investors, so demand for the company‟s stock will go up, which in turn will raise the stock price (Sunaryo, 2020) Nonetheless, a company‟s ability to distribute some of its profits to its

shareholders can be affected by its capital structure because debt grows, interest expense will increase and successionally reduce distributable net income for common shareholders ranked last among those with priority claims on the

company‟s income and assets (Alias et al., 2014)

2.3.3 Earnings per share

Earnings per share is the most complete measure to evaluate a company‟s achievements related to the goal of maximizing company value and shareholder wealth (Jasman and Kasran, 2017) A company whose earnings per share has increased steadily for many years is considered a company with a good foundation Earnings per share is separated into two types: Basic Earnings per share and Diluted Earnings per share Basic Earnings per share is spent to measure basic earnings per common share whereas Diluted Earnings per share is used to estimate basic earnings per preferred stock, ESOP, bonds, etc that will be converted into common stocks, gradually increasing the index if cash flow continues to flow in

2.3.4 Financial leverage

Financial leverage is an indicator used to measure the following essential criteria: (1) Creditors can see capital contribution ratio of the company‟s owners so they can feel secure in entrusting their debts If the owners only contribure a small portion of the companies‟ total capital, the business risk will mainly be borne by creditors (2) The companies‟ owners raise capital using debt still have the right to control the companies with little or no additional capital contribution (3) When the companies generate more profit on the loan than the interest paid, the profit available to owners

will go up (Ngo Kim Phuong et al., 2021)

2.3.5 Price-earnings ratio

The Price-earnings ratio is a widely used metric to measure the expected performance of companies (Anderson and Brooks, 2005) The price-earnings ratio can be defined as a constant cash flow whose present value is equivalent to the present value of the cash flows generated from the current equity investment

(Beaver and Morse, 1978) On the other hand, the Price-earnings ratio can be understood as a comparison of two sets of data, information about current earnings and future earnings summarized by price and information about current earnings only Accordingly, the mean reversion behavior of the price-earnings ratio is known as the price level that indicates future earnings relative to current earnings A high price-earnings ratio shows that earnings will be higher in the future and vice versa When these subsequent with higher or lower earnings are finally recorded, the observed price-earnings ratio returns to the mean (Ou and Penman, 1989)

2.3.6 Exchange rate

The Exchange rate is an asset price determined at a level to ensure that outstanding shares of various assets (especially those denominated in different currencies) are readily available to hold (Williamson, 2008) Futhermore, the exchange rate is said to be stable as the basic factor of macroeconomics Countries may have different policies and dissimilar inflation rates A fact fixed exchange rate system forces countries to keep price levels stable and maintain their macroeconomic policies appropriately The consequence of following a more expansionist policy than neighboring countries is a trade deficit (Frankel, 1993) Currently, the central exchange rate between VND and USD has increased beyond the mark of 24.000 VND, a total surge of 393 VND, equivalent to 1,66% The pressure on exchange rate is going up when in the international market, the USD has the longest streak of price that has increased in 9 years while other currencies such as the Japanese yen, Euro, and Chinese yuan are depreciating sharply (Thao Nguyen, 2023)

2.3.7 Gross domestic product growth rate

The Gross domestic product growth rate is the market value of goods and services produced in a chosen geographic area (usually a country) during a selected period (usually a year) This is a standard index used to measure the size, income, quantity, national growth, and development or decline of a country The gross domestic product growth rate is divided into two types: Nominal Gross domestic product

growth rate (also called Money Gross domestic product growth rate) and Real Gross domestic product growth rate (also called Inflation-corrected Gross domestic product growth rate or Constant Gross domestic product growth rate) Anyway, the Gross domestic product growth rate is not a measure of a country‟s general standard of living or well-being (Callen, 2008)

2.3.8 Inflation rate

The Inflation rate is an important economic phenomenon related to the rate of economic growth, affecting the value of money and indicating the stability of the national economy, whereby the annual Inflation rate is usually accepted as a reasonable measure of the annual dynamics of the price level (Arlt, 2020) In other words, inflation happens when money demand is due to rising actual income and other factors, the price level must grow to balance supply and demand (Fitzgerald, 1999) By contrast, most people will naturally assume that a price increase in their country is a bad thing This may be true in some cases, but there are others where it is not necessarily so In reality, where wages and prices are both automatically tied to inflation, and there is no significant time gap between when inflation is measured and when spending is made, this will have very little impact on people‟s

consumption (O‟Neil et al., 2017)

2.4 Related experimental studies

2.4.1.Overseas experimental studies

Table 2.1 Summary of related overseas experimental studies

Negative effect (-) Arshad Mehmood et al (2019)

Not statistically significant Paolo Saona Hoffmann (2018), Snežana Milošević Avdalović (2018)

Positive effect (+)

Mehr-un-Nisa and Mohammad Nishat (2012), Taimur Sharif (2015), Fouzan Al Qaisi (2016), Faith Wairimu Ngugi (2017), Felix Kwame Aveh and Dadson

Awunyo-Vitor (2017), Heny Handayani et al (2018), Purna Man Shrestha (2022)

2 Dividends per share

Not statistically significant Nidhi Malhotra and Kamini Tandon (2013), Felix Kwame Aveh and Dadson

Awunyo-Vitor (2017)

Positive effect (+)

Taimur Sharif (2015), Enow Samuel Tabot and Brijlal Pradeep (2016), Fadiran Taiwo Phebe and Olowookere Afolabi Emmanuel (2016), Purna Man Shrestha (2022)

3 Earnings per share

Not statistically significant Taimur Sharif (2015)

Positive effect (+)

Hussein A Hassan Al-Tamimi et al (2011), Kanwal Iqbal Khan et al (2011),

Kanwal Iqbal Khan (2012), Mehr-un-Nisa and Mohammad Nishat (2012), Nidhi Malhotra and Kamini Tandon (2013), Enow Samuel Tabot and Brijlal Pradeep (2016), Fadiran Taiwo Phebe and Olowookere Afolabi Emmanuel (2016), Felix

Kwame Aveh and Dadson Awunyo-Vitor (2017), Pudji Astuty (2017), Paolo Saona Hoffmann (2018), Purna Man Shrestha (2022)

4 Financial leverage Not statistically significant

Felix Kwame Aveh and Dadson Awunyo-Vitor (2017), Arshad Mehmood et al

(2019)

Positive effect (+) Paolo Saona Hoffmann (2018)

5 Price-earnings ratio

Not statistically significant Paolo Saona Hoffmann (2018)

Positive effect (+) Nidhi Malhotra and Kamini Tandon (2013), Taimur Sharif (2015), Enow Samuel Tabot and Brijlal Pradeep (2016), Pudji Astuty (2017)

6 Exchange rate Negative effect (-) Hendri Sivilianto and Endri Endri (2019)

product growth rate

Not statistically significant Shafiqul Alam et al (2016), Paolo Saona Hoffmann (2018)

Positive effect (+)

Hussein A Hassan Al-Tamimi et al (2011), Mehr-un-Nisa and Mohammad Nishat

(2012), Fadiran Taiwo Phebe and Olowookere Afolabi Emmanuel (2016), Faith Wairimu Ngugi (2017)

8 Inflation rate

Negative effect (-) Mehr-un-Nisa and Mohammad Nishat (2012), Shafiqul Alam et al (2016)

Not statistically significant Hussein A Hassan Al-Tamimi et al (2011), Paolo Saona Hoffmann (2018), Hendri

Sivilianto and Endri Endri (2019)

Positive effect (+) Faith Wairimu Ngugi (2017)

(Source: Compiled by the author)

2.4.2.Vietnam experimental studies

Table 2.2 Summary of related Vietnam experimental studies

Negative effect (-) Dinh Bao Ngoc and Nguyen Chi Cuong (2016), Nguyen Thanh Hieu et al (2019)

Not statistically significant Pham Tien Manh (2017), Nguyen Linh Nhat Minh and Pham Manh Tien (2022),

Le Nguyen Tra Giang et al (2023)

Positive effect (+) Chu Thi Thu Thuy (2018), Dang Ngoc Hung et al (2018), Nguyen Ngoc Thuc

et al (2018), Ta Thi Thuy Hang et al (2020)

2 Dividends per share Positive effect (+) Chu Thi Thu Thuy (2018), Ta Thi Thuy Hang et al (2020), Pham Ngoc Van

(2021), Tran Thi Thanh Tam (2021)

3 Earnings per share Positive effect (+)

Nguyen Thi Thuc Doan (2011), Truong Dong Loc (2014), Le Tan Phuoc (2016), Truong Dong Loc and Nguyen Minh Nhat (2016), Pham Tien Manh (2017), Chu

Thi Thu Thuy (2018), Hoang Thi Viet Ha et al (2018), Nguyen Ngoc Thuc et al (2018), Nguyen Khac Hung et al (2019), Ta Thi Thuy Hang et al (2020), Dang Ngoc Hung et al (2021), Pham Ngoc Van (2021), Tran Thi Thanh Tam (2021),

Nguyen Linh Nhat Minh and Pham Manh Tien (2022)

4 Financial leverage Not statistically significant Ta Thi Thuy Hang et al (2020), Dang Ngoc Hung et al (2021), Tran Thi Thanh

Tam (2021)

Positive effect (+) Nguyen Thanh Hieu et al (2019)

5 Price-earnings ratio Not statistically significant Nguyen Ngoc Thuc et al (2018) Positive effect (+) Pham Tien Manh (2017)

Negative effect (-) Phan Thi Bich Nguyet and Pham Duong Phuong Thao (2013)

Not statistically significant Le Tan Phuoc (2016), Nguyen Thi Phuong Dung (2019)

Positive effect (+) Bui Kim Yen and Nguyen Thai Son (2014), Truong Dong Loc (2014), Than Thi

Thu Thuy and Vo Thi Thuy Duong (2015), Nguyen Khac Hung et al (2019)

product growth rate

Negative effect (-) Dinh Bao Ngoc and Nguyen Chi Cuong (2016)

Not statistically significant Nguyen Linh Nhat Minh and Pham Manh Tien (2022)

Positive effect (+) Le Tan Phuoc (2016), Pham Tien Manh (2017)

Negative effect (-)

Bui Kim Yen and Nguyen Thai Son (2014), Truong Dong Loc (2014), Than Thi Thu Thuy and Vo Thi Thuy Duong (2015), Le Tan Phuoc (2016), Chu Thi Thu

Thuy (2018), Nguyen Khac Hung et al (2019)

Not statistically significant Phan Thi Bich Nguyet and Pham Duong Phuong Thao (2013), Nguyen Ngoc

Thuc et al (2018), Nguyen Phu Ha et el (2020), Pham Ngoc Van (2021)

Positive effect (+) Dinh Bao Ngoc and Nguyen Chi Cuong (2016), Pham Tien Manh (2017),

Nguyen Thi Phuong Dung (2019)

(Source: Compiled by the author)

SUMMARY OF CHAPTER 2

Chapter 2 introduces an overview of theoretical basis of research on the concept of stock, and the value factors of stocks, for example, par value, book value, intrinsic value, and market value In addition, chapter 2 also determines the roles of each independent variable in the economy together with showing the importance and mutual support of economic indicators that can cause positive or negative effects on the economy A focus of this chapter is stock price changes and the research surrounding them Domestic and foreign studies point to many different conclusions about eight factors chosen that lead to stock price changes by the author These are foundational for the author to propose research hypotheses, provide research models, and measure the impact of factors on the companies‟ stock prices in the following chapters

CHAPTER 3 RESEARCH METHOD AND DATA ANALYSIS 3.1 Research method

To perform this graduation thesis, the main steps of the research process are carried out as follows:

Figure 3.1 Research process

(Source: Compiled by the author)

 Step 1: Propose research hypotheses for model and select factors that affect stock price changes of companies supplying electricity from renewable energy resources

Noting the results of previous studies and considering the appropriateness for measurement, the author selected eight factors with the most impact Endogenous factors comprise Company size, dividends per share, earnings per share, financial leverage, and price-earnings ratio, and exogenous factors consist of Exchange rate, gross domestic product growth rate, and inflation rate Clearly identifying

endogenous and exogenous factors will help collect, calculate, and process data quickly and completely

 Step 2: Collect and process data

Based on the factors recognized in step 1, the author will collect secondary data from 39 companies supplying electricity from renewable energy resources listed on the Vietnam Stock Market with three popular Exchanges: HNX, HOSE, and UPCOM over a period of 7 years from 2016 to 2022 through financial reports,

website finance.vietstock.vn and macroeconomic information collected on the website www.worldbank.org to do research topic For independent variables that are

not available, the author will conduct calculations through the mathematical formulas stated in the explanation of variables All data in step 2 is collected using Microsoft Excel 2019 software The data is built in table data form with observations of dependent variables and independent variables

 Step 3: Describe statistics between variables

After collecting and processing the data, the author used Stata 17.0 software to analyze description statistics, giving the simplest characteristics of endogenous and exogenous factors affecting stock price changes through the following statistical indicators:

- The number of observed variables (also known as number of measured variables or number of noticed indicators) is the number of variables that can be directly observed and measured

- The mean is a simple mathematical average of a set of two or more numbers - Standard deviation is calculated by determining the difference between each data point compared to the mean value If a data point is far from the mean, that point has a high deviation in the data set The more spread out the data is, the higher the standard deviation