Financial capacity of listed pharmaceutical companies in vietnam

Improving financial capacity will help pharmaceutical companies apply science and technology, improve working conditions, increase labor productivity, increase competitiveness and thereb

INTRODUCTION

1 Urgency of the research

In the age of globalization and international economic integration, the companies have to make timely changes to adapt to new contexts When participating in the global economy, financial capacity is the top factor of business evaluation World and regional financial crises and the bankruptcy of large enterprises are also caused by the financial situation Vietnam is a developing country, the financial and monetary market has many fluctuations that greatly impact the financial activities of businesses Difficulties in mobilizing capital from the financial market directly impact the activities of enterprises Only companies with strong financial capacity can overcome economic fluctuations Every company needs to rely on its financial capacity to have an optimal business plan, thereby ensuring the ultimate goal of maximizing business value Facing significant opportunities and challenges, for each business more than ever, financial capacity needs

to be respected Financial capacity affects the competitiveness of businesses Financial capacity is reflected in the ability to ensure the capital that the company can mobilize to meet the capital needs; expressed in capital scale, ability to mobilize and use capital effectively Thus, the financial capacity of a company is associated with capital - a basic factor of production and an input factor of the enterprise Effective use of capital and quick capital turnover are of great significance in reducing capital and product costs And capital is a prerequisite for other factors of business In consequence, financial capacity reflects the economic strength of the enterprise and is the first and must-have requirement which lead enterprise to succeed in doing business and improve its competitiveness The financial capacity also affects the companies’ business value If a company has good financial capacity, the future cash flow of the business will be better, the future cash flow growth rate will be high, thereby increasing the business value Thus, it can be seen that improving financial capacity is an important task for business administrators if they want

to improve competitiveness and increase business value

Pharmaceuticals is one of Vietnam's important economic sectors, because it contributes to helping people and employees ensure their health, thereby supporting other industries and fields to well carry out their missions Vietnam's pharmaceutical industry

has a compound annual growth rate of 6% in the period 2018-2020 The growth rate in

2021 and 2022 is slower than previous years due to tightening infection control in hospitals and a sharp decrease in employees’ income as business operations are affected

by Covid-19 pandemic During this period, the pharmaceutical business system is still expanding with about 250 manufacturing factories, 200 import-export entities, 4,300 wholesale agents and 62,000 retail agents (DATC, Report on Vietnam Pharmaceutical Industry) Pharmaceutical companies have a large need for capital to invest in research and development and the high competition with the imported products To stand firmly in the market, each company in general and pharmaceutical companies in particular are required to have strong enough financial capacity Improving financial capacity will help pharmaceutical companies apply science and technology, improve working conditions, increase labor productivity, increase competitiveness and thereby improve operational efficiency business activity

Recognizing that importance, in recent years, many pharmaceutical companies have made great efforts to improve their financial capacity to meet practical requirements However, Vietnamese pharmaceutical companies have a highly fragmented scale and small financial potential In 2021, Hau Giang Pharmaceutical Joint Stock Company - the largest enterprise currently only accounts for less than 3% of the total market share of the Pharmaceutical industry Some pharmaceutical companies have a low capital growth rate, their ability to self-finance from retained profits is still low and their forms of capital mobilization are not yet diverse Low financial capacity leads to limited ability to increase investment in research and equipment for production technology, difficulties in investing

in large-scale projects, in purchasing pharmaceutical inventions and making improvements difficult And it make improving the capacity of human resources to research and develop products more difficult as well as difficult to improve the productivity and costs are also affected Weakness in financial capacity makes Vietnamese pharmaceutical companies less competitive than foreign ones Therefore, improving financial capacity to thereby improve production and business efficiency and increase competitiveness is the goal of pharmaceutical companies

Starting from limited financial capacity practices, there needs to be complete, systematic research to provide synchronous and feasible solutions to improve the financial capacity of company in Vietnam Pharmaceutical Industry Therefore, the PhD student

chose the topic: “Financial capacity of listed pharmaceutical companies in Vietnam” as

a doctoral thesis topic in economics with scientific and practical significance

2 OVERVIEW OF THE RESEARCH SITUATION

In the current context of volatile domestic and world economies, strong financial capacity plays an important role in influencing the survival and development of businesses Improving financial capacity is an important task in corporate financial management In the world and in Vietnam, many research works by different authors have focused on solving some aspects of this problem The thesis will review domestic and foreign research projects with the following contents:

(i) Connotation of financial capacity;

(ii) Indicators reflecting financial capacity:

(iii) Factors affecting financial capacity;

(iv) The impact of financial capacity on the value of the enterprise;

(v) Research on Pharmaceutical companies

Scientific and practical values are inherited by the thesis

Through the above overview of domestic and foreign research, the projects have provided a comprehensive theoretical basis on the financial capacity of company

With the theoretical basis of the financial capacity of company, there are suggestions about research orientation as well as important and necessary experience for the author to build a knowledge base about the research issues From there, the author can inherit to develop a research direction and build a theoretical basis on the financial capacity of listed pharmaceutical companies in Vietnam in the new context

Through authentic assessments based on rich data sources, the author has oriented practical research directions, data sources to access, and a basis for building a data collection plan and surveying the current situation on the financial capacity of listed pharmaceutical companies in Vietnam The results of previous studies are an important basis for the author to make recommendations and propose solutions to improve the financial capacity of listed pharmaceutical companies in Vietnam

Research gaps

(1) The studies have explained the concept of financial capacity, pointed out the

connotation of financial capacity, thereby providing indicators for assessing financial capacity and factors affecting the financial capacity of company However, it is necessary

to clarify and supplement additional issues such as: clarifying the connotation of an enterprise's financial capacity through the knowledge, skills, and qualifications of business administrators; clarify the content and criteria for assessing an enterprise's financial capacity; more complete in content and approach when analyzing factors affecting the financial capacity of company

(2) The studies have only addressed one aspect of the financial capacity of SMEs,

banks and listed enterprises in the construction industry without comprehensively and fully researching the financial capacity of listed Pharmaceutical companies in Vietnam

(3) Research on the financial capacity of listed pharmaceutical companies in

Vietnamese at each stage is not the same due to fluctuations in the macroeconomic situation, market fluctuations, the impact of the epidemic and changes in the State's economic policies

(4) The solutions that proposed in previous studies were both theoretically and

practically meaningful in the period when the authors researched But there is no study that offers comprehensive and specific solutions for the listed pharmaceutical companies

in Vietnam in accordance with policy changes, economic fluctuations and each stage of business development

(5) The researches on pharmaceutical companies have only studied the aspects of

financial risk management, capital structure, working capital management and competitiveness There has been no research on the financial capacity of listed pharmaceutical companies in Vietnam

From the above analysis, it can be seen that currently there is no research on the financial capacity of listed pharmaceutical companies in a complete and current manner

In addition, previous researches have not provided a complete and systematic set of criteria for assessing the financial capacity of company, have not studied the factors affecting the financial capacity of company and the impact of financial capacity on the value of listed pharmaceutical companies in Vietnam This is the research gap that the

author will address in this study Thesis “Financial capacity of listed pharmaceutical companies in Vietnam” has scientific and practical significance and it is independent

and does not overlap with any other research work

3 RESEARCH OBJECTIVES AND TASKS

Research objectives:

The research could propose solutions to improve the financial capacity of listed pharmaceutical companies in Vietnam

Research tasks:

(1) Systematize and contribute to clarifying the theoretical basis of the financial

capacity of company

(2) Analyze and evaluate the financial capacity of listed pharmaceutical companies

in Vietnam in the period 2015-2022

(3) Propose solutions to improve the financial capacity of listed pharmaceutical

companies in Vietnam

4 RESEARCH QUESTIONS

- What is the financial capacity of the company? Which criteria used to evaluate? What factors affect the financial capacity of company?

- How does a company's financial capacity affect its value?

- What is the experience of foreign pharmaceutical companies in improving financial capacity?

- What is the current financial capacity of listed pharmaceutical companies in Vietnam? What factors affect the financial capacity of listed pharmaceutical companies in Vietnam? How does the financial capacity affect the value of listed pharmaceutical companies in Vietnam?

- Appropriate solutions to improve the financial capacity of listed pharmaceutical companies in Vietnam?

5 SUBJECTS AND SCOPE OF RESEARCH

*Research subjects: The research object of the thesis is the financial capacity of

company

* Research scope:

- Content: research on the financial capacity of company

-Space: the listed pharmaceutical companies in Vietnam in which 16 pharmaceutical

companies listed on two stock exchanges, HOSE and HNX are selected

- Time: in the period 2015-2022

6 RESEARCH METHODS

Methodological basis: Based on the methodology of dialectical materialism and

historical materialism to perceive and consider the situation realistically, objectively, and logically

Database

- Primary data sources: data collected by this thesis author, unprocessed, collected

for the first time and directly from the companies through business surveys and interviews with managers of pharmaceutical companies

- Secondary data sources: are data that have been processed, compiled and

presented by listed pharmaceutical companies or collected by the thesis author from available information sources on the media, internet, and websites of the companies Accounting and financial data: Audited financial statements of listed pharmaceutical companies Previous domestic and world studies related to the financial capacity of company

Data processing and analysis methods

- Methods of synthesis and analysis: used to conduct an overview of theoretical

issues about the financial capacity of company; develop a set of questions to survey factors affecting the financial capacity of company; Build a study model of the impact of the financial capacity on company value

- Descriptive and comparative statistical methods: to assess the current financial

capacity of listed pharmaceutical companies in Vietnam; Evaluate factors affecting the financial capacity of listed pharmaceutical companies in Vietnam from a qualitative perspective

- Quantitative research methods:

+ Using exploratory factor analysis and linear regression models to analyze factors affecting the financial capacity of listed pharmaceutical companies The database is collected through conducting surveys at listed pharmaceutical companies

+ Use econometric models including FEM, REM and standard error variance model

to study the influence of the financial capacity on company value

Quantitative research methods will be conducted by collecting and processing actual secondary data of the 16 selected companies using Excel, STATA 15 and SPSS software

to measure, evaluate and test the hypotheses of the factors affecting financial capacity and its impact on company value These methods help the author in synthesizeing the

scientific theories, analyzing and evaluating the current situatation of financial capacity and find the solutions to improve the financial capacity of listed pharmaceutical companies

- Expert methods: Consult with experts, researchers, and policy-making managers

on the financial capacity of the listed pharmaceutical companies

- In-depth interviews: in-depth interviews with experts and managers at the listed

pharmaceutical companies The results of the interviews will supplement the analysis of qualitative information about the financial capacity of the company In-depth interview content is prepared and designed in the form of a list of questions

7 NEW CONTRIBUTION OF THE THESIS

- Scientific meaning: The thesis contributes to systematizing and clarifying the

basic theory of financial capacity of company Connotations, measurement criteria, factors affecting the financial capacity of company and the influence of financial capacity

on company value

- Practical meaning: The thesis comprehensively evaluates the financial capacity of

listed pharmaceutical companies in the period 2015-2022, clarifies the factors affecting their financial capacity and the impact of the financial capacity on the company value Clearly indicate the achieved results and limitations in financial capacity of listed pharmaceutical companies Propose synchronous and feasible solutions to improve the financial capacity of listed pharmaceutical companies

8 STRUCTURE OF THE THESIS

In addition to the introduction, conclusion and appendix, the thesis is divided into 3 chapters:

Chapter 1: Theories of the financial capacity of company

Chapter 2: Current status of financial capacity of the listed pharmaceutical

companies in Vietnam

Chapter 3:Solutions to improve the financial capacity of the listed pharmaceutical

companies in Vietnam

Chapter 1 THEORIES OF FINANCIAL CAPACITY OF COMPANY 1.1 Overview of the financial capacity of company

1.1.1 Concept of financial capacity of company

From the perspective of company, considering companies as subjects, the author

believes that: “The financial capacity of a company represents its ability to mobilize

capital, manage and use capital in operating to achieve business goals" The financial

capacity of company is reflected in its ability to mobilize capital and its ability to manage and use capital

1.1.2 The connotation of an enterprise's financial capacity

First, the financial capacity of company is reflected in its ability to mobilize capital

Second, the financial capacity of company is expressed in its ability to manage and

use capital

1.1.3 Indicators to evaluate the financial capacity of company

* Group of indicators to evaluate capital mobilization capacity

A company’s ability to mobilize capital is assessed through the following criteria: (1) Total capital and growth rate of mobilized capital

(2) Equity size, equity ratio and equity growth rate

(3) Scale of liabilities, debt ratio and debt growth rate

* Group of indicators to evaluate capital management and use capacity:

(1) Scale and structure of asset

(2) Group of capital efficiency indicators

(3) Profitable indicators

(4) Group of indicators to evaluate capital preservation

1.2 Factors affecting the financial capacity of company

In the business activities, the company always need financial support from many sources with the different approaches Choosing which form of financing, from which source and capital cost depends on the internal and external factors of the company The process of seeking outside financial resources will give rise to financial relationships between the company and capital market, thereby generating factors that affect the company's ability to access capital These factors are the difficulties and obstacles that the company facing in that financial relationship

Factors affecting the financial capacity of company can be divided into two main groups: external and internal factors

1.2.1 External factors

- Business and institutional environment

- Development of financial markets and intermediary financial institutions

- Technical and technological factors

- Company management factors

1.3 Impact of financial capacity on company value

1.3.1 Company value

From the perspective of corporate financial management, the benefits that investors receive from a business are reflected in the cash flow that brings to investors in the future Business administrators understand that money has value over time, so when investing capital in a company, investors require theirs investment to gain a rate of return equal to the opportunity cost With the investment for profit, the most common way to determine company value is to discount the cash flow of income that the business brings in the future to the present time at the expected return rate

Therefore, company value can be understood as the total present value of the cash flows that investors will receive in the future from the business profit

1.3.2 The impact of financial capacity on corporate value

From an empirical research perspective, there are many empirical studies on financial capacity affecting corporate value As mentioned above, financial capacity assessment criteria are divided into 2 groups: capital mobilization capacity and capital management capacity To build a model to study the impact of financial capacity on company value, the thesis author selected a number of representative indicators for each group mentioned above to measure financial capacity, including:

- Payment ability

- Capital structure

- Firm size

- Asset structure

- Growth rate

- Self-financing ability

- Retained profit ratio

1.4 Experience of some pharmaceutical companies in the world on improving financial capacity and lessons for Vietnamese pharmaceutical companies

1.4.1 Experience in improving the financial capacity of pharmaceutical companies in the world: Assess the scale and capital structure of some large

pharmaceutical companies in the world: Pfizer, Novartis International AG, Roche

1.4.2 Lessons for Vietnamese Pharmaceutical companies:

By reviewing the strategies and financial situations of major pharmaceutical companies in the world, a number of lessons can be drawn for Vietnamese pharmaceutical companies to improve their financial capacity as follows:

(1) Build a flexible capital mobilization strategy:

For financial management, diversification between short-term and long-term debt is

a smart strategy This not only reduces risks but also helps companies optimize financial costs, opening the door for flexibility in capital use and management Effective debt management helps the company maintain a stable profit margin

(2) Focus on profit management to increase profitability and improve capital use and management efficiency:

In addition to building flexible capital mobilization strategies, companies are also careful with debt levels, considering increasing capital mobilization and maintaining profits to help companies strengthen their financial capacity in facing of market fluctuations Debt ratio and profit margin are important dashboards Combining information from these two indicators will help companies maintain stability in capital structure, optimize profits and profitability ratios, thereby improving the financial capacity

(3) Invest in research and development to diversify the market:

Facing challenges and opportunities, besides the flexibility in capital management to help companies come over the market fluctuations and take advantage of all beneficial investment opportunities, the large pharmaceutical companies also have an international

expansion to diversify markets and reduce risks Investment in research and development not only helps pharmaceutical companies create new products but also improve quality and maintain a competitive position in the industry, thereby improving financial capacity Continuous assessment of market trends is the tool to helping companies adjust their investment strategies and capital structures Building investment strategies and mobilizing capital flexibly against market fluctuations can help pharmaceutical companies improve business efficiency, thereby enhancing their financial capacity