DECLARATION I hereby declare that the graduation thesis with the topic “Factors affecting the business performance of construction material companies on the Vietnam Stock Market" is my r
Rationale
For Vietnam's developing economy, the construction material industry plays an important position in the national economy, strongly attracting investment capital flows and promoting the development and expansion of the market In all fields of construction material production, there are several positive changes Production lines with outdated technology, low productivity, raw materials and fuel consumption, low efficiency, and environmental pollution are gradually eliminated Newly invested factories apply advanced technology and modern equipment, many lines are equipped with high levels of mechanization and automation, and the technology level is on par with developed countries around the world Construction material development has gradually received more attention towards sustainable development and environmental protection
Construction material is typically an industry that requires large capital and long project construction periods as well as project scale, which requires managers to come up with plans for issues such as managing capital and costs or increasing business competitiveness In the current context of a fiercely competitive market, in any industry, there are certain difficulties; thus, to avoid risks, businesses need to set operational goals, which is to maximize the value of firm assets Improving business performance is not only important for businesses but also crucial for our society as a whole However, how to effectively utilize capital as well as other resources to achieve goals is difficult for business managers Businesses need to have reasonable policies and strategies to be able to develop well and sustainably when affected by changes in endogenous and macro factors Through the process of studying and researching at the Banking Academy, the author realized that improving the business efficiency of construction material companies is utterly essential In addition, to have effective solutions to enhance business performance, it is necessary to analyze the influencing factors, so the author chose to research the topic “Factors affecting the business performance of construction material companies on Vietnam Stock Market”
Aims and objectives
The research conducts theoretical research on business performance and factors affecting the performance of businesses in the construction materials industry on the Vietnam Stock Market in the period 2014 to 2023 Since then, analyzing practical data research results as a basis to help administrators evaluate, improve, and enhance business performance.
Research subjects and scope
The subjects of the topic are construction material businesses on the Vietnam
- Spatial range: The author chose to study a sample of 63 businesses manufacturing and selling construction materials listed on both HOSE and HNX exchanges along with companies traded in UpCom
- Time range: The author researched over a period of ten years, from 2014 to
Research methodology
In this research, the author synthesizes, compiles statistics, and analyzes data
Based on modeling methods of analyzing quantitative data, the author builds hypotheses and uses multivariate linear regression models to find results From there, recommendations are made for individuals and organizations managing or participating in construction materials businesses in Vietnam.
Study structure
The study is divided into four main chapters:
Chapter 2: Data and Research Methodology
Chapter 3: Research Model and Results
Chapter 4: Conclusions, Policy Recommendations and Limitations
LITERATURE REVIEW
Theoretical basis of business performance
Business activities include any activity a company engages in for the primary purpose of making a profit This is a general term that encompasses all the economic activities carried out by an enterprise during business Business activities, including operating, investing, and financing activities, are ongoing and focus on creating value for shareholders Companies must build their business plans and suggest practical solutions to market fluctuations In the process of making their plans, the businesses cannot but calculate economic benefits from those activities or in other words, the business efficiency
The term efficiency can be defined as the ability to achieve an end goal with little to no waste, effort, or energy In manufacturing, it can be described as productivity, while in business, efficiency is possibly reflected through profits or competitiveness of companies Measuring firm performance is an essential part of the effective business management of every enterprise (Demirbag et al., 2006) Performance assessment can provide valuable information that allows managers to track performance, and report progress, thereby accurately determining and improving the situation (Wagoner et al 1999)
There have been different varieties of opinions about the business efficiency of a firm so far For example, Adam Smith, a famous British economist considered as the father of modern economics, stated that efficiency was the outcomes achieved in economic activities or the revenue from the consumption of goods This perspective focuses on output results and ignores input factors, so evaluating the performance of a business following this point of view will not reflect the costs the business has spent to obtain the output results
Porter M (1986) contended that a business’s performance depended on its ability to create value for its partners However, he did not point out which specific values were here and whether they were only partners who were interested in raising business values
Manfred Kuhn (1990) also gave an opinion that efficiency was possibly determined by dividing the results calculated following value units by firm costs This is an improved view of Adam Smith's With this perspective, Manfred Kuhn indicated the relationship between costs and results or inputs and outputs This is also the viewpoint that many economists and business administrators apply in practice to calculate economic efficiency Accordingly, the formula to compute firm efficiency will be:
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡𝑠 Neely, G., and Platts (1995) argued that performance assessment was the process of quantifying the efficiency and effectiveness of action Research by Siminica M (2008) reinforced that an efficient business could maximize its time to generate profits A business with good performance can simultaneously achieve both productivity and great results In other words, the performance of a firm is a function of two variables: productivity and operating results While productivity reflects the relative level to the external environment, performance measures the achievement of operating activities within the enterprise.”
According to Nguyen Khac Minh (2004), "efficiency" in economics is defined as the correlation between the input of scarce factors and the output of goods and services The concept of efficiency is used to consider how well markets distribute resources Thus, efficiency can be understood as the degree of success that corporations attain in the allocation of usable inputs and the outputs they produce to meet a certain goal
The goal of producers can be simply to try to avoid waste, either by achieving maximum output from limited inputs or by minimizing input utilized in the production of given outputs In this case, the concept of efficiency corresponds to what we call technical efficiency, the ability to minimize the use of inputs to produce a given output vector, and the manufacturer's goal of avoiding waste becomes the goal of achieving a high level of technical efficiency
Colase B (2009) showed a fairly complete view that business performance was a broad and diverse concept, which was assessed through growth, productivity, profit, or competitiveness According to Mutende and colleagues (2017), business performance refers to the capability of a business to achieve output results compared to the set financial plan
Based on the above viewpoints, we can conclude that company performance is a measurement of the quality of business activities, reflecting the ability of businesses to use resources to achieve set goals This is expressed through the correlation between the results achieved and the costs spent to gain those results The larger the difference is, the more effectively the business operates From the above perspective, we can calculate absolute and relative business performance through the following formulas:
Absolute Value: Efficiency = Outputs – Inputs
With this formula, the efficiency here can be computed in specific numbers, which can be usually net profit as regards business This formula measures the efficiency of a business through the value of revenue received after eliminating all costs However, in reality, comparing profits among enterprises cannot thoroughly reflect their operating efficiency because profits do not infer the business's capacity to use the resources For example, two businesses generate the same profit, but the company spending half of the capital to achieve that profit will be better than a business investing all the capital to achieve that same result
This formula shows how many units of output will be produced by each unit of input, reflecting the efficiency of resource use
This formula refers to how many units of input factors are needed to create one unit of output, reflecting the costs the businesses have to spend to make products
1.1.2 Theories related to business performance
Market Power Theory was initially mentioned by Bain (1951), who studied the relationship between profitability and structural variables such as concentration, growth, economies of scale, and advertising Bain found that concentration has a positive impact on profits Bain's (1951) research built market power theory asserting that an increase in market power leads to monopoly and increases profitability The theory that market concentration is the optimal way for market power leads to market imperfections, making it possible for organizations with market power to charge higher prices to customers The theory also asserts that firms with large market shares with differentiated products and services can easily earn monopoly profits, winning over their competitors The theory is applied in the banking industry to explain the effect of market share on profitability At the same time, this theory helps explain the positive relationship between bank size and financial efficiency
The Efficient Structural Theory initiated by Demsetz (1973) and Peltzman
(1977) originated from criticisms of market power theory Therefore, this theory is seen as an alternative to market power theory This theory describes the interaction between market structure and bank efficiency This theory also posits that managerial efficiency not only increases profits but also leads to greater market share and improved market concentration (Athanasoglou et al., 2008) The argument of the theory helps explain the relationship between cost management efficiency, technology, scale, market share (market concentration), and the profitability of banks or organizations Olweny and Shipho (2011) argue that banks are more profitable because they operate more efficiently Efficiency structure theory has two main approaches: X-Efficiency approach and the Scale-Efficiency approach In the X-efficiency approach, banks can improve operational efficiency by cutting operating costs to reduce product and service prices, thereby attracting more customers and dominating the market gain a larger market share, resulting in
7 higher profitability In the scale efficiency approach, large banks can cut costs thanks to scale, thereby achieving higher profitability (Olweny & Shipho, 2011) Large banks can operate at lower costs than small banks because large institutions typically operate in a more competitive environment
The theory of Modigliani and Miller
The theory of Modigliani and Miller was developed by Franco Modigliani and Merton Miller in the late 1950s Modigliani and Miller (1958) assumed that when firms operated in an environment with no taxes, no transaction costs, no bankruptcy costs, and no information asymmetry, the capital structure had no effect on the value of the enterprise, or in other words, the enterprise could not increase its value by changing its capital structure This theory cannot be applied in reality because the business environment of any enterprise in any country in the world always exists asymmetric information, transaction costs, and income taxes
Literature review
In the age of rapid digitalization and globalization, companies around the world are facing increasing pressure to innovate, improve productivity, and raise competitiveness Due to the importance of acknowledging firm performance, a large number of researchers majoring in finance have focused on exploring various factors related to business performance In the world, there have been many studies evaluating the impact of factors on business performance
Lazaridis and Tryfonidis (2006) collected data from 131 companies listed on the Athens stock exchange between 2001 and 2004 to find the relationship between capital structure and profitability In the study, gross profit is the dependent variable, and independent variables include the cash conversion cycle, fixed assets structure, debt ratio, and business size Research results show that the cash conversion cycle and debt ratio have a negative impact on business profitability Meanwhile, enterprise size and the ratio of fixed assets to total assets have a positive relationship with business performance
Zeitun and Tian (2007) researched the capital structure and corporate performance of 167 businesses in Jordan over 15 years (1989-2003) Their research results show that capital structure has a negative effect on business performance measured by both accounting and market basis A bright spot in this study is that the ratio of short-term debt to total assets has a positive effect on performance measured by Tobin-Q In addition, research also states that business size has a positive impact on operational efficiency Large enterprises have low bankruptcy costs or bankruptcy costs have a negative impact on operational efficiency
Bolek & Wiliński (2012) studied the impact of internal and external economic factors on the profitability of construction companies listed on the Warsaw stock exchange in the period from 2000 to 2010 Research results have shown that company size and GDP growth rate have the same impact on business profitability (ROA), while asset structure, capital structure, average cash collection, and quick ratio have opposite effects
Considering the impact of GDP on operational efficiency, a study by Tan and Floros (2012) on banks in China found a negative relationship between GDP growth and the profits of banks This bank, however, when they conducted the above research on banks in India, they found a positive relationship between GDP growth rate and profits Another study by Trujillo-Ponce (2013) on banks in Spain also found that GDP growth has a positive impact on Return on Assets (ROA) and Return on Equity (ROE) Research by Osamwonyi and Michael (2014) on banks in Nigeria also shows that GDP has a positive impact on ROE
Sivathaasan & colleagues (2013) researched factors affecting the profitability of all manufacturing companies listed on the Colombian and Sri Lankan stock exchanges in the period from 2008 to 2012 Influencing factors include asset structure, capital structure, company size, and growth rate, which are dependent variables representing a business's profitability ROE and ROA The study showed that the independent variables explained 76.6% and 84.7% of the influence of factors on the growth of ROA and ROE of the enterprise Only capital structure has a positive impact on the profitability of companies, while the variables asset structure, company size, and growth rate do not have a statistically significant relationship with ROE and ROA
Ebimobowei and his colleagues (2013) investigated 32 businesses listed on the Nigerian stock exchange during the period 2005-2011 In this study, they used ROA, ROE, and capital structure to evaluate business performance and the research results showed that short-term debt, long-term debt, and total debt have a negative impact on ROA and ROE Continuing the research of Ebimobowei, Mnang'at, S.A., and colleagues (2016) studied the relationship of interest rates to business performance measured by ROA and ROE on 21 consumer manufacturing enterprises listed on the Nigerian stock exchange The results showed that there exists a negative correlation between interest rates and ROA and ROE
Vătavu (2014) analyzed the impact of factors on profit margins of 126 Romanian enterprises listed on the Bucharest Stock Exchange, in the period 2003 -
2012 and found a positive impact of scale and a negative impact of debt ratio on
14 profit margin The results also show that during periods of unstable economic conditions, high inflation has a strong negative impact on business operations
Pattweekongka & Napompech (2014) found the relationship between working capital and profits by investigating 255 companies listed on the Stock Exchange of Thailand from 2007 to 2009 The independent variables used by the author in the model include average collection period, inventory turnover, cash conversion cycle, and business characteristics, and the dependent variable represents profitability Profit is the ratio of net profit from business activities to total assets excluding financial assets The results show that the average collection period and the number of days per inventory turnover have a negative impact on profitability Thai companies can increase profits by shortening the average collection period and inventory turnover days
Yazhu, F and Yanfei, G (2015) also researched the impact of capital structure on the performance of 53 real estate enterprises listed on exchanges in China during the period 2010-2012 They evaluated the impact of capital structure measured by debt to total assets ratio on performance measured by ROA, ROE, and current ratio Research results show that capital structure and operating efficiency of real estate businesses in China have a negative correlation, through which the authors stated that the correlation between these two variables is contrary to theory Regarding Western capital structure, if a business's debt increases, its tax shield will be enhanced, helping to increase the business's operating efficiency However, the authors' research still faces certain limitations such as the sample period being too short and only focusing on the period when the real estate market in China was almost frozen, which can not reflect the overall impact of capital structure on this industry
Tita D and Lionel, G.H (2015) evaluated the impact of factors such as business size, operating time, financial leverage, current ratio, and ownership ratio of the executive board on business performance The real estate industry’s performance was measured by using ROA on 37 businesses listed on the Indonesian stock exchange between 2007-2012 The study was analyzed using the FEM fixed-
15 effects regression model and found that business size had a large positive impact on performance while financial leverage had a negative impact on business performance The remaining factors do not have a clear influence and are negatively correlated with ROA The authors' research still faces many limitations: the study only evaluated 5 independent variables and could not fully explain the effects of other factors Besides, the research sample was small because there is a lot of cross- sectional data that does not match the research criteria set out and the research period only lasts 6 years, so it cannot reflect all businesses
Based on the research of Tita D and Lionel, F.H., author group Dr John F.T.D and Martha C.T.H (2017) continued to develop research on factors affecting the profits of listed real estate businesses in Indonesia with a sample set of 47 listed real estate businesses from 2010-2014 The average number of days of receivables has a negative relationship with profits but does not affect medium-sized real estate businesses The factor of average number of days of inventory negatively influences businesses Small-scale businesses are opposite to large-scale businesses because these businesses have more liquid assets Besides, this study also shows that business size and sales growth both have a positive relationship with the profits of both large and small real estate businesses On the other hand, the authors also point out that the current ratio has a positive relationship with the profits of large enterprises but inversely with small enterprises
Another study on 53 real estate companies also listed on the two stock exchanges SSE (Shanghai Stock Exchange) and SZSE (Shenzen Stock Exchange) in the period 2004-2015 by Cheng, Q., and colleagues (2016) concluded that the larger the business scale, the higher the efficiency the business achieves, however, the business scale does not have a significant effect on return on assets ROA and return on equity ROE The authors explain this because diversity in development has impacted the traditional economic scale effect The study also shows that, over the period studied, financial leverage has a significant negative correlation with business performance In particular, this negative impact existed before the financial crisis and it peaked during the crisis and gradually decreased afterward
In addition to studies evaluating the effectiveness of businesses abroad, there are also a large number of studies evaluating the performance factors of businesses in Vietnam
Nguyen Thi Hong Phuong and Banchuenvijit, W (2012) investigated the impact of capital intensity, business size, and exports on the performance (measured by ROA, ROE) of listed enterprises in Vietnam The research was conducted on 612 observations during the period 2004-2010 on 119 companies listed on the Hanoi Stock Exchange and 114 businesses listed on the Ho Chi Minh Stock Exchange The study used a 2-step regression model The research results showed that the longer the operating time, the higher the operating efficiency (measured by ROA), while the operating time had no significant impact on ROE, and capital intensity had a negative correlation with operating efficiency The results also show that exporting has no significant impact on business performance These results can be explained by the fact that Vietnam's exporting companies are often in the fisheries, agriculture, and clothing industries, and these companies have more opportunities to achieve profits than other companies which do not export However, these industries are also labor-intensive, meaning Vietnamese export companies often have many employees Therefore, exporting companies tend to have a low ROE
Nguyen Le Thanh Tuyen (2013) researched the influence of factors such as business size, revenue growth rate, average collection period, financial leverage (debt/total assets), fixed asset ratio, and cash flow standard deviation on operating efficiency measured by ROA of manufacturing and processing enterprises With an observation sample of 45 companies listed on the Vietnam stock exchange during the 3 years 2010-2012, the author's research results show that asset size does not affect the efficiency of businesses Besides, the revenue growth rate has a positive impact on ROA while the remaining factors have a negative impact on the profitability ratio of the total assets of the business Although certain research results have been achieved, the author's article still faces some limitations such as
17 the observation sample time being small, so the results may not fully reflect the influence of the factors mentioned above
DATA AND RESEARCH METHODOLOGY
With this research thesis, I have built a process compressing six main steps Setting up a research process is extremely crucial so that the research can be conducted smoothly and logically
Step 1: Research previous studies and identify the main research questions
Find, read, and review previous research topics by researchers related to the topic Going through the steps of evaluating research, I will exploit missing aspects or research gaps to identify problems and new points in the research After acknowledging the previous studies on the same issue, I decided to choose the topic: “Factors affecting the business performance of construction material enterprises listed on the Vietnam Stock Market”
Step 2: Identify impact factors, research objectives, scope, and objects by doing a literature review
The research was conducted to find the relationship of several factors to business performance The scope of the study is limited to the construction material industry, specifically, construction materials businesses listed on the stock market in Vietnam
As presented in the theoretical basis of factors affecting business performance above, this study uses two main indicators to measure the performance of construction material businesses, including return on total assets (ROA) and return on equity (ROE) The study evaluates the impact on operating efficiency of a variety of factors like firm scale, firm age, financial leverage, liquidity, fixed asset structure, asset turnover, revenue growth, and two macro factors such as inflation and GDP growth
Step 3: Collect, edit, and check data quality
Based on the identified research objectives, the author collected financial data of enterprises in the construction materials industry traded on the Vietnam stock market over 10 years, from 2014 to 2023 Indicators in the balance sheet and
20 business results are collected from audited financial statements through reliable sources In addition, macro data is collected according to statistical results published by World Bank Data between 2014 and 2023
To get good research results, accurate research data is needed, so after collecting primary data, the author randomly checks and compares the collected data with other data sources such as VietStock and CafeF With variables that are not available indicators such as profitability ratios, asset turnover, fixed asset structure, revenue growth, and more, the author makes calculations based on the formula which will be presented in the following section
Step 4: Identify hypotheses and build models
Based on past research results, the author proposes questions and hypotheses of the research topic According to the reference model and identified variables, the author builds a model to create the basis for the next quantitative steps
Step 5: Run the validation and select the appropriate model
From the prepared research data, using STATA17 software, regression the research model to produce model results, overcome model defects, and complete the model
After completing the validation steps and providing results of the model's impact, it is necessary to draw general conclusions From there, timely solutions and recommendations are proposed based on research results
In this research article, the author uses a multiple linear regression model to analyze the relationship between dependent variables that reflect business performance, which is the rate of return on total asset (ROA), as well as return on equity (ROE) and independent variables will be specified in the section below to evaluate their impact
The author divided the factors affecting the business performance of construction material companies into two groups, including internal factors and external factors
To be specific, the independent variables, which are considered micro factors, comprise firm age, firm size, financial leverage, liquidity, fixed asset structure, asset
21 turnover, and revenue growth of the enterprises Meanwhile, the macro factors are GDP growth and Inflation rate
Figure 2.1 Factors Affecting Business Performance
In this analysis, the author limits the research scope to businesses traded on the Vietnam stock market Selecting firms traded on the Vietnam stock market helps the author reduce the lack of data for companies that do not publish reports or reports of private businesses recorded according to common law The privacy of this group of businesses leads to data that does not reflect the indicators the study needs to evaluate in detail
The research was conducted on 63 enterprises manufacturing and trading construction materials within 10 years from 2014 to 2023 The author chose a time frame for data within 10 years based on many opinions that 10 years is considered to be the cycle of Vietnam's construction materials industry and also the economic cycle of Vietnam In the total 63 samples of construction materials industry
22 enterprises studied, there are 15 enterprises on HOSE, 16 companies on HNX, and the others on UpCom As there were some years that the studied companies did not publicize their financial statements, the author collected a total observation of 532
Table 2.1 Summary of researched firms
Stock Market Numbers of firms
Data related to financial reports are collected and compiled by the author from annual financial statements from the CafeF data platform and official websites of companies About the macro data group, the author collected it on the World Bank Data website and compared it through the official information page of the General Statistics Office of Vietnam The above checking helps the author improve the quality of input data and avoid data errors that affect the results of the research
The qualitative research method involves collecting and analyzing non- numerical data to understand concepts, opinions, or experiences It can be used to gather in-depth insights into a problem or generate new ideas for research I have collected information about indicators of business performance and factors affecting the profitability of the firms through prestigious studies and theses publicized on the Internet
Quantitative research is the opposite of qualitative research, which involves collecting and analyzing non-numerical data The quantitative method engages in collecting and analyzing numerical data It can be used to find patterns and averages, make predictions, test causal relationships, and generalize results to wider populations Quantitative research is widely used in the natural and social sciences: biology, chemistry, psychology, economics, sociology, marketing, and so forth
Microsoft Excel is a popular software specialized for storing data in spreadsheet form, supporting calculations and statistics in an intuitive way Besides, this is good software that supports synthesis and in-depth analysis of data with the advantage of a friendly, easy-to-use interface Therefore, the author chose Microsoft Excel to synthesize input data sources and statistically arrange the data in a scientific and easy-to-understand manner to make it more convenient to run the econometric model
RESEARCH MODEL AND RESULTS
According to theory, to evaluate the profitability of a business, 4 indicators can be used ROA, ROE, and ROS However, unlike the two indices ROA and ROE, ROS is an index that evaluates profitability on revenue Therefore, the ROS index depends heavily on macro factors that are difficult to measure accurately such as social situation, inflation, epidemics,
Because of this reason, to study the profitability of the enterprise, the author chose two index variables ROA and ROE as the two dependent variables of the research model In which the variable ROA is the rate of return on total assets, the variable ROE is the rate of return on equity
Analyzing factors affecting business performance of an enterprise is the study of the influence of macro and micro factors that directly or indirectly impact business management efficiency based on numbers
By considering the impact of factors on business performance, the results of the project also provide administrators with tools to assess risks In business, whether in any field or industry, it posibly has risks and to achieve desired business performance, managers need to understand and quantify the level of risk that may come from market factors and reduce risks to a minimum Based on analysis and assessment of the impact of factors, managers will make reasonable decisions to cut or increase spending in necessary areas
Analyzing factors affecting production and business performance is also the basis for business managers to make decisions as well as business plans in accordance with the strengths or limitations of the enterprises or the entire industry Based on previously conducted studies on factors affecting the performance of the construction material industry, most of these studies divided the factors into two groups The first group comprises internal factors of businesses like firm asset size,
31 firm age, financial leverage, liquidity, fixed asset structure, asset turnover, and revenue growth The second group includes macro factors such as GDP growth or Inflation rate In this research article, the author also divides the factors into the two groups above and makes hypotheses based on theoretical basis and research conducted on the same topic as the following
Firm size refers to the scale on which a company operates It is often determined by factors such as total sales, asset value, employment numbers, or business volume It is a quantifiable measure of a business's scale and operating capacity The size of the enterprise will affect the company's organizational structure, reputation, market share, and profits
Scale can be considered the first sign for an investor to scrutinize a business
A large-scale business will have a large amount of assets and a more competitive advantage in the market According to Taani and Banykhaled (2011) as well as Adekunle and Kajola (2010), the size of the business has a significant influence on the profitability of the business Some researchers like Malik (2011), Amoroso
(2015), Serrasqueiro and Nunes (2008), Asimakopoulos et al (2009), and Mesut
(2013) believed that the more powerful the financial potential of a business was, the easier it was to gain a good reputation and take many competitive advantages in trade negotiations as well as diversify products and services Besides, a company with a larger scale can have enough financial resources to recruit highly qualified workers, thereby having many opportunities to improve business performance However, according to the research results of Kartikasari and Merianti (2016), Shehata and colleagues (2017), it showed that enterprise size measured by total assets had a negative impact on business performance
In the scope of this research, the author will use revenue as the main factor determining the size of the business and have the following calculation formula:
Firm size= ln (total assets)
Hypothesis H1: The asset size of the company has a positive or negative impact on business performance
According to Ilaboya (2016), a firm's age is defined as “the number of years of incorporation of the company” Some argued that listing should be used to define firm age for the reason that listing is more economical, and because a company's life starts from the moment of listing (Shumway, 2001)
Some studies suggest that businesses operating for a long time will have better financial performance and operational efficiency because they have more experience (Coad et al., 2013; Osunsan et al., 2015) However, research by Loderer et al (2011), and Ouimet and Zarutkskie (2014) indicate that the aging of businesses can negatively impact the operations of businesses, making indicators like ROA and ROE worse Because enterprises that have been operating for a long time often have difficulty accessing modern production and business technologies, the competitive advantage of these businesses is also lower than that of young businesses Business age is calculated using the following formula:
Firm age = Current year – Founded year
Hypothesis H2: Firm age has a positive or negative impact on business performance
Financial leverage is the concept of using borrowed capital as a funding source Leverage is often used when businesses invest in themselves for expansions, acquisitions, or other growth methods
The results of the study by the author group Iqbal and colleagues (2018) are similar to the research of the authors Egbunike and Okerekeoti (2018), Zeitun and Tian (2007), Kartiningsih and colleagues (2020), which have found that the financial leverage ratio has a significant impact on business performance However, some other studies contend the more financial leverage is used, the lower the business's operating efficiency (Simerly and Li, 2000; Thuy et al., 2015)
Financial leverage = Total liabilities/ Total assets
Hypothesis H3: Financial leverage has a positive or negative impact on business performance
Liquidity refers to the efficiency or ease with which an asset or a security can be converted into ready cash without affecting its market price The most liquid asset of all is cash itself Consequently, the availability of cash to make such conversions is the biggest influence on whether a market can move efficiently The more liquid an asset is, the easier and more efficient it is to turn it back into cash Less liquid assets take more time and may have a higher cost
According to Abor (2005), Almajali et al (2012), and Gill et al (2011), liquidity has an impact on the operating efficiency of business activities of enterprises The research results of Akenga (2017) and Khidmat et al (2014) confirmed that liquidity had an impact in the same direction as business performance Accordingly, liquidity has a positive impact on corporate performance measured through ROA and ROE However, research by Khalifa and Zurina (2013) and Thuy et al (2015) indicated that if a business maintained too high liquidity, it meant that the business had invested too much in short-term assets With increasing operating costs, business profits would decrease
Liquidity= Current Assets/Current Liabilities
Hypothesis H4: Liquidity has a positive impact on business performance
Fixed assets are production materials used in the production and business process, with great value, and participate in many business cycles Fixed assets are tangible, long-lived assets used by a company in its operations, such as machinery, factories, tools, furniture, and computers Fixed asset investment ratio and business performance evaluation measures (ROA, ROE) are examined by Pouraghajan et al
(2012) and they are shown to have a positive relationship By contrast, Zeitun and Tian (2007), and Onaolapo and Kajola (2010) have pointed out that significant
CONCLUSIONS, POLICY RECOMMENDATIONS AND
The study was conducted on 63 construction materials enterprises listed on the Vietnam stock market from 2014 to 2023 With the purpose of determining the impact of factors on enterprise performance, the author used the regression method with Pooled OLS model, fixed effects model (FEM), random effects model (REM), and finally GLS regression model for panel data collected from businesses Research results show that several internal factors are correlated with ROA and ROE, including business size, asset turnover, and revenue growth, which all have a positive impact on business performance; whereas, financial leverage has a negative impact on firm profitability The other internal factors like firm age, liquidity, and fixed asset structure have no correlation with the profitability of the companies As regards the group of external factors, the author used indexes such as GDP growth and inflation rate Research results show that GDP growth and inflation have no impact on the profitability of businesses in the construction materials industry
In recent years, the construction materials production industry has developed strongly in quantity, quality, and type, meeting the increasing demand for infrastructure construction, urban development, and housing The value of construction materials usually accounts for about 60-70% of the cost structure of construction projects; therefore, the quality and cost of construction materials greatly determine the quality and price of construction
The development of our country's construction materials is inevitably influenced by the world's trends in construction materials development aa well as scientific and technological advances Currently, our country's construction materials development has begun to aim at applying scientific and technological advances, effectively using resources, and protecting the environment This will help to ensure economic security, and proactive international integration, as well as
56 form the basic conditions for a green economy, with little solid waste and low carbon emissions
From the research results and the current status of production and business activities of enterprises in the construction materials industry, it can be figured out that to improve business efficiency, enterprises can increase their total asset scale In addition, the enterprises also need to take measures to enhance revenue, which contributes to the increase in asset turnover while financial leverage should be diminished The author would like to suggest several practical recommendations to help improve the business performance of construction material companies traded on the Vietnam Stock Market
Firstly, construction material companies should expand their business scale
As the author has pointed out above, firm asset size has a positive relationship with business efficiency, which means more money invested in the total assets of these companies will help to raise business performance For instance, enterprises can consider investing more in machines and factories to improve their scale However, an increase in assets by borrowing for investment with weak management capacity causes the burden of interest and depreciation expenses, which reduces operational efficiency Therefore, enterprises should prioritize a raise in short-term assets to improve existing business capacity before considering the increase in long-term assets for stable growth
Secondly, Vietnamese construction material enterprises need to build a reasonable capital structure The research result demonstrates that capital structure has a significant impact on the business performance of Vietnamese construction material companies These enterprises must restructure the ratio of borrowed capital and allocate existing cash flows to ensure reinvestment ability, which plays a core role in improving the business efficiency of the construction enterprise In addition, the companies must handle tasks well such as debt recovery from other business partners or releasing unplanned inventory Increasing the speed of working capital turnover helps to reduce the need for capital, so businesses are not pressured to borrow to invest in operations as well as to pay debts such as those owed to
57 suppliers According to research results, asset growth will improve business efficiency, but financial leverage has the opposite effect, which shows that growth is achieved when the source of increase is from profits and shareholders’ equity Thus, enterprises should focus on capital mobilization channels from issuing shares to existing shareholders, to the workforce in the business, to strategic partners or widely issued on the stock market This is a fairly effective form of capital mobilization that can assist to raise capital in large quantities with a fixed capital price for a long time From there, businesses can make long-term production and business plans, without worrying about capital costs changing with the market like bank loans
Thirdly, construction material businesses need to develop a reasonable sales strategy to increase revenue To do this, some measures could be considered such as improving marketing efficiency, conducting market research, promoting and positioning brands to expand market share, making a suitable distribution system and pricing strategy, developing human resources, and researching and applying science and technology to improve the quality of works and reduce production costs Moreover, enterprises need to restructure production, promptly grasp and research the market, ensure to maintain and improve the quality of products and services to meet the increasing needs of customers To improve competitiveness and expand market share, companies can choose projects in potential segments based on market trends or technical strengths
Lastly, applying an effective and flexible credit policy to strictly manage receivables is extremely crucial in improving business efficiency for the construction material enterprises For traditional customers with a reputable history, it is necessary to create favorable conditions and provide the best products and services to retain customers For new or old customers who are still late in their payment obligations, it is necessary to regularly remind and strengthen debt collection by arranging for staff to closely monitor and manage Besides, the construction material companies to use information technology, debt management software, construction of a professional debt control system to help track debts quickly and accurately
The study only analyzed financial data from 63 companies in the construction materials industry traded on the Vietnam stock market Therefore, the research results are part of the overall industry picture and cannot fully represent the entire construction materials industry In addition, the time data was selected from 2014-
2023, a period when the economy was still relatively volatile, especially in 2019-
2022, when the COVID-19 epidemic posed a heavy impact on the whole economy, both domestically and internationally On the other hand, profitability is a sensitive variable, which will always fluctuate over time, and is affected by many different endogenous and exogenous factors, so the results obtained may not be accurate
In this chapter, the author makes some conclusions about the research results
Besides, the author also provides an overview of the current situation of construction material companies in the Vietnam stock market and then gives several pragmatic solutions to help improve the business performance of these enterprises
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