The study uses an Event Study model to draw conclusions about the impact of stock split announcements and the relationship between signal theory and price volatility in the Vietnamese st
The significance of the ion
The stock market is crucial for economic development and serves as a key component of a country's financial system Investors prioritize the quality and impact of information on stock prices, prompting companies to be cautious when releasing public information Stock price fluctuations and investor interest are influenced not only by financial reports but also by media communications Information from financial firms, securities companies, and analysts shapes the market's landscape for investors Consequently, understanding investors' reactions to disclosed information on the stock market is a significant focus for researchers.
A stock split is a common practice among publicly traded companies that increases the number of shares without affecting the company's cash flow or overall value Despite this theoretical neutrality, research indicates that stock splits can influence stock prices and liquidity Some studies, such as those by Wu and Chang (1997) and Li et al (2015), suggest that stock splits positively impact stock prices and liquidity, while other research, including findings by Lammoureux and Poon (1987) and Patel et al (2016), presents contrary evidence.
In recent years, stock splits have become increasingly prevalent among listed companies on the Ho Chi Minh Stock Exchange (HOSE) This research aims to explore how investors respond to stock split announcements and the connection between signal theory and stock price volatility Utilizing data from 56 stock split events involving 38 companies on both the Ho Chi Minh City and Hanoi Stock Exchanges in 2022, the study employs an Event Study model to analyze the effects of these announcements The findings will provide valuable insights for investors, aiding them in evaluating company prospects and enhancing their decision-making processes.
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The objective of this research is to test the signaling theory using the stock split activities of listed companies on the Vietnamese stock market.
Based on the research findings, recommendations can be made for business managers to devise appropriate policies, while aiding investors in making accurate predictions on the future returns of stocks.
Systemizing the theoretical foundations of the signaling theory regarding stock splits of enterprises.
Evaluating, analyzing and verifying how stock split information affects the stock price and the market.
Providing some suggestions for investors and enterprises before making decisions to trade securities and announce stock split information.
Based on the research objectives, in this thesis, the author will focus on studying and explaining the research questions:
1 The impact of the stock split announcement on the stock market in Vietnam in recent times?
2 The relationship between signaling theory and stock price volatility
3 For investors and other organizations, what purposes can they use the effect of the stock split announcement on stock prices for?
This research aims to validate signal theory through the analysis of stock split activities of listed companies in the Vietnamese stock market, utilizing the event study method The study emphasizes data analysis and the development of investment models and recommendations, rather than an in-depth market analysis for decision-making Ultimately, investment decisions are influenced by the individual skills and preferences of each investor.
A study analyzing 56 stock split events from listed companies on the Vietnam Stock Exchange was conducted, focusing on data collected from January to December 2022 This analysis included essential information such as closing trade prices and the VN-Index.
This study employs the event study method to analyze how announcements regarding stock splits influence changes in stock prices The article will be structured to adhere to the established sequence and standards of the event study methodology.
This article examines the impact of stock split announcements on stock prices and trading volumes The event date is determined by when the information is disclosed on platforms like vietstock.vn and cafef.vn If the announcement occurs during trading hours, the event date coincides with the announcement date; however, if it is made after hours or on a holiday, the event date shifts to the next trading day.
This research aids investors in forecasting stock price trends and crafting effective investment strategies The findings offer essential signals and serve as valuable references for personal investment choices Additionally, the study recommends that securities companies and related entities enhance market transparency and boost investor knowledge It also highlights the importance of maintaining a company's growth trajectory.
In addition to the introduction, conclusion, attached appendices, the research paper is built through 4 main chapters:
- Chapter 2: Research overview and theoretical basis on the theory of signal theory from stock split activity
- Chapter 4: Research results of analyzing the stock price volatility in relation to the announcement of stock split in Vietnam
- Chapter 5: Summary, conclusions and recommendations.
CHAPTER 2: RESEARCH OVERVIEW AND THEORETICAL BASIS ON THE THERY OF
SIGNAL THEORY FROM STOCK SPLIT ACTIVITY
Numerous studies have examined the effects of stock splits on stock prices and liquidity, with significant contributions from researchers like Truong Dong Loc and Ngon.
A study by Ly Quan (2019) examined the effects of stock split announcements on the price and trading volume of stocks listed on the Hanoi Stock Exchange from 2015 to 2017, utilizing the event study method in financial economics Analyzing 237 stock split events from 150 companies, the findings revealed that stock prices increased by 0.33% two days prior to the announcement and by 0.59% in the session following it, with this upward trend maintained for 10 trading sessions Additionally, the research indicated a significant enhancement in stock liquidity, particularly in the two sessions post-announcement, confirming that stock split information positively influences both price and liquidity of stocks on the HOSE.
Vo Xuan Vinh and Dang Buu Kiem (2016) explored the market's reaction to changes in the VNM fund's stock portfolio within the Vietnamese stock market from 2009 to 2015, utilizing the event study method in financial economics Their research focused on announcements regarding the addition or removal of stocks and changes in stock holdings The findings revealed that the market did not respond to these announcements on the announcement date; however, it exhibited reactions both before and after The study provided evidence for the theory of imperfect substitution, indicating that adding stocks to the VNM fund's portfolio led to price increases that stabilized at a new equilibrium, while increasing stock holdings resulted in price decreases that also settled at a new equilibrium level.
Vietnamese investors, especially individuals, should develop clear, principle-based, and long-term investment strategies tailored to their specific needs to prevent impulsive decisions driven by market trends or foreign trading influences Attention should be given to stocks likely to be included in the VNM fund's portfolio Additionally, policy-makers must implement programs to improve financial literacy among investors, which is essential for ensuring the stability and sustainable growth of the stock market amid ongoing global integration.
Numerous global studies have examined the impact of stock split announcements on the volatility of company stock prices, but the findings remain inconsistent While some research suggests that stock splits enhance stock prices and liquidity, other studies present contrasting outcomes.
Research by Elfakhani and Lung (2003) on the Canadian Stock Exchange from 1977-1993 revealed that stock splits positively influence stock prices for approximately 11 days following the announcement Similarly, Kuse and Yamamoto (2004) observed cumulative abnormal returns on the Japanese Stock Exchange during the 30 trading days post-announcement, indicating a favorable market reaction Consistent with these findings, Li et al (2015) also reported a positive effect of stock split announcements on stock prices, attributing the increase to enhanced liquidity of the stocks.
On another note, several empirical studies reported excess returns on the announcement and effective dates of stock splits Positive excess returns were discovered in other markets as well.
Aduda and Caroline (2010) investigated the effects of stock splits on stock prices and liquidity within the Nairobi Stock Exchange, revealing a positive correlation between stock splits and increased trading volume Similarly, Rudnicki (2012) employed the event study method to analyze how stock splits influence liquidity, further supporting the notion that stock splits can enhance market activity.
Research conducted on stocks listed on the Warsaw and Vienna Stock Exchanges from 2000 to 2011 revealed a significant increase in stock liquidity following stock split announcements Similarly, a study by Huang et al (2015) examined the effects of stock split information on liquidity across the NYSE, AMEX, and NASDAQ from 1960 to 2010, finding that most stocks experienced a notable rise in liquidity around the announcement date Although liquidity tended to decline after the announcement, it remained higher than pre-split levels However, post-ex-dividend, liquidity often fell below the levels observed before the split.
While some research suggests that stock splits negatively affect stock prices, Szewczyk and Tsetsekos (1993) found an increase in institutional investor participation post-split, although negative investor reactions were anticipated when splits appeared to favor executives Gorkittisunthorn et al (2006) noted a decline in insider ownership following splits, aligning with the asymmetric information framework that indicates less informed traders can lead to narrower bid-ask spreads, thereby supporting the liquidity hypothesis Their traditional event study revealed positive market responses on both announcement and effective dates Additionally, Byun and Rozeff (2003) examined 12,747 stock splits from 1927 to 1996 and concluded that these splits were largely value-neutral transactions, challenging the findings of earlier studies.
Goyonke et al (2006) examined the impact of stock splits on liquidity over a six-year period, revealing that firms initially faced a temporary decline in liquidity for the first 9 to 12 months, followed by an increase in liquidity observed 24 months post-split Conversely, Gupta and Kumar (2007) found no significant announcement effect of stock splits in India Earlier research by Baker and Gallagher (1980), Lakonishok and Lev (1987), and Lamoureux and Poon (1987) suggested that executives may utilize stock splits as a strategy to fend off takeover threats by broadening the shareholder base, complicating potential acquirers' control over the company's equity.
Research objectives and SCOD - 6 TH TH TT HT TT HH TH Hà nh Hà Hà chip 5
This research aims to validate signal theory through the analysis of stock split activities among listed companies in the Vietnamese stock market, employing the event study method The study emphasizes data analysis and the development of investment models, providing investment recommendations rather than extensive market analysis for decision-making Ultimately, investment choices are influenced by individual investor skills and preferences.
The study analyzed 56 stock split events from listed companies on the Vietnam Stock Exchange between January and December 2022, focusing on key data such as closing prices, the VN-Index, and other relevant metrics.
Research methOS - + 1xx TH TT nh HH TH HT TH Hà HT TH Hà cư 6 6 Contribution of research
This study employs the event study method to analyze how announcements of stock splits affect stock price fluctuations The article will systematically outline the research design in accordance with the established protocols of the event study methodology.
This article examines the impact of stock split announcements on stock prices and trading volumes The event date is defined as the day the information is disclosed on platforms like vietstock.vn and cafef.vn If the announcement occurs during trading hours, the event date coincides with the announcement date; however, if it happens after trading hours or on a holiday, the event date shifts to the next trading day.
This research aids investors in forecasting stock price trends and formulating effective investment strategies, while also offering vital signals for personal investment choices It provides recommendations for Securities Companies and stakeholders to enhance market transparency and boost investor competence Furthermore, the study underscores the importance of maintaining a company's growth for long-term success.
Structure of the Study
In addition to the introduction, conclusion, attached appendices, the research paper is built through 4 main chapters:
- Chapter 2: Research overview and theoretical basis on the theory of signal theory from stock split activity
- Chapter 4: Research results of analyzing the stock price volatility in relation to the announcement of stock split in Vietnam
- Chapter 5: Summary, conclusions and recommendations.
RESEARCH OVERVIEW AND THEORETICAL BASIS ON THE THERY OF SIGNAL
Overview of foreign reSearch 0n ẦỒ
Numerous global studies have analyzed the effects of stock split announcements on company stock price volatility, yet their findings remain inconsistent While some research suggests that stock splits positively influence stock prices and liquidity, other studies present contrasting outcomes.
Research by Elfakhani and Lung (2003) on the Canadian Stock Exchange from 1977 to 1993 revealed that stock splits positively influenced stock prices, with effects lasting approximately 11 days post-announcement Similarly, Kuse and Yamamoto (2004) observed cumulative abnormal returns on the Japanese Stock Exchange during the 30 trading days following a stock split announcement, indicating a favorable market reaction Additionally, Li et al (2015) supported these findings, attributing the price increases after stock split announcements to enhanced stock liquidity.
On another note, several empirical studies reported excess returns on the announcement and effective dates of stock splits Positive excess returns were discovered in other markets as well.
Aduda and Caroline (2010) examined the effects of stock splits on stock prices and liquidity within the Nairobi Stock Exchange, discovering that such splits significantly enhance trading volume Similarly, Rudnicki (2012) utilized the event study approach to analyze the influence of stock splits on liquidity, reinforcing the notion that stock splits can positively affect market dynamics.
Research conducted on stocks listed on the Warsaw and Vienna Stock Exchanges from 2000 to 2011 revealed a significant increase in liquidity following stock split announcements Similarly, a study by Huang et al (2015) examined stock split impacts on liquidity across the NYSE, AMEX, and NASDAQ from 1960 to 2010, finding that most stocks experienced a notable rise in liquidity around the announcement date Although liquidity tended to decline after the announcement, it remained above pre-split levels; however, post ex-dividend date, liquidity fell below the levels seen prior to the split.
Some studies indicate that stock splits can negatively affect stock prices Szewczyk and Tsetsekos (1993) found an increase in institutional investors post-split, while concerns arose that splits might prioritize executives' interests, leading to negative investor reactions Gorkittisunthorn et al (2006) noted a decrease in insider ownership after splits, aligning with the asymmetric information framework, which suggests that less informed traders contribute to narrower bid-ask spreads, thus supporting the liquidity hypothesis Their traditional event study revealed positive market responses on both announcement and effective dates Additionally, Byun and Rozeff (2003) examined the long-term effects of 12,747 stock splits from 1927 to 1996, concluding that stock splits are generally value-neutral transactions, contrasting with earlier findings.
Goyonke et al (2006) explored the link between stock splits and liquidity over a six-year period, revealing that firms initially faced a temporary decline in liquidity for the first 9 to 12 months post-split, followed by a significant increase in liquidity after 24 months Conversely, Gupta and Kumar (2007) found no announcement effect related to stock splits in India Earlier research by Baker and Gallagher (1980), Lakonishok and Lev (1987), and Lamoureux and Poon (1987) indicated that executives might use stock splits as a strategy to fend off takeover threats by increasing the shareholder base, thereby complicating potential acquirers' control over the company.
In a study by Leemakdej (2007) analyzing 100 stock splits on the Stock Exchange of Thailand, it was discovered that these splits were associated with significantly negative returns Specifically, the research highlighted a notable decline in stock performance during the 20 days leading up to the split and the 18 days following the effective date, with the most pronounced negative returns occurring during this period.
The study revealed that stock splits were associated with a concentration of activity around the event date, contrasting with previous research that indicated positive returns during stock split periods It highlighted an increase in earnings and dividends post-split, alongside a rise in large shareholders and overall investor numbers, while the bid-ask spread narrowed Despite these factors, trading volumes decreased after the split Additionally, the study found that systematic risk diminished on the split date but reverted to prior levels afterward, indicating nuanced long-term effects of stock splits in the U.S market.
From 1950 to 2000, Boehme (2001) identified that abnormal returns were primarily observed in the initial year, diminishing in subsequent years Notably, significant abnormal returns were recorded exclusively between 1975 and 1987, attributed to a decrease in systematic risk during that timeframe.
Research gap nh
Research on the Vietnamese market regarding stock split announcements and their impact on price fluctuations is currently limited, with existing studies often featuring small sample sizes and varied findings, making it challenging for non-researchers to apply these insights The two Vietnamese studies mentioned earlier indicate that stock split research is relatively new and outdated, as most were conducted over three years ago These studies primarily focus on the effects of dividend policy on market value or stock price fluctuations without providing clear signals Therefore, there is a pressing need for more comprehensive research that encompasses diverse sample sizes across various sectors and economic periods, to better understand the implications of stock splits and stock reactions to dividend announcements in the Vietnamese stock market.
RESEARCH METHODOLOGY csscssssssssssssssesenensssseeseesseneenseseneseneneaneaneaeeaseeeneenenseanenteneenees 23
Design research
Based on the research objectives presented above, the study mainly focuses on the following issues:
This article reviews prior research on how stock split events influence stock prices, highlighting the theoretical foundations of stock splits, including signal theory and stock price volatility.
Second, it collects and calculates stock price data in 2022 to identify abnormal returns, average abnormal returns and cumulative abnormal returns around the announcement date of stock split events.
Finally, the study will discuss the research results to provide recommendations for enhancing investment efficiency for investors and maximizing profits while avoiding risks for the issuing companies.
This article examines how stock split announcements influence stock prices, using data from the Vietnam Stock Info website and cafef.vn The event date is defined as the date when the information is disclosed; if disclosed during trading hours, it is the same day, while disclosures made after hours or on holidays are considered to occur on the next trading day.
Based on the research objectives and content presented above, the study outlines the following research procedures:
Apply research methods oo | ee > Step 2
Test the calculation results to determine the
Calculate average relationship between the
To calculate the abnormal average return using the market model, we analyze the stock announcements and their impact on returns during the event window of [-10; +10] days surrounding stock splits on the Vietnamese stock market This method allows us to assess the accumulated abnormal returns during this period, providing insights into market reactions to such corporate events.
Synthesize, evaluate the results and > Step 3 make appropriate recommendations in Vietnam
Step 1: Identifying the Analysis Problem
~Source: Compiled by the author
This study addresses the limited research on the effects of stock split announcements on stock price volatility in Vietnam, highlighting a scarcity of relevant studies that utilize signal theory and event study methodologies By focusing on the impact of stock splits among listed companies in the Vietnamese stock market, this research aims to provide updated insights and contribute to the existing literature in this area.
Step 2: Data Collection, Calculation, and Testing of Results
The literature review is essential for authors as it guides the selection of appropriate research methods, aids in data filtering, and facilitates the development of relevant calculation and testing models tailored to the specific research needs and current data landscape of the Vietnamese market.
Step 3: Summarizing Results and Making Recommendations for the Vietnamese Market From the results obtained, the author analyzes and evaluates them to provide suitable recommendations for the Vietnamese market.
The study collected data on 56 stock split announcements from 38 listed companies on the HSX and HNX exchanges The data was selected from all stock split announcements in
2022 and met the following requirements:
- The company is listed on the HSX or HNX stock exchange
- The company has at least one stock split announcement in 2022
For a thorough analysis of stock splits, it's essential to gather historical price data for a minimum of 61 days surrounding the announcement date, which includes 50 days prior to the announcement and 10 days following the event This timeframe ensures a comprehensive understanding of market reactions and price trends related to the stock split.
The stock price data is sourced from securities company websites, including VNDIRECT and Cophieu68 Trading volume and closing prices for each stock are gathered for a 20-day period surrounding the stock split announcement date, with closing prices reflecting the session's end and trading volume representing the total matched volume Information regarding stock split announcements is compiled from the Hanoi Stock Exchange and Ho Chi Minh City Stock Exchange.
Research Methods
The research paper is a combination of two research methods: qualitative and quantitative studies.
The qualitative method involves gathering credible literature and reviewing prior relevant studies to gain in-depth insights into the research topic, thereby establishing a solid theoretical framework and a compelling argument for the investigation.
The author employs a quantitative method by gathering extensive basic information and a substantial dataset to analyze the impact of stock splits on stock prices Utilizing the Event Study model, the research examines the fluctuations in stock prices over a defined period, revealing how these corporate actions influence market behavior.
The Event Study research method analyzes the effects of significant financial events, including mergers, acquisitions, stock splits, and earnings announcements This methodology assesses the informational value of events, such as a stock split announcement, predicting that the market will react upon receiving this information The market's response is measured through abnormal returns observed around the announcement date, highlighting the event's impact on stock performance.
This method evaluates abnormal returns (AR) and cumulative abnormal returns (CAR) to assess market reactions to stock price changes and the effectiveness of company operations during significant events Such analyses are crucial for investors, managers, and business owners, as the findings from event studies serve as valuable references for making informed decisions about buying and selling securities, as well as for guiding the implementation of important programs or projects.
The methodology has been utilized in previous studies by Bonnier and Bruner (1989), MacKinlay (1997), and Vo Xuan Vinh and Dang Buu Kiem (2016) The research involves the following steps:
Step 1: Identifying the event under analysis.
Step 2: Selecting a model to measure price reaction to the event.
Step 3: Estimating excess returns (abnormal returns).
Step 4: Sorting and grouping excess returns.
This study utilizes established research methodologies and draws upon a variety of existing studies to identify an appropriate model and application technique The detailed research steps undertaken will be outlined in the subsequent sections.
3.2.1.1 Identifying the research event time frame
The analysis time frame consists oftwo concepts: Event window and Estimation window.
The Event window is utilized to assess the impact of study variables and market reactions at the time of information announcements, with t=0 marking the announcement day Meanwhile, the Estimation window is essential for calculating the coefficients of the Market Model, which are used to determine the abnormal returns of stocks.
The event period encompasses the days leading up to the event date, allowing for the assessment of potential information leaks regarding market awareness of announcements prior to their official release This timeframe is crucial for analyzing market reactions to announcements In this study, the event window is defined as [-10; +10], indicating a ten-day period before and after the event.
10 days before and after the stock split information announcement date The author chose this Event window because according to Circular 155/2015/TT-BTC issued on October 6,
In 2015, the Ministry of Finance established guidelines for information disclosure on the Stock Exchange, specifically addressing the notification of the last registration date for existing shareholders' rights Public companies are required to submit comprehensive legal documents regarding this date to the Securities Depository Center and the Securities Trading Center, if applicable Additionally, they must report to the State Securities Commission and announce this information at least 10 days prior to the last registration date.
The event period is divided into three parts (Jogiyanto, 2009), namely:
1) pre-event, namely t = t - 10 (10 days before the event);
2) event date, namely t = 0 (event day);
3) post event, namely t= t + 10 (10 days after the event).
The estimation window for determining expected stock returns was set at 40 days prior to the event window, specifically from t=-11 to t=-50 While there is no established benchmark for the length of the estimation period, prior research has utilized windows ranging from a minimum of 10 days to less than 100 days (Zarah Puspitaningtyas, Indonesia, 2019) This chosen duration aims to reduce the effects of short-term volatility, allowing for a more accurate assessment of expected stock returns Additionally, this approach minimizes the impact of corporate information disclosures on stock prices during the observation period.
Source: Compiled by the author
Brown and Warner (1984) identified a straightforward and effective technique based on the market model, which was utilized to calculate anomalous returns To determine the price change (profit) of the stocks involved in this study, it is essential to establish the event and study period, following the methodology outlined by Kiymaz and Berument (2003) This is expressed mathematically as rie = log(Pie) — log(Pie-1) = log(7%).
Tit: is the actual stock return i in the period.
Bị: is the closing price of stock i in the period t.
P¡¿—¡: is the closing price of stock i in the period t -1.
To isolate the impact of external factors on stock price fluctuations, abnormal returns—defined as returns resulting from additional stock listing information—were calculated using the methodology established by Lynch and Mendenhall (1997).
Abnormal return (AR) refers to the deviation of a stock's return from the expected market return during a specific period The market return at trading session t, denoted as ryt, is determined using a formula akin to that used for calculating abnormal returns, based on the market index.
In an efficient market, the objective of measuring anomalous returns is to assess the impact of announcements However, pinpointing when the market first receives this information can be challenging Often, announcements occur after market hours, making them non-tradable until their official release On the event day (day 0), the market reacts to the announcement, which is designated as the event date for research purposes.
The study analyzes the abnormal return results of 56 stock split events over a 61-day period, including the announcement day, to calculate the average abnormal return (AAR) for each session and the cumulative average abnormal return (CAAR) using the methodology established by Lynch and Mendenhall (1997) By focusing on an event window of (-10, +10) days, the research aims to accurately assess the relationship between stock split announcements and stock prices, considering potential information leaks prior to the official announcements The cumulative average abnormal returns (CAARt) were computed for all companies over a span of 60 days based on the total abnormal returns observed.
AAR;: Mean abnormal return of the sample at trading session t;
CAAR„ : Cumulative average abnormal return of the sample during period n;
N: Number of observations in the research period (56); n: Number of sessions in the research
3.2.2 Testing the existence of abnormal return and cumulative abnormal return
To assess the effect of the stock split announcement on the company's value, this study will evaluate the significance of the abnormal income associated with the stock Utilizing quantitative models and hypotheses from prior research, including works by Gurgul et al (2003), McCluskey et al (2006), and Dasilas and Leventis (2011), the study aims to illustrate how the stock split announcement influences the company's stock price by identifying significant abnormal income values This analysis will be conducted through rigorous hypothesis testing.
General hypothesis (H0): The stock split announcements do not provide information to the Vietnamese stock market (or the stock prices do not react to stock split announcements).
Hypothesis 1 (H1): There is no significant average abnormal return around the stock split announcement event (H1: E(AARt) = 0).
Hypothesis 2 (H2): There is no significant cumulative average abnormal return around the stock split announcement event (H2: E(CAARt) = 0).
An overview of the Vietnamese economy and stock market in 2022 - - -ô+ 32
In 2022, Vietnam achieved a remarkable economic recovery characterized by stable macroeconomic conditions, controlled inflation, and significant balances, with an impressive GDP growth rate of 8.02%, the highest since 2011 Key sectors contributed to this growth: agriculture, forestry, and fishery rose by 3.36%, the industrial and construction sector increased by 7.78%, and the service sector surged by 9.99% Despite global economic volatility, Vietnam's growth was commendable, consistently meeting and surpassing the forecasts set in Resolution No 01/NQ-CP, showcasing effective governance and enhanced economic resilience.
Figure 4.1: GDP for the period 2011-2022 (%)
? The GDP growth rates for the years 2011 to 2022 are: 6.24%, 5.25%, 5.42%, 5.98%, 6.68%, 6.21%, 6.81%,
3 General Statistics Office: Report on the economic and social situation in the fourth quarter and the year
Established under Government Decree No 48/CP on July 11, 1998, the Vietnam stock market began operations in 2000 with the launch of the Ho Chi Minh City Stock Exchange (HSX) and was followed by the Hanoi Stock Exchange (HNX) on March 8, 2005, catering to small- and medium-sized enterprises Over the past 22 years, the stock market has played a vital role in advancing the Vietnamese economy, serving as a key channel for capital mobilization and investment opportunities for the public It facilitates the creation and concentration of high liquidity instruments, enabling efficient capital distribution and transfer in line with economic development needs Additionally, the stock market allows the government to harness financial resources while mitigating inflationary pressures, particularly given the constraints on state investment sources.
Figure 4.2: Number of securities investment accounts opened annually and VN-
Index movements at the end of the year.
@ The number of newly opened accounts per year The VN-INDEX on December 31st
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The Vietnamese stock market has historically experienced significant growth periods, which correlate with a surge in new investors For instance, from 2006 to 2008, over 500,000 new accounts were opened, a stark increase from just 106,393 accounts at the end of 2005 Similarly, the period from 2020 to 2022 also saw a notable rise in investor participation.
In the last three years, the number of new accounts opened has surged to over 3.64 million, a significant increase from just 2.37 million at the end of 2019 This remarkable growth highlights that the total number of new accounts established during this recent market boom has surpassed the combined total from the previous 20 years.
In 2022, the Vietnamese stock market experienced a significant surge in the number of securities investor accounts, with over 2.48 million new accounts opened by domestic individual investors in the first 11 months, marking a 2.58-fold increase compared to the previous year The total number of securities accounts in Vietnam reached nearly 6.8 million, reflecting a 57.7% growth from the end of 2021 This figure represents over 6.7% of the country's population, highlighting the substantial potential of the Vietnam stock market to attract more domestic investors.
SUMMARY, CONCLUSIONS AND RECOMMENDA'TIONS - ô-ô ôô-ô 41
Policy SUBESTIONS 1117
Research shows that stock splits lead to increased trading volumes, particularly around the announcement and split dates Following a stock split, trading activity typically rises compared to pre-split levels The findings indicate a positive announcement effect, with an average abnormal return of 2.4247 on the split date, significant at the 0.05% level Cumulative abnormal returns were calculated throughout the event period, supporting the signaling hypothesis associated with stock splits, as noted in studies by Chen et al (2002), Cheng & Leung (2008), and Gurgul et al (2003).
The research aimed to investigate how the market reacts to stock split announcements, revealing that the Vietnam market generally responds positively The study indicated positive mean returns associated with stock splits, with an increase in average cumulative abnormal returns post-split, suggesting that stock splits serve as a positive signal for companies and lead to future stock price increases This aligns with findings by Grinblatt et al (1984), which reported favorable outcomes around split announcement dates Additionally, the study supports the signaling hypothesis, indicating that company managers utilize stock splits to convey information to shareholders and potential investors Brennan and Copeland (1988) argued that managers initiate stock splits only when they are optimistic about future price increases or at least expect prices to remain stable.
Based on the above quantified results, some suggestions can be made for businesses, investors, and policy makers in Vietnam.
Stock split information plays a crucial role in forecasting stock prices, as investors often experience positive abnormal returns on the announcement day or shortly thereafter.
Therefore, the following recommendations are provided to assist investors in making the best and most profitable decisions:
Investors must first clarify their approach to a stock, deciding between investment and speculation For companies undergoing stock splits, those with a lower risk appetite should focus on understanding shareholder benefits and past stock split announcements By integrating this knowledge with technical analysis, investors can better pinpoint optimal buying times, minimizing the impact of price volatility and enabling them to acquire shares at lower prices.
Investors should be mindful of tax implications related to dividend payments, as shareholders typically do not incur taxes on stock dividends unless the shares are issued below market value or granted for free, in which case taxes may apply Additionally, selling stock received as dividends incurs taxes similar to any stock transaction Furthermore, it's crucial for investors to thoroughly assess a company's financial health to ensure it can sustain dividend payments and to understand the leadership's philosophy and vision, thereby avoiding potential conflicts of interest that could affect shareholder and personal interests.
Finally, investors need to limit investment decisions based on herd mentality.
Announcing a stock split serves as a strategic communication tool for companies, effectively informing shareholders and potential investors about their financial health and growth potential Typically, such announcements elicit a favorable market response, especially when a company demonstrates consistent income growth Increasing the share split ratio can enhance share value and draw investor interest, while keeping the current split level may help mitigate any adverse market reactions.
Publicly traded companies must meticulously plan their stock splits and adhere to legal regulations by providing clear notifications to shareholders These notifications should encompass comprehensive details regarding the timing, ratio, and number of shares to be issued Additionally, it is crucial to assess the company's financial health to ensure it can sustain the split effectively.
42 dividends in stock Publicly traded companies should only plan stock splits when finances are stable and robust enough to meet the dividend distribution requirements.
Companies must prioritize information security prior to issuing dividend notifications to prevent insider trading that could adversely impact stock prices Large organizations with substantial investments may exploit this sensitive information, purchasing shares in bulk at lower prices before the announcement and selling them at a profit afterward This manipulation can jeopardize the financial stability of the company.
Dividend tax impacts both investors and companies, making it crucial for firms to carefully evaluate their dividend payment policies By implementing appropriate notification procedures, companies can effectively manage and adjust their shareholder structure in alignment with their operational circumstances.
The Vietnamese stock market demonstrates low efficiency, as evidenced by the pre- and post-announcement reflection of information To address this, policy-making agencies must implement measures to prevent information leakage and the misuse of insider information that could affect stock prices Furthermore, investing in an effective information transmission system is crucial to ensure that all market investors receive announcements promptly Additionally, policy incentives should be established to encourage listed companies to provide complete, accurate, and timely information to investors.
This study is among the few early investigations in Vietnam regarding the impact of stock split announcements on stock prices in 2022, yet it has notable limitations It focuses on a sample of only 38 listed companies from the Ho Chi Minh City and Hanoi Stock Exchanges and primarily examines the significance of abnormal returns Future research could enhance this study by expanding the sample size to include various stock split announcements with different ratios Furthermore, employing regression analysis could help identify additional factors influencing abnormal stock returns, such as the split ratio, trading volume, and company size.
This study utilized a simple market model technique to identify anomalous returns Future research should explore additional independent variables, including business size and dividend expectations, to determine if the market's positive response to stock split announcements persists when these factors are considered.
There is a need to carry out research to find out whether the same reasons are true for the Vietnam Market.
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2 Copeland, T., 1979, Liquidity changes following stock splits The Journal of Finance, 34(1): 115-141
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Appendix 1: Summary of stock split information of 38 companies in 2022
Stock Company name Stock Split Announcemants
ACB Asia Commercial Joint Stock Bank 02/06/2022
An Gia Real Estate Investment and AGG 25/01/2022 | 07/12/2022
Development Corp ASM Sao Mai Group Corp 14/01/2022
Joint Stock Commercial Bank for Investment BID 23/12/2022 and Development of Vietnam
Joint Stock Commercial Bank for Investment CRE 15/08/2022 and Development of Vietnam
CTR Viettel Construction JSC 17/06/2022 DBC Dabaco 05/04/2022 | 22/06/2022
Ducgiang Chemicals & Detergent Powder DGC 03/06/2022
DGW Digiworld Corp 01/07/2022 DHC Dong Hai JSC of Bentre 14/12/2022 DIG Dong Hai JSC of Bentre 21/07/2022
FPT FPT Corp 13/06/2022 FTS FPT Securities JSC 25/07/2022 GEG Gia Lai Electricity JSC 16/06/2022
Ho Chi Minh City Development Joint Stock HDB 27/09/2022
HPG Hoa Phat Group JSC 17/06/2022 HSG Hoa Phat Group JSC 14/09/2022
Kinh Bac City Development Share Holding KBC 21/06/2022
MBB Military Commercial Joint Stock Bank 22/08/2022 MWG _| Mobile World Investment Corporation 16/06/2022 NKG Nam Kim Steel Joint Stock Company 03/06/2022
NVL No Va Land Investment Group Corporation 17/10/2022 | 11/11/2022 PNJ Phu Nhuan Jewelry Joint Stock Company 29/12/2022 PTB Phu Tai Joint Stock Company 26/05/2022
SCS SCSC Cargo Service Corporation 05/08/2022
VCI Vietcap Securities Joint Stock Company 17/08/2022 VIX VIX Securities Joint Stock Company 26/08/2022 VND _ | VNDirect Securities Corporation 10/03/2022
VPB Vietnam Prosperity Joint Stock Commercial 28/09/2022
VÌ Van Phu - Invest Investment Joint Stock 08/09/2022
On July 5, 2022, BAB Bac A Commercial Joint Stock Bank was established, followed by D11 Real Estate 11 Joint Stock Company on June 24, 2022 IDC IDICO Corporation - JSC was founded shortly after on June 27, 2022, while I.P.A Investments Group Joint Stock Company (IPA) was created on June 16, 2022 Saigon - Hanoi Securities JSC (SHS) was established on July 22, 2022, and Trung An Hi-Tech Farming JSC (TAR) followed on November 10, 2022 Lastly, TNG Investment and Trading JSC (TNG) was formed on June 2, 2022.
Bao Ngoc Investment Production BNA 29/11/2022