Empirical investigation of market value change in vietnam stock market

luận văn, khóa luận, chuyên đề, đề tài

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY - oOo - HUỲNH THỊ BÍCH THẢO EMPIRICAL INVESTIGATION OF MARKET VALUE CHANGE IN VIETNAM STOCK MARKET MASTER THESIS Ho Chi Minh City – 2011 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY - oOo - HUỲNH THỊ BÍCH THẢO EMPIRICAL INVESTIGATION OF MARKET VALUE CHANGE IN VIETNAM STOCK MARKET MAJOR: FINANCE - BANKING MAJOR CODE: 60.31.12 MASTER THESIS SUPERVISOR: Assoc Prof, Ph.D TRAN HUY HOANG Ho Chi Minh City – 2011 ACKNOWLEDGEMENT I am grateful to my master thesis supervisor, Assoc Prof, Ph.D Tran Huy Hoang, for his guidance, time and insightful comments on my work It is my honor indeed to have the opportunity to work with him and I appreciate on the things we have shared during this time I would like to express profound gratitude to Dr Vo Xuan Vinh for his invaluable supports and useful suggestions as well as his excellent advising from the very first to the final steps of mine in conducting the work leading to this thesis I would like to express my sincere gratitude to all of my lecturers for their teaching and guidance during my maser course at the University of Economics, Ho Chi Minh City Finally, the people I would like to thank the most are my parents and my fiancé Without their continual encouragement and understanding, I would not have been able to complete this journey In addition to immediate family members, there are many closed friends who have supported me through this rough journey I feel very fortunate to have such wonderful friends and supporters in my life With my appreciation Huynh Thi Bich Thao i ABSTRACT This paper attempts to determine stock price volatility in Vietnam stock market using a rich and detailed data set, including both market data and firm attributes In particular, we aim to investigate which firm characteristics affect stock price volatility From the perspective of informational asymmetry, the paper examines the relationship between stock price volatility and firm characteristics of Vietnamese listed firms on Ho Chi Minh City Stock Exchange A sample of 110 listed companies in Vietnam stock market is examined for a period from 2007 to 2009 The empirical estimation is based on panel data modeling technique The findings of the paper indicate that stock price volatility is positively affected by dividend yield, firm age and liquidity Meanwhile, it is negatively correlated with firm size In addition, the results of this study also report that stock price volatility favors foods and beverages, industrials and real estates, construction & materials industries Keywords: Stock price volatility, firm attributes, Vietnam stock market, panel data ii CONTENTS ACKNOWLEDGEMENT i ABSTRACT ii CONTENTS iii LIST OF ABBREVIATION v LIST OF TABLES vi INTRODUCTION 1.1 Background, research motivation and rationale 1.2 Research objectives and research questions .2 1.3 Methodology 1.4 Contribution 1.5 Structure of the thesis LITERATURE REVIEW 2.1 Stock price volatility and dividend policy 2.2 Stock price volatility and firm age 2.3 Sstock price volatility and trading liquidity .8 2.4 Other firm attributes and stock price volatility DATA DESCRIPTION AND DEVELOPING EMPIRICAL RESEARCH HYPOTHESES 11 3.1 Data description 11 3.2 Developing empirical research hypotheses 20 METHODOLOGY 25 4.1 Descriptive statistics and correlation matrix 25 4.2 Bivariate analysis 25 4.3 Multivariate analysis .26 4.3.1 Ordinary Least Square (OLS) regression 27 4.3.2 Fixed effects regression 28 4.3.3 Random effect regression .29 4.3.4 F-statistic test 29 iii 4.3.5 Hausman test 29 RESULTS AND DISCUSSION OF RESULTS 31 5.1 Correlation matrix 31 5.2 Bivariate analysis 33 5.3 Multivariate analysis .35 5.2.1 Overall regression results 35 5.2.2 Overall regression with industry dummies .39 5.2.3 Regression results in each year .42 5.2.3.1 Regression results of 2007 42 5.2.3.2 Regression results of 2008 43 5.2.3.3 Regression results of 2009 44 5.2.4 Regression results for each industry 45 5.2.4.1 Basic materials industry .45 5.2.4.2 Consumer goods and services industry 46 5.2.4.3 Food and beverage industry 47 5.2.4.4 Industrials industry .48 5.2.4.5 Real estate, construction & materials industry .49 5.2.4.6 Others industry 50 CONCLUSIONS 54 6.1 Reviews of findings .54 6.2 Contribution 55 6.3 Limitations and recommendations for future researches 55 REFERENCES 57 APPENDICES 60 Appendix A: Regression results 60 Appendix B: List of 110 companies 88 iv LIST OF ABBREVIATION HOSE Ho Chi Minh City Stock Exchange HNX Hanoi Stock Exchange PV Price volatility EV Earning volatility ROA Return on assets ROE Return on equity ASGR Asset growth rate LEVR Firm leverage CURR Current ratio DY Dividend yield POR Payout ratio SIZE Firm size AGE Firm age TOVR Liquidity EBIT Earning Before Interest and Tax IPO Initial Public Offer OLS Ordinary Least Square v LIST OF TABLES Table 3.1 Summary of industry structure .14 Table 3.2 Description of stock price volatility in Vietnam .15 Table 3.3 Data descriptive statistics for firm attributes 16 Table 3.4 Data descriptive statistics for firm attributes by year 17 Table 3.5 Data descriptive statistics for firm attributes by industry 18 Table 3.6 Data description and expected relation to stock price volatility 24 Table 5.1 Correlation matrix among variables .32 Table 5.2 Variance Inflation Factor .33 Table 5.3 Bivariate regression results 34 Table 5.4 Overall regression results .36 Table 5.5 OLS, fixed effect and random effect tests 39 Table 5.6 Overall regression results with industry dummies 41 Table 5.7 Regression results of 2007 without and with industry dummies .42 Table 5.8 Regression results of 2008 without and with industry dummies .43 Table 5.9 Regression results of 2009 without and with industry dummies .44 Table 5.10 Regression results for basic materials industry .45 Table 5.11 Regression results for consumer goods and services industry .46 Table 5.12 Regression results of food and beverage industry .47 Table 5.13 Regression results of industrials 48 Table 5.14 Regression results of real estates, construction & materials industry 49 Table 5.15 Regression results of others industry 50 Table 5.16 OLS Regression results with ROA, ROE and EV .52 Table 5.17 Cross-section fixed effect regression results with ROA, ROE and EV 53 vi Empirical investigation of stock price volatility in Vietnam stock market INTRODUCTION This section starts with reviewing background and figuring out motivation and rationale of this research This section is then followed by discussing research objectives and research questions After that, a brief of methodology, contribution and structure of this study is presented 1.1 Background, research motivation and rationale Stock price volatility and its determinants remain a source of controversy despite years of theoretical and empirical research Investigations of share price changes appear to yield evidence that changes in fundamental variables should jointly bring about changes in share prices both in developed and emerging markets However, the actual fundamental factors found to be relevant may vary from market to market It is widely agreed that a set of fundamental variables as suggested by individual theories is no doubt relevant as possible factors affecting share price changes in the short and the long-run A substantial a mount of research has been directed toward analyzing the relationship between stock price volatility and firm attributes Among those substantial research in developed market, it can be listed out some outstanding findings such as Baskin (1989) and Fama and French (1992) in the United States context and Allen and Rachim (1996) in Australian context While Baskin (1989) reports a strongly significant relationship between dividend yield and stock price volatility, Allen and Rachim (1996) cannot find any evidence to support this hypothesis but finds another interesting results related to payout ratio Even though Vietnam initiates the stock market later than many other developed countries, there has been a substantial growth The first stock exchange in Ho Chi Minh city was established in 2000 with four listed companies Increased foreign interest and the privatization of state-owned enterprises lead to a rapid increase in listings At the end of 2009, there are about 250 firms listed on the Ho Chi Minh Stock Exchange and the smaller exchange in Hanoi Huynh Thi Bich Thao Empirical investigation of stock price volatility in Vietnam stock market Most of the previous studies on determinants of stock return volatility focus on well-developed markets with less attention given to the developing markets To the best of the author knowledge, there are very few studies that address the issue of stock price volatility and fundamental factors in the Vietnamese context This motivates the present study to examine whether firm characteristics can affect the stock price volatility of the Vietnamese companies This study focuses on the same issue for Vietnam Stock market, a developing market Apart from using the latest data, we develop this study by incorporating selected variables for selected purposes to examine the determinants of stock price volatility In addition, industry effects are also taken into consideration of this research As general thinking, the stock prices response to market news everyday Therefore, many researches are conducted on investigation over a short horizon with event study on information announcement effects By contrast, this study attempts to examine the relationship between stock price volatility and firm attributes in a long run basis In order to facility our primary aim, the stock price volatility is calculated using Parkinson (1980) method which reduces the mismatch between relevant time for the share prices and the fundamental ratios Under this method, this study in ideal situation should employ quarterly data for analysis However, there is a large difference between the internal financial statements of firms and the audited reports In addition, according to the regulation, only annual audited reports are required to submit This study, therefore, use annual data from audited reports for more accurate firm attributes 1.2 Research objectives and research questions This study is conducted to analyze the behavior of stock price from a broad perspective The main purpose of this paper is to determine the relationship between stock price volatility and firm attributes We also look at the influence of industry effect on stock price volatility In addition, stock price behavior in each year and each industry is also discussed in this study in order to identify whether there is any Huynh Thi Bich Thao ...MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY - oOo - HUỲNH THỊ BÍCH THẢO EMPIRICAL INVESTIGATION OF MARKET VALUE CHANGE IN VIETNAM STOCK MARKET MAJOR: FINANCE... Thao Empirical investigation of stock price volatility in Vietnam stock market period The construction of stock price data, together with detailed attributes of listed firms in Ho Chi Minh City Stock. .. between stock price volatility and firm characteristics for firms listed in Vietnam stock market Huynh Thi Bich Thao 10 Empirical investigation of stock price volatility in Vietnam stock market