Empirical investigation of market value change in vietnam stock market

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 ABSTRACT CONTENTS LIST OF ABBREVIATION LIST OF TABLES INTRODUCTION 1.1 Background, research motivation and ratio 1.2 Research objectives and research question 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 liquidit 2.4 Other firm attributes and stock price volat DATA DESCRIPTION AND DEVELOPING EMPIRICAL RESEARCH HYPOTHESES 3.1 Data description 3.2 Developing empirical research hypotheses METHODOLOGY 4.1 Descriptive statistics and correlation matr 4.2 Bivariate analysis 4.3 Multivariate analysis 4.3.1 Ordinary Least Square (OLS) regre 4.3.2 Fixed effects regression 4.3.3 Random effect regression 4.3.4 F-statistic test iii RESULTS AND DISCUSSION OF RESULTS 5.1Correlation matrix 5.2Bivariate analysis 5.3Multivariate analysis 5.2.4.2 Consumer goods and services industry 5.2.4.3 Food and beverage industry 5.2.4.5 Real estate, construction & materials industr CONCLUSIONS 6.1Reviews of findings 6.2Contribution 6.3Limitations and recommendations for future researche REFERENCES APPENDICES Appendix A: Regression results Appendix B: List of 110 companies 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 welldeveloped 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 Regression results of Model 11 Dependent Variable: PV Method: Panel Least Squares Sample: 2007 2009 IF DUM3=1 Periods included: Cross-sections included: 22 Total panel (balanced) observations: 66 Variabl C ROA ASGR LEVR CURR DY POR SIZE AGE TOVR R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Huynh Thi Bich Thao Regression results of Model 12 Dependent Variable: PV Method: Panel Least Squares Sample: 2007 2009 IF DUM4=1 Periods included: Cross-sections included: 22 Total panel (balanced) observations: 66 Variabl C ROA ASGR LEVR CURR DY POR SIZE AGE TOVR R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Huynh Thi Bich Thao Regression results of Model 13 Dependent Variable: PV Method: Panel Least Squares Sample: 2007 2009 IF DUM5=1 Periods included: Cross-sections included: 29 Total panel (balanced) observations: 87 Variabl C ROA ASGR LEVR CURR DY POR SIZE AGE TOVR R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Huynh Thi Bich Thao Regression results of Model 14 Dependent Variable: PV Method: Panel Least Squares Sample: 2007 2009 IF DUM6=1 Periods included: Cross-sections included: 11 Total panel (balanced) observations: 33 Variabl C ROA ASGR LEVR CURR DY POR SIZE AGE TOVR R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Huynh Thi Bich Thao Regression results of Model 15 Dependent Variable: PV Method: Panel Least Squares Sample: 2007 2009 Periods included: Cross-sections included: 110 Total panel (balanced) observations: 330 Variabl C ROA ASGR LEVR CURR DY POR SIZE AGE TOVR R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Huynh Thi Bich Thao Regression results of Model 16 Dependent Variable: PV Method: Panel Least Squares Sample: 2007 2009 Periods included: Cross-sections included: 110 Total panel (balanced) observations: 330 Variabl C ROE ASGR LEVR CURR DY POR SIZE AGE TOVR R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Huynh Thi Bich Thao Regression results of Model 17 Dependent Variable: PV Method: Panel Least Squares Sample: 2007 2009 Periods included: Cross-sections included: 110 Total panel (balanced) observations: 330 Variabl C EV ASGR LEVR CURR DY POR SIZE AGE TOVR R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Huynh Thi Bich Thao Regression results of Model 18 Dependent Variable: PV Method: Panel Least Squares Sample: 2007 2009 Periods included: Cross-sections included: 110 Total panel (balanced) observations: 330 Variable C ROA ASGR LEVR CURR DY POR SIZE AGE TOVR Effects Specification Cross-section fixed (dummy variables) R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Huynh Thi Bich Thao Regression results of Model 19 Dependent Variable: PV Method: Panel Least Squares Sample: 2007 2009 Periods included: Cross-sections included: 110 Total panel (balanced) observations: 330 Variable C ROE ASGR LEVR CURR DY POR SIZE AGE TOVR Effects Specification Cross-section fixed (dummy variables) R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Huynh Thi Bich Thao Regression results of Model 20 Dependent Variable: PV Method: Panel Least Squares Sample: 2007 2009 Periods included: Cross-sections included: 110 Total panel (balanced) observations: 330 Variable C EV ASGR LEVR CURR DY POR SIZE AGE TOVR Effects Specification Cross-section fixed (dummy variables) R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Huynh Thi Bich Thao Appendix B: List of 110 companies No 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Huynh Thi Bich Thao CODE ABT ACL AGF ALP ANV BBC BHS BMC BMP BT6 CII CLC COM CYC DCC DCT DHA DHG DIC DMC DPM DPR DRC DTT FMC FPC COMPANY NAME Bentre Aquaproduct Import and Export Joint Stock Company Cuulong Fish Joint Stock Company Angiang Fisheries Import & Export Joint Stock Company Alphanam Joint Stock Company Namviet Corporation Bibica Corporation Bienhoa Sugar Joint Stock Company Binhdinh Minerals Joint Stock Company Binhminh Plastics Joint Stock Company 620 Chauthoi Concrete Corporation Hochiminh City Infrastructure Investment Joint Stock Company Catloi Joint Stock Company Materials - Petroleum Joint Stock Company Chang Yih Ceramic Joint Stock Company DESCON Construction Corporation Dongnai Roofsheet and Construction Material Joint Stock Company Hoaan Joint Stock Company Haugiang Pharmaceutical Joint Stock Company DIC Investment and Trading Joint Stock Company Domesco Medical Import Export Joint Stock Corporation Petrovietnam Fertilizer and Chemicals Corporation Dongphu Rubber Joint Stock Company Danang Rubber Joint Stock Company Dothanh Technology Corporation Saota Foods Joint Stock Company Full Power Joint Stock Company 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 Huynh Thi Bich Thao FPT GIL GMC GMD GTA HAP HAS HAX HBC HDC HMC HPG HRC HSI HT1 HTV ICF IFS IMP ITA KDC KHA KHP L10 LAF LBM LGC MCP MCV FPT Corporation Binhthanh Import-Export Production and Trade Joint Stock Company Saigon Garment Manufacturing Trade Joint Stock Company General Forwarding and Agency Corporation Thuanan Wood Processing Joint Stock Company Hapaco Group Hanoi Post - Telecominication Construction and Installation Joint stock Company Hangxanh Motors Service Joint Stock Company Hoabinh Construction and Real Estate Corporation Baria – Vungtau House Development Joint Stock Company Hochiminh City Metal Corporation Hoaphat Group Joint Stock Company Hoabinh Rubber Joint Stock Company General Materials Biochemistry Fertilizer Joint Stock Company Hatien Cement Joint Stock Company Hatien Transport Joint Stock Company Investment Commerce Fisheries Corporation Interfood Shareholding Company Imexpharm Pharmaceutical Joint Stock Company Tantao Investment-Industry Corporation Kinhdo Corporation Khanhhoi Import Export Joint Stock Company Khanhhoa Power Joint Stock Company Lilama 10 Joint Stock Company Longan Food Processing Export Joint Stock Company Lamdong Building Materials Joint Stock Company Lugia Mechanical Electric Joint Stock Company Mychau Printing and Packaging Holdings Company Cavico Vietnam Mining and Construction Joint Stock Company Huynh Thi Bich Thao 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 MHC MPC NAV NKD NSC NTL PAC PET PGC PJT PNC PPC PVD PVT RAL REE RIC SAM SAV SC5 SCD SFC SFI SJD Hanoi Maritime Holding Company Minhphu Seafood Corporation Namviet Joint Stock Company North Kinhdo Food Joint Stock Company National Seed Joint Stock Company Tuliem Urban Development Joint Stock Company Dry Cell and Storage Battery Joint Stock Company Petrovietnam General Services Joint Stock Corporation Petrolimex Gas Joint Stock Company Petrolimex Joint Stock Tanker Company Phuongnam Cultural Joint Stock Corporation Phalai Thermal Power Joint Stock Company PetroVietnam Drilling and Well Services Joint Stock Company PetroVietnam Transportation Corporation Rangdong Light Sources and Vacuum Flask Joint Stock Company Refrigeration Electrical Engineering Corporation Royal International Corporation Sacom Development and investment corporation Savimex Corporation Construction Joint Stock Company No Chuongduong Beverages Joint Stock Company Saigon Fuel Company Sea and Air Freight International Candon Hydroelectric Joint Stock Company 80 81 82 83 SJS SMC SSC ST8 Songda Urban & Industrial Zone Investment and Development Joint Stock Company SMC Trading Investment joint stock company Southern Seed Corporation Sieuthanh Joint Stock Corporation 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 Huynh Thi Bich Thao TAC TCM TCR TDH TMS TNA TNC TPC TRC TRI TS4 TSC TTP TYA UIC VFC VHC VIC VID VIP VIS VNE VNM VPK VSH VTB VTO Tuongan Vegetable Oil Joint Stock Company Thanhcong Textile Garment Joint Stock Company Taicera Enterprise Company Thuduc Housing Development Corporation Transforwarding Warehousing Joint Stock Corporation Thiennam Trading-Import Export Joint Stock Company Thongnhat Rubber Joint Stock Company Tandaihung Plastic Joint Stock Company Tayninh Rubber Joint Stock Company Saigon Beverage Joint Stock Company Seafood Joint Stock Company No Techno-Agricultural Supplying Joint Stock Company Tantien Plastic Packaging Joint Stock Company Taya Vietnam Electric Wire and Cable Joint Stock Company Idico Urban And House Development Joint Stock company Vinafco Joint Stock Corporation Vinhhoan Corporation Vincom Joint Stock Company Viendong Paper Joint Stock Company Vietnam Petrolium Transport Joint Stock Company Vietnam-Italy Steel Joint Stock Company VietNam Electricity Construction Joint Stock Corporation Vietnam Dairy Products Joint Stock Company Vegetable Oil Packing Joint Stock Company Vinhson-Songhinh Hydropower Joint Stock Company Viettronics Tanbinh Joint Stock Company Vietnam Tanker Joint Stock Company 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... characteristics of stock price volatility in Vietnam and other markets including Huynh Thi Bich Thao 20 Empirical investigation of stock price volatility in Vietnam stock market developed market such... 30 Empirical investigation of stock price volatility in Vietnam stock market RESULTS AND DISCUSSION OF RESULTS In this section, we present the empirical findings and an in- depth analysis of the