OVERVIEW
INTRODUCTION
The retail sector is considered the most significant economic sector in Vietnam, according to MB Securities's retail industry research (2019), because:
Vietnam's economy, while heavily focused on exports, also relies significantly on domestic consumption, which reached a total retail market value of $142 billion by the end of 2018, representing 59% of the country's GDP However, listed retail businesses operate within a smaller segment of this market, valued at approximately $71 billion and contributing 29.8% to the GDP.
Investing in the retail sector is crucial for Vietnam's economic future, as it consistently grows at a rate one-and-a-half to two times higher than the country's overall GDP growth The General Statistics Office reports that from 2011 to 2020, Vietnam's retail sales of products surged, averaging an impressive 11% annual increase This significant contribution highlights the retail industry's vital role in the nation's economic landscape.
Retail operations play a crucial role in connecting production and consumption, significantly impacting industries that produce goods and services The growth metrics of the retail sector, including outputs, inputs, and return rates, are vital not only for the retail business itself but also for the overall growth of various industrial sectors within the economy.
1.1.2 Research issue and the urgency of the topic
Dividend payout policy is a crucial aspect of corporate finance, serving as a balancing mechanism between distributed profits and retained earnings to satisfy both investment needs and shareholder expectations According to Edward Marfo-Yiadom and Samuel Agyei (2011), this policy not only addresses the capital requirements for business growth but also plays a significant role in attracting investors Shareholders prioritize dividends, making them a key consideration alongside investment efficiency and future growth potential when deciding on buying or selling shares.
In recent years, dividends have emerged as a significant income source for investors in the Vietnam stock exchange, especially within the retail sector, which is gaining popularity due to its consistent dividend payout policy As a vital component of the national economy, retail not only meets everyday consumer needs but also plays a crucial role in satisfying public demand While the retail industry is essential for providing essential goods, it remains susceptible to short-term economic fluctuations.
Various theoretical frameworks exist for determining a company's dividend payout ratio globally, yet findings differ based on study contexts, lacking a universally accepted explanation Lintner's (1956) theory posits that the previous year's dividend payout ratio influences current decisions, while Gordon and Walter (1963) argue that profitability is a key determinant Myers and Majluf (1984) suggest that factors such as firm size and capital structure play a role, whereas Higgins (1972) and Fama (1974) highlight the impact of debt capital structure Numerous studies aim to clarify the elements influencing dividend payout policies to aid business executives in decision-making However, research on the relationship between micro and macro factors and dividend payout policy remains limited for firms listed on the Vietnamese stock exchange, with prior studies primarily addressing all registered businesses without delving into industry-specific characteristics, company growth plans, or sector variations.
This article aims to enhance the understanding of dividend distribution decisions and emphasizes the importance of profit maximization for shareholders, stemming from the recognition of these critical needs.
"Determinants of dividend payout policy – the case of listed retail companies in Vietnam " as the focus of the research.
AIM OF STUDY AND RESEARCH QUESTIONS
The study's goals are to:
Analyse the effects of factors on the dividend payout policy of retail businesses listed on Vietnam stock exchange;
Determine the level of effect of each factor on dividend payout policy; and
Offer solutions and recommendations for developing appropriate dividend payout policy
To achieve the study's objectives regarding the "Determinants of Dividend Payout Policy" in listed retail companies in Vietnam, the author formulated specific research questions.
What factors influence retail companies' dividend payout policy in the Vietnam stock exchange?
What is the level of the impact of each factor on dividend payout policy?
What recommendations should be made to support retail companies in developing effective dividend payout policy?
OBJECT AND SCOPE OF THE STUDY
The dividend payout policy of retail companies on the Vietnam stock exchange (cash dividend), as well as the factors that influence it
This research examines 21 retail companies listed on the Vietnam Stock Exchange, including both HOSE and HNX, that maintain a consistent cash dividend payout policy.
The research spans a decade from 2011 to 2020, a period chosen due to the recovery of the Vietnam stock exchange following the crisis of 2008-2010, as the economy began to heal and improve This timeframe also witnessed significant changes in the retail sector, with a shift from traditional to modern, large-scale retail models Notably, many retail companies, such as CTF, CRC, BSC, BNA, DGW, FID, MWG, FRT, and VRE, began listing on the Vietnam stock exchange during these transformative years.
RESEARCH METHOD
Data collection for this study involved gathering primary information from audited financial statements and dividend payment announcements available on various corporate and financial websites, including vietstock.vn, cophieu68.vn, and cafef.vn Additionally, secondary data was sourced from platforms such as vcsc.com.vn, the Hanoi Stock Exchange (hnx.vn), and the Ho Chi Minh City Stock Exchange (hsx.vn) The data compilation spanned from the year 2011 onwards.
2020 Panel data is a type of research data
This research employs a quantitative approach, utilizing panel data from 21 retail companies listed on the Vietnam Stock Exchange between 2011 and 2020 A multivariable linear regression model is applied to explore the relationship between dividend payout policy and various independent variables The study carefully selects one of three commonly used regression models for panel data analysis: the Pooled Ordinary Least Squares (OLS), the Fixed Effect Model (FEM), or the Random Effect Model (REM).
Method of data processing: The regression model was proposed with the use of Stata 13.0 and Excel statistics
CONTRIBUTION OF THE RESEARCH
The study provides empirical evidence regarding the factors influencing the dividend payout policy of retail companies listed on the Vietnam Stock Exchange, highlighting the significance of these factors in shaping the dividend strategies of retail businesses.
This article focuses on identifying and analyzing the factors that impact the dividend payout policy of retail firms listed on the Vietnamese stock exchange By providing a scientific foundation for managers, it aids in the development of effective dividend strategies Additionally, the insights offered can help investors forecast future dividend income, enhancing their decision-making process before investing in a company's stock.
PROPOSED THESIS STRUCTURE
There are five chapters in the research topic:
Providing an overview of a research subject, including the topic's urgency, research purpose, research issue, research scope and research method
Chapter 2: Theoretical foundation and literature review of factors affecting dividend payout policy
Present theories and related studies that have been conducted in order to develop research models and research hypotheses
Chapter 3: Research design and data
Make hypotheses based on empirical studies, build models, methodologies for research and how to collected data
Chapter 4: Results of the research
Presentation of research findings on the factors that influence the dividend payout policies of retail companies listed on the Vietnam stock exchange
Chapter 5: Conclusion, recommendations and limitation of the research
Presenting the findings of this study, some recommendations, and the study's contributions and limitations, as well as the suggestion for future research
The author expressed a desire to conduct research on the topic "Determinants of dividend payout policy – the case of listed retail companies in Vietnam" in Chapter
This article aims to analyze the endogenous variables influencing dividend payout policies of retail companies listed on HOSE and HNX in Vietnam It evaluates key factors affecting these policies and proposes actionable solutions to enhance them.
The author has carefully selected the research topic, methodology, and structure to align with the thesis objectives, ensuring their successful achievement The findings of this study can serve as a scientific basis for management to establish an appropriate dividend payout policy, while also enabling investors to accurately estimate dividend income before making investment decisions in retail firms' shares.
THEORETICAL FOUNDATION AND LITERATURE
THEORETICAL FOUNDATION FOR DIVIDEND PAYOUT POLICY 8 1 Overview of dividend and dividend payout policy
2.1.1 Overview of dividend and dividend payout policy
Dividends are a portion of a company's net income that is distributed to shareholders based on the number and type of shares they own (CFA Program Curriculum, 2015)
The dividend payout policy dictates the allocation of retained earnings and reinvested dividends, where retained earnings are reinvested to foster future profit growth for investors, while dividends offer immediate income.
Dividend per share is a common metric that reflects the actual profit that each share is entitled to as a result of business operations
Dividend per share = Total dividends paid out over a period
Investors exploring dividend-paying stocks should consider dividends per share and the associated formula; however, it's essential to note that this metric alone may not fully represent a company's financial health Companies that retain earnings for growth instead of paying out dividends may have a low dividend payout ratio, indicating they reinvest profits, which can enhance the company's value over time through expansion.
The dividend payout ratio represents the proportion of a company's net income that is distributed to shareholders in the form of dividends Essentially, it is the percentage of profits allocated to investors, reflecting how much of the earnings are returned to shareholders.
Dividend payout ratio = Dividend per share
Earnings per share (EPS) = Net income − minority interests
The corporation strategically reinvests its retained earnings into promising projects, aiming to provide shareholders with future capital gains Investors seeking capital appreciation typically prefer companies with low dividend payout ratios, whereas those focused on immediate income tend to favor firms with high dividend payout ratios.
The dividend yield is another way to calculate investment income This is the relationship between a company's current annual dividend and its current share price
In general, if the dividend remains constant but the stock price falls, the dividend yield rises If the stock price rises, the yield will fall
Dividend yield = Dividend per share
A cash dividend is a direct payment made to shareholders from a company's current income or accumulated profits, representing a portion of the profits generated Unlike stock dividends or other value forms, cash dividends are issued in monetary form, providing immediate financial benefits to investors.
A cash dividend represents the monetary payment made to shareholders for each share they own, calculated as a percentage of the stock's par value, which is typically 10,000 VND in Vietnam Distributing cash dividends results in a reduction of the company's cash reserves, subsequently decreasing its total assets and retained earnings on the balance sheet, ultimately leading to a decline in equity.
Stock A offers a 10% dividend based on its par value of 10,000 VND, resulting in a dividend of 1,000 VND per share Therefore, shareholders with 100 shares of Stock A will receive a total dividend of 100,000 VND.
A stock dividend is a form of dividend paid to shareholders in shares instead of cash, which can dilute earnings per share However, it benefits companies by rewarding shareholders while preserving cash reserves.
Stock distributions are typically allocated in fractions based on the number of shares outstanding For instance, when a company announces a 5% stock dividend, it will issue 0.05 shares for each share owned by shareholders Consequently, a shareholder with 100 shares will receive an additional five shares.
For the form of stock dividend payment, the formula for calculating the reference price at the ex-dividend date:
PR: Stock reference price at ex-dividend date
Pt-1: Closing price of the stock at the last trading day of the right
An asset dividend, also referred to as a property dividend, is a type of dividend paid in the form of a company's products rather than cash or stock.
Dividends are distributed to shareholders only after a company fulfills its financial responsibilities to the government, creditors, and employees, as well as future obligations The decision to declare dividends is made during the general meeting of shareholders, and once declared, it becomes a legally binding commitment for the company The dividend payment process involves specific dates, including the declaration date, ex-dividend date, record date, and payment date.
P ICTURE 2.1.D IVIDEND PAYMENT PROCESS DIAGRAM
The ex-dividend date The record date The payment date
Source: Compiled by the author
The declaration date is the day a company announces its upcoming dividend payment, providing crucial information such as the dividend payout ratio, ex-dividend date, and payment date This date is essential for investors as it informs them of their eligibility for the upcoming dividend.
The ex-dividend date is crucial for investors as it marks the cutoff for eligibility to receive a company's upcoming dividend payment Those who purchase shares before this date are entitled to the dividend, while those who buy afterward will not benefit Since stock trades settle on a "T+2" basis, the ex-dividend date precedes the record date On this date, the reference price of the stock is adjusted based on the closing price from the previous trading day and the value of the dividends declared.
The record date is the crucial cut-off date for identifying shareholders eligible for a corporate dividend, typically occurring the day after the ex-dividend date To qualify for the dividend, investors must purchase the stock at least two business days prior to the record date, as any purchases made on or after the ex-dividend date will not entitle the buyer to the dividend.
The payment date is the designated day when a company issues dividends to its eligible shareholders, usually occurring a few weeks after the ex-dividend date.
LITERATURE REVIEW
Previous studies, such as the one conducted by Edward Marfo-Yiadom, have identified various influencing factors categorized into two main groups: endogenous factors and macroeconomic factors, including interest rates, GDP, and inflation rates.
In their studies, Dinh Bao Ngoc and Nguyen Chi Cuong (2011, 2014) identified key factors influencing company characteristics and corporate governance These factors include corporate governance efficiency, state ownership, and controllability, as highlighted in the research conducted by Al Shabibi et al.
(2011) ), Truong Dong Loc et al (2015)
The research identifies several endogenous factors that influence the model, including profitability, revenue growth rate, firm size, earnings per share, financial leverage, and liquidity.
In the period 2011-2020, these characteristics are utilized to explain the correlation between dividend payout ratio and endogenous factors of retail businesses listed on the Vietnam stock exchange
Profitability plays a crucial role in determining the cash available for dividend payments, with higher income and profitability providing companies greater flexibility in their dividend decisions Lintner's (1956) research highlighted net income as a key factor influencing dividend payout policy Additionally, studies by Lintner and Brittain (1964) established a positive correlation between Return on Assets (ROA) and Return on Equity (ROE) and dividend payouts among US corporations from 1919 to 1960 Furthermore, empirical research in developing markets has consistently shown a positive relationship between profitability and dividend payout policy (Adaoglu, 2000; Aivazian, 2003).
Dividend income is subject to higher taxation compared to capital gains, as dividends are taxed upon payment while capital gains are taxed only upon the sale of shares This tax disparity influences shareholders' post-tax profits, leading some investors to prefer companies that retain earnings and maintain a low dividend payout ratio The preference for modest dividends arises from the tax advantages of capital gains, which can lower the cost of capital and increase stock prices However, management aims to maintain reasonable dividend payouts, supported by theories such as Miller and Modigliani's signaling theory and Lintner and Gordon's Bird-in-the-Hand theory Research by Bogna Kaźmierska-Jóźwiak (2015) corroborates this perspective, revealing a statistically significant negative relationship between dividend payout ratio and profitability, with profitability assessed through return on assets (ROA).
From 2001 to 2006, Ahmed and Javid (2009) examined the dividend payout policies of non-financial businesses on the Karachi Stock Exchange, supporting Lintner's theory that these policies are influenced by earnings per share from both the current and previous years Similarly, Dinh Bao Ngoc and Nguyen Chi Cuong (2014) analyzed 95 companies listed on the Vietnam Stock Exchange from 2008 to 2013, finding that higher earnings per share and increased company income correlate with a tendency for higher dividend payout rates.
According to the Pecking Order theory by Myers and Majluf (1984), businesses prioritize internal funding over external debt, leading them to retain more profits to meet their operational needs As a result, these companies tend to pay lower dividends to shareholders, opting instead to reinvest in their assets Supporting this perspective, Franklin and Muthusamy (2010) found a negative relationship between earnings per share and dividend payout policy, highlighting the preference for internal capital over shareholder dividends.
Rapid revenue growth often leads businesses to retain more earnings for reinvestment, as this capital is generally less expensive than external borrowing or issuing new shares This strategy can result in significant profitability increases, prompting companies to signal their success by raising dividend payouts, in line with Signaling theory Empirical studies, such as Saxena's research on 333 U.S companies from 1981 to 1990 and findings by Gill et al in 2010, support this correlation.
Research by Jabbouri (2016) on emerging stock markets in the MENA region, along with a 2004 study on dividend payout policies in Central and Eastern European firms, reveals a contrasting trend These studies indicate that companies experiencing rapid growth often choose to retain profits for reinvestment and market expansion instead of prioritizing high dividend payments to shareholders.
In the credit market, larger firms typically enjoy higher ratings, granting them easier access to external financing Consequently, for large-scale businesses, relying solely on retained earnings to fund production expansion and finance projects may not be the most effective strategy, contrasting with the approach often taken by smaller enterprises.
Fama and French (2002) discovered that dividend-paying firms are significantly larger than non-dividend-paying or low-dividend-paying firms in the U.S stock market, using Log(At) to measure firm size Similarly, Al-Kuwari (2009) concluded that larger firms tend to pay higher dividends, also utilizing Log(At) for firm size analysis In a different context, Bushra and Mirza (2015) examined corporate dividend policies across various sectors in Pakistan, analyzing data from 75 companies listed on the KSE from 2005 to 2010, and found a negative correlation between firm size and both dividend payout ratio and dividend yield.
Previous research indicates a positive relationship between firm size and dividend payout policy This thesis utilizes the variable Log(At), which represents the logarithm of total assets, to analyze how firm size influences dividend payout decisions.
Liquidity is the ability of a company to convert its assets into cash, with cash flow serving as a key measure of this liquidity A company's liquidity significantly influences its ability to pay cash dividends and meet financial obligations High liquidity indicates stable cash flow, enhancing the company's capacity to distribute dividends Shareholders often prefer receiving dividends over retained earnings when there is surplus cash flow, which can reduce the funds available for reinvestment and lead to a reliance on external equity for financing growth Raising external equity, such as through common stock sales, subjects the firm to regulatory oversight, which can lower agency costs between shareholders and management.
Imad Jabbouri's 2016 empirical study on emerging stock markets in the Middle East and North Africa (MENA) from 2004 to 2013 reveals a positive correlation between dividend payout policy and liquidity This finding is echoed by Theophano Patra et al (2012), who demonstrated a similar positive relationship in their analysis of 63 non-financial firms during 1993.
Research indicates that cash flow may not positively influence a company's payout ratio, with some studies showing a negative impact Issa's (2015) analysis of Malaysian firms revealed that free cash flow adversely affects the dividend payout ratio Shareholders typically prefer companies to reduce free cash flow and increase dividend payouts to mitigate agency costs However, this approach can lead to higher expenses when seeking external capital This study will incorporate the current ratio as a key variable.
RESEARCH DESIGN AND DATA
RESEARCH DESIGN
The research model examines the dependent variable of dividend payment rates, influenced by several internal factors such as profitability, revenue growth, earnings per share, firm size, financial leverage, and liquidity Additionally, to align with the economic context of Vietnam, the model incorporates Gross Domestic Product (GDP) growth as a control variable, reflecting macroeconomic conditions.
DPR i,t = β 0 + β 1 ROA i,t + β 2 EPS i,t + β 3 GROW i,t + β 4 SIZE i,t +β 5 LIQ i,t + β 6 LEV i,t + Y t + ε i,t
DPR i,t = Dividend payout ratio for firm i at time t
ROA i,t = Return on assets for firm i at time t
EPS i,t = Earnings per share for firm i at time t
GROW i,t = Growth in Sales/Revenue for firm i at time t
SIZE i,t = The size for firm i at time t
LIQ i,t = Liquidity for firm i at time t
LEV i,t = Liabilities equity ratio for firm i ai time t
Y t = Year fixed effect (gross domestic product growth at time t) ε i,t = Residual
3.1.2 Hypothesis and representative variables for the study
This study examines the dividend payout policy of retail businesses on the Vietnamese stock market from 2011 to 2020, utilizing the dividend payout ratio (DPR) as the key dependent variable.
The formula to calculate is as follows:
Dividend payout ratio = Dividend per share
This study examines the factors influencing dividend payout policy in Vietnamese retail companies by employing a multiple linear regression model Key variables analyzed include profitability measured by Return on Assets (ROA), Earnings Per Share (EPS), revenue growth (GROW), firm size (SIZE), liquidity (LIQ), and financial leverage (LEV) The findings aim to enhance understanding of how these elements impact dividend distribution in the context of Vietnam's evolving business landscape.
Research by Lintner (1956) established that a company's net income significantly influences its dividend payout policy Subsequent studies, including those by Brittain (1964), Adaoglu (2000), and Aivazian (2003), have consistently demonstrated a positive correlation between profitability and dividend payouts Thus, the prevailing hypothesis is that higher profitability leads to increased dividend distributions.
H 1 : There is positive relationship between dividend payout policy and profitability
The formula to calculate is as follows:
Lintner's theory posits that a company's dividend is influenced by its earnings per share (EPS) from both the current and previous year, a notion supported by Ahmed and Javid (2009) Additionally, research by Dinh Bao Ngoc and Nguyen Chi Cuong (2014) indicates that higher EPS correlates with an increased dividend payout rate Consequently, the hypothesis of the study suggests a positive relationship between earnings per share and dividend payouts.
H 2 : There is positive relationship between dividend payout policy and earnings per share
The formula to calculate is as follows:
Earnings per share = Net income−minority intersest
During periods of rapid growth, companies often prioritize retaining profits for reinvestment over paying high dividends to shareholders Research by Todd Mitton (2004) on Central and Eastern European firms, along with Imad Jabbouri's (2016) study of emerging stock markets in the MENA region from 2004 to 2013, supports this trend Consequently, it is assumed that a negative relationship exists between dividend payouts and revenue growth rates.
H 3 : There is negative relationship between dividend payout policy and revenue growth
The formula to calculate is as follows:
Size of the company (SIZE)
Fama and French (2002) found that dividend-paying companies tend to be significantly larger than those that do not pay dividends or pay low dividends, as measured by Log(At) Similarly, Al-Kuwari (2009) utilized the logarithmic variable of total assets, Log(At), and concluded that larger firms are more likely to distribute higher dividends, reinforcing Fama and French's findings.
As a result, most previous research has found that there is a positive relationship between firm size and dividend payout policy
H 4 : There is positive relationship between dividend payout policy and firm size
The formula to calculate is as follows:
Liquidity refers to a firm's capacity to convert assets into cash, playing a crucial role in its ability to meet financial obligations and distribute cash dividends High liquidity indicates stable cash flow, enhancing the firm's potential to pay dividends This positive correlation between liquidity and dividend payout policy is corroborated by empirical research conducted by Theophano Patra et al (2012) and Imad Jabbouri.
(2016) As a result, it is assumed that liquidity and dividend payout policy are positive relationship
H 5 : There is positive relationship between dividend payout policy and liquidity
The formula to calculate is as follows:
Research indicates that financial leverage negatively impacts dividend payout policy (Al-Malkawi, 2005; Theophano Patra et al., 2012; Imad Jabbouri, 2016) Firms with high debt levels tend to prioritize retaining internal cash flow to meet obligations over distributing cash to shareholders, thereby safeguarding their creditors Consequently, it is hypothesized that there is a negative relationship between financial leverage and dividend payout policy.
H 6 : There is negative relationship between dividend payout policy and leverage
The formula to calculate is as follows:
This study analyzes the determinants of dividend payout policy over a decade (2011-2020) for 21 retail companies listed on the Vietnam Stock Exchange Utilizing a regression model based on tabular data, the research employs three primary models: the Pooled OLS Model, the Fixed Effects Model (FEM), and the Random Effects Model (REM) The author conducts tests to identify the most appropriate model for the analysis.
The Fixed Effects Model (FEM) accounts for varying intercepts among individuals, highlighting the unique characteristics of different cross-units, making it suitable when these intercepts relate to one or more independent variables In contrast, the Random Effects Model (REM) assumes that the intercepts are derived from a larger population with a constant mean, where each unit's intercept is a deviation from this mean REM is best utilized when the random intercepts are not correlated with the independent variables, allowing for a broader analysis of the data.
The Ordinary Least Squares (OLS) method assumes constant estimated coefficients over time and across different economic units, but tabular data incorporates observations from both time series and various economic units, leading to unique differences among them To facilitate comparison, the pooled regression model will also be examined It is standard practice to model the pooled regression, fixed effect, and random effect models, utilizing metrics such as R-squared, adjusted R-squared, the F test, and the Hausman test to statistically determine the most appropriate model for analysis.
Comparison between Pooled OLS and FEM
The Pooled OLS model assumes uniform intercepts across time and space, while the Fixed Effects Model (FEM) allows for varying intercepts over time, keeping the slopes of independent variables constant To decide between these models, the author employs the F test to evaluate the null hypothesis H0: β1=β2= =βk=β If the test yields a Prob > F value less than 0.05, the null hypothesis is rejected, indicating that the FEM model is the more appropriate choice.
Comparision between FEM and REM
The Hausman test is essential for deciding between the Fixed Effects Model (FEM) and the Random Effects Model (REM) By introducing a correlation between the error component and the independent variables, this test simplifies the decision-making process regarding model selection Ultimately, the Hausman test provides a robust framework for determining the most appropriate econometric model for analysis.
The REM model is generally preferred over the FEM model for model selection However, if the test results indicate that Prob > Chi2 is less than 0.05, the hypothesis is rejected, suggesting that the FEM model is more appropriate than the REM model in that scenario.
DATA
This study focuses on researching the determinants of the dividend payout policy of the listed retail companies on HOSE and HNX in Vietnam from 20011-
In 2020, the research focused on retail companies listed on HOSE and HNX prior to 2011, which maintained a consistent cash dividend payout policy and continued active securities trading until 2020 The study utilized financial statements and dividend payment notices spanning a decade from 2011 to 2020.
In 2020, data can be accessed through financial websites like Vietstock and Cafef, as well as the respective company websites The research sample comprises 21 retail companies, including 11 listed on HOSE and 10 on HNX, totaling 210 firm-year observations.
In Vietnam, seven key variables are anticipated to influence dividend payout policy, including firm-specific characteristics such as profitability (ROA), earnings per share (EPS), revenue growth (GROW), firm size (SIZE), liquidity (LIQ), and financial leverage (LEV), along with the macroeconomic factor of Gross Domestic Product growth (GDP).
The dividend payout ratio represents the percentage of earnings distributed to shareholders as dividends, calculated by dividing dividends per share by earnings per share This research collected data on dividends per share and earnings per share for listed Vietnamese retail companies from their shareholder meeting resolutions and financial statements spanning 2011 to 2020 Additional variables analyzed include return on assets (ROA), earnings per share (EPS), revenue growth (GROW), firm size (SIZE), liquidity (LIQ), and financial leverage (LEV), sourced from the financial statements of 21 retail companies during the same period Furthermore, the Gross Domestic Product (GDP) growth of Vietnam from 2011 to 2020 was obtained from World Bank data.
In Chapter 3, the author outlines a comprehensive research design that incorporates relevant studies and hypotheses based on empirical evidence The study will collect and filter data from the financial statements and economic-financial information of 21 retail companies listed on HOSE and HNX, covering the period from 2011 to 2020, resulting in a total of 210 observations The analysis will employ various analytical techniques and tests, including descriptive statistics, linear regression, autocorrelation tests, and heteroskedasticity tests.
This chapter establishes a comprehensive research model focusing on the Dividend Payout Ratio (DPR) of retail companies listed on HOSE and HNX from 2011 to 2020 It identifies seven independent variables that are analyzed for their influence on the DPR, providing a foundation for the tests conducted in Chapter 4.
RESULTS OF THE RESEARCH
DESCRIPTIVE STATISTICS
The statistical analysis presented in Table 4.1 reveals the mean, maximum, minimum, and standard deviation of retail enterprises listed on the Vietnam Stock Exchange, highlighting the various impact factors influencing these metrics.
DPR: The dividend payout ratio of the firms in the sample ranged from 0% to
The average dividend payout ratio among the sampled companies is 70.1%, with a notable range from 0% to 265.5%, as detailed in Table 4.1 This indicates a diverse mix of firms, including those with both high and low dividend payment ratios Ben Thanh Service Joint Stock Company (BSC) stands out with a remarkable dividend payout ratio of 265.5% in 2018, attributed to earnings per share of 113 VND and a dividend per share of 300 VND Some companies in the sample also reported dividend payouts exceeding 100%, which is possible as they utilize undistributed profits from previous years to fund these dividends.
Chart 4.1 Number of retail companies by dividend payout ratio over the years
Source:Compiled by the author
Recent data indicates that dividend payments by businesses have remained consistent over time, typically falling within the 10% to 50% and 50% to 100% ranges Despite economic fluctuations between 2011 and 2020 that affected corporate performance, the dividend payout ratio has been upheld Most companies implement a stable dividend payout policy, with management focused on maintaining a consistent payout while minimizing the impact on overall income.
From 2011 to 2020, the revenue growth rate (Grow) among firms exhibited significant disparity, ranging from -62.6% to 81.1% The average annual revenue growth rate during this period was 4.4%, with a standard deviation of 20.4% Notably, Ben Thanh Service Joint Stock Company (BSC) achieved the highest revenue growth rate in this timeframe.
In 2016, BSC experienced an impressive revenue growth, with net revenue soaring from 26.2 billion VND in 2015 to 47.4 billion VND, primarily due to the successful transfer of residential properties at 136-137 Ben Chuong Duong This exceptional income led to a remarkable increase in revenue, reaching up to 81.1% When excluding years marked by unusual revenue spikes, BSC's average revenue growth rate from 2011 remains noteworthy.
TABLE 4.2 REVENUE GROWTH RATE OF 21 RETAIL COMPANIES FROM 2011-2020
Source:Compiled by the author
Chart 4.2 Revenue growth rate of 21 retail firms from 2011-2020
Source:Compiled by the author
In 2012, retail and consumer services experienced their most significant sales decline on record, with 21 publicly listed retail companies reporting a staggering 21% drop in total revenue This sharp decline highlights the challenging economic conditions faced by the retail sector during that year.
From 2011 to 2015, Phu Nhuan Jewelry Joint Stock Company (PNJ) experienced a drastic revenue decline, with a growth rate plummeting by -62.6% as sales dropped from VND 17,694 billion in 2011 to VND 6,717 billion in 2012 This downturn was primarily attributed to a significant decrease in gold bar sales and limited purchasing power, which also affected other jewelry categories such as gold, silver, and diamonds Additionally, the total revenue of 21 Vietnamese retail firms listed on the stock exchange fell from VND 53,603 billion in 2011 to VND 48,678 billion in 2015.
From 2012 to 2015, Vietnam's economy and society were significantly affected by fluctuations in the international economy, particularly due to the unresolved European financial and public debt crises Changes in commodity prices, along with severe disruptions in global production and trade, led to a slowdown in major economies, which in turn impacted Vietnam This global economic downturn resulted in negative effects on production, trade, and the overall quality of life for the Vietnamese people, characterized by a shrinking consumption market, rising inventories, and decreased purchasing power Consequently, retail firms experienced a substantial drop in overall income as consumption trends declined However, the economic situation began to show significant improvement starting in 2016.
In 2019, 21 retail firms experienced an average revenue growth rate of 10% per year However, the onset of the Covid-19 pandemic in 2020 led to a significant decline in consumer shopping demand, causing a decrease in revenue for retail service companies.
The size of retail firms is assessed through their total assets, with data from the Vietnamese stock exchange indicating that between 2011 and 2020, 21 retail businesses had an average total asset value of approximately 970.9 billion VND The smallest firm reported total assets of 15.1 billion VND, while the largest reached 8,602.9 billion VND, resulting in a standard deviation of 1,619.9 billion VND.
CHART 4.3 AVERAGE VALUE OF 21 RETAIL FIRMS ' S SIZE FROM 2011-2020
Source:Compiled by the author
Between 2011 and 2020, the average total assets of retail businesses rose significantly from 712.3 billion VND to 1,336.2 billion VND, indicating a trend of expansion and adaptation within the industry This growth aligns with the study's hypothesis in Chapter 3, which suggests that larger firm sizes correlate with higher dividend payout ratios.
The average earnings per share (EPS) stand at 2,440.9 VND, with a peak value of 9,739 VND and a minimum price of -1,511 VND The standard deviation for this data is 1,720.3 VND per share.
Chart 4.4 Average value of 21 retail firms’s EPS from 2011-2020
Source:Compiled by the author
The par value of a share is 10,000 dong, and all businesses listed on the three exchanges (HOSE, HNX, and UPCOM) have the same par value As a result, a
From 2011 to 2020, a company is deemed successful if its earnings per share (EPS) exceeds 1,500 VND, with a consistent performance over the years and potential for future growth An EPS of at least 1,000 VND is considered satisfactory The average EPS of retail companies during this period is 2,440.9 VND per share, indicating strong operational performance.
The liquidity of firms, as indicated by the current ratio, varies significantly within the sample, ranging from 0.435 to 17.50, which translates to percentages between 43.5% and 1750% The average current ratio across the sample is 2.82, with a standard deviation of 282.8% Notably, 21 retail companies in the sample consistently maintain a current ratio above 1, reflecting their strong liquidity position and sufficient current assets to meet their current liabilities.
Chart 4.5 Average value of 21 retail firms’s curent ratio from 2011-2020
Source:Compiled by the author
The liquidity of retail companies has steadily increased over time, as illustrated in Chart 4.6, reflecting their strong ability to meet outstanding obligations A higher liquidity ratio signifies a greater capacity for these companies to pay dividends.
ROA : The average Return on assets (ROA) factor of 21 businesses was around
CORRELATION ANALYSIS AND COLLINEARITY DIAGNOSTICS 39 4.3 REGRESSION RESULT
Table 4.3 demonstrates that the relationships among the variables are deemed acceptable, as the absolute values of the correlation coefficients for all variables are below 0.8, in accordance with Kennedy's (1985) guidelines.
Table 4.3 Correlation matrix between variables
DPR GROW SIZE LIQ ROA LEV GDP EPS
1 From this test onwards, the value of the variable Earnings per share (EPS) is taken Logarithmic to facilitate reading the results
Table 4.3 reveals a positive linear relationship between liquidity (LIQ) and the dividend payout ratio (DPR), suggesting that as liquidity increases, the dividend payout ratio also rises Conversely, factors such as growth (GROW), size (SIZE), return on assets (ROA), leverage (LEV), and earnings per share (EPS) exhibit a negative correlation with the dividend payout ratio, indicating that these variables tend to move in the opposite direction of DPR.
In the analysis of financial variables, collinearity diagnostics are essential to address potential multicollinearity issues within the research model The author examines the variance inflation factors (VIF) and finds that all independent variables have VIF coefficients below 5, with an average VIF of 1.93, indicating a low risk of multicollinearity.
In conclusion, the analysis reaffirms that there is no significant correlation among the independent variables, indicating that multicollinearity is not a major concern As a result, the regression model can be effectively utilized to examine the influence of the independent variables on the dependent variable.
Comparison between Pooled OLS and FEM
To carry out a comparison between two models to determine which model is better for research, the author employs the F test (presented in Appendix 6), as described in Chapter 3, with:
Hypothesis H0: The Pooled OLS model is appropriate
Hypothesis H1: The FEM model is appropriate
As a consequence, F(20, 182) =2.42 and Prob > F = 0.0011 (p-value < 0.05) are obtained, indicating that hypothesis H0 is rejected and hypothesis H1 is accepted The FEM model is more appropriate for the research
Comparison between FEM and REM
In Chapter 3, the author employs the Hausman test (detailed in Appendix 7) to evaluate the Fixed Effects Model (FEM) and the Random Effects Model (REM), aiming to identify the more appropriate model for the research.
Hypothesis H0: The REM model is appropriate (intercept coefficient in regression model is different for each individual)
Hypothesis H1: The FEM model is appropriate (the intercept of each cross- unit is a difference from the mean intercept)
The hausman test shows that Prob > chi2 = 0.3541 (p-value > 0.05), implying that accepting hypothesis H0 is equivalent to rejecting hypothesis H1 As a result, the REM is the most appropriate model for the research
4.3.2 Regression result of Random effect model (REM)
T ABLE 4.4.R EGRESSION RESULT OF REM Variable Coef Std Err
Table 4.4 reveals that the R² value is 12.41%, meaning the independent variables in the model account for 12.41% of the variance in the dependent variable Additionally, the P-value is below 0.05, confirming that the model is statistically significant at the 5% level.
4.3.3 Testing and fixing defects of the REM model
To address the model's flaws, an autocorrelation test and a heteroskedasticity test were used to continue the research process
To check autocorrelation, the authorr use the Wooldrige test (presented in Appendix 8), which includes:
Hypothesis H0: No first order autocorrelation
Hypothesis H1: There is first order autocorrelation
As a consequence, Prob > F = 0.0684 (p-value > 0.05), hypothesis H0 is accepted whereas hypothesis H1 is rejected Therefore, the model does not have first order autocorrelation
The author continue to use the Breusch and Pagan test (presented in Appendix
9) to determine whether the model has heteroscedasticity, with:
The result shows that Prob > Chibar2 = 0.0005 (p-value < 0.05), indicating that hypothesis H0 is rejected and hypothesis H1 is accepted As a result, the REM model has heteroscedasticity
Fixing defects of the REM model:
The author utilizes an estimate by the Feasible Generalised Least Squares (FGLS) to fix the REM model's heteroscedasticity and make the estimation results unbiased and efficient
T ABLE 4.5.R EGRESSION RESULT BY FGLS
Table 4.6 shows that four of the model's seven explanatory variables exhibit statistical significance at 1%, 5% and 10%, including: The statistical significance (P
At a 1% significance level, revenue growth (GROW) and earnings per share (EPS) are the most significant factors influencing the dividend payout of retail businesses, with p-values of 0.003 and 0.000, respectively Liquidity (LIQ) and firm size (SIZE) also show statistical significance at the 5% and 10% levels, with p-values of 0.062 and 0.023 In contrast, financial leverage (LEV) and profitability (ROA) do not significantly affect dividend payout policy, as their p-values exceed 10%.
The final regression equation for the model is as follows, based on the regression findings in Table 4.5:
DPR i,t = 2.362 - 0.283*GROW i,t – 0.056*SIZE i.t + 0.014*LIQ i,t – 0.459*EPS i,t + 4.989*Y t + ε i,t
The following is an explanation of the impact of variables (explanatory variable) on the dividend payout ratio (dependent variable) of retail businesses listed on the Vietnam stock exchange:
Revenue growth is inversely related to dividend payout policy, as indicated by a GROW correlation coefficient of -0.283 This suggests that for every 1% increase in a company's revenue growth, the dividend payout ratio decreases by 0.283% These findings align with the research hypothesis and support previous empirical studies (Todd Mitton, 2004; Imad Jabbouri, 2016) Furthermore, the statistically significant result (P > |z| = 0.003) confirms the substantial impact of revenue growth on dividend payout strategies.
Retail businesses in Vietnam, particularly those in their early growth stages, need additional capital to invest in new projects and expand their market presence By cutting dividend payments, these companies can focus on growth while reducing their dependence on external funding This strategy not only supports reinvestment but also sends a positive signal to shareholders about potential future dividend increases.
Research indicates that firm size significantly affects dividend payments among retail companies listed on the Vietnam Stock Exchange, with a significance level of 10% A negative correlation coefficient of -0.056 suggests that for every 1% increase in firm size, dividend payouts decrease by 0.056% This finding aligns with the study by Aliya Bushra and Nawazish Mirza (2015), which asserts that larger firms tend to retain cash reserves to meet their debt obligations.
The conclusion aligns closely with the situation of retail companies on the Vietnamese stock market, where many rely heavily on debt to meet their capital requirements As these companies expand, their need for capital increases, leading to a greater accumulation of debt Consequently, larger retailers require more cash to service their obligations Instead of attracting investors through dividends, these sizable firms often retain earnings for further investment, resulting in a lower dividend payout ratio compared to smaller and medium-sized retailers.
Liquidity (LIQ) significantly influences the dividend payments of retail companies listed on the Vietnamese stock market, with a correlation coefficient of 0.014 at a 5% significance level (p >|z|= 0.023) This indicates that a 1% increase in liquidity results in a 0.014% increase in the dividend payout ratio, assuming other conditions remain constant The positive relationship between liquidity and dividend payouts suggests that firms with higher liquidity are better positioned to distribute dividends, thereby mitigating agency cost issues These findings align with previous research by Theophano Patra et al (2012) and Imad Jabbouri (2016).
The regression analysis indicates that earnings per share (EPS) negatively affects the dividend payout ratio (DPR), with a statistically significant regression coefficient of -0.459 at the 1% level, aligning with the findings of Franklin & Muthusamy (2010) Consequently, the hypothesis H2 of the study model is rejected Specifically, this means that for every 1% increase in EPS, the DPR decreases by 0.459%, highlighting an inverse relationship between these two financial metrics.
This shows that during the 10-year period from 2011 to 2020, the majority of retail businesses in Vietnam's stock exchange are in the early stages of stable growth
Despite strong performance and high earnings per share (EPS), companies prioritize maintaining high share prices over paying substantial dividends to shareholders To achieve growth, these firms focus on expanding their commercial operations, leading to a preference for retaining profits rather than distributing them as dividends Consequently, while profits may increase, dividend payouts tend to decline.
Table 4.5 indicates that while return on assets (ROA) and financial leverage exhibit a positive correlation with dividend payout policy, their statistical significance is lacking These findings may vary from previous empirical studies due to factors such as market conditions, sample size, industry specialization, or the duration of the research.