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1 MINISTRY OF EDUCATION AND TRAINING THUONG MAI UNIVERSITY - TRAN THI THU TRANG WORKING CAPITAL MANAGEMENT OF PLASTIC FIRMS LISTED ON THE VIETNAM STOCK MARKET Major: Banking – Finance Code: 9.34.02.01 Summary of economic doctoral thesis The thesis was completed at: Thuongmai University Science instructor Assoc.Prof.Dr Le Thi Kim Nhung Dr Nguyen The Hung Reviewer 1: ……………………………………………………… …………………………………………………………………… Reviewer 2: ……………………………………………………… …………………………………………………………………… Reviewer 3: ……………………………………………………… …………………………………………………………………… The thesis will be protected before the thesis review board meeting at ……………………………………………………………………… The dissertation can be found at National Library Thuongmai University Library INTRODUCTION The urgency of the topic In the production and business activities, assets in general and working capital in particular always play an extremely important role Therefore, working capital management directly affects the profitability and risk of enterprises In order to achieve the goal of profit maximization, enterprises must effectively manage their working capital and managers need to answer the questions: how does working capital management affect the profitability and risks of enterprises? This interesting research problem has attracted the attention of many researchers and there have been many published empirical studies approaching from different research angles However, no research studies the impact of working capital management on both profitability and risk for Vietnamese enterprises Therefore, research on this issue is necessary The plastic industry plays an important role in the life and production of countries, including Vietnam The industry has a relatively fast growth rate Therefore, the number of enterprises in this industry is increasing and the scale is also going up However, in the current period, the plastic industry has been facing many difficulties The rapid development of enterprises in the industry along with existing difficulties make financial managers always wonder about how to well manage working capital The plastic joint-stock companies listed on the stock market are the largest manufacturing companies in the plastic market in Vietnam with relatively good scale and business efficiency However, the preliminary survey result showed that the working capital management of the listed plastic joint-stock companies still revealed many limitations Therefore, it is necessary to understand the current status of working capital management, find out the limitations, causes and propose solutions to improve the working capital management for plastic enterprises Stemming from practical requirements, the author has chosen the research topic "Working capital management at jointstock companies in the plastic industry listed on the Vietnamese stock market" as my thesis Research questions - What is the status of working capital management at the listed plastic companies inVietnam? - How does the working capital management affect the profitability and risks of the listed plastic companies in Vietnam? - What solutions are needed to improve the working capital management of listed plastic companies in Vietnam? Research objectives 3.1 General objectives Base on the theoretical background and empirical research results on the current status of the working capital management of the plastic companies listed on the Vietnam stock market in the period 2016-2020, some solutions and recommendations are proposed to improve the working capital management at the plastic firms listed on the Vietnam stock market 3.2 Specific objectives - Systematize the theoretical basis for the working capital management of enterprises - Building an empirical research model on the impact of working capital management on the profitability and risks of enterprises - Assessing the current status of working capital management of plastic joint-stock companies in the sample for the period 2016 – 2020 Base on the results, the author points out the successes and limitations in the working capital management of Vietnamese plastic joint-stock companies - Proposing solutions and recommendations to improve the working capital management at the Plastics Joint Stock Company listed on the Vietnam Stock Exchange in the future Object and scope of study Object: the working capital management at the plastic companies listed on the Vietnam stock market Scope: - Space: Listed plastic firms in Vietnam Stock Market - Time: From 2016 to 2020 Methodology The thesis is based on the methodological basis of dialectical materialism, historical materialism Secondary data taken from reliable sources was used The thesis combines the use of qualitative research methods and quantitative research methods, in which, quantitative methods will be mainly used to evaluate the impact of working capital management on profitability and risk of enterprises New contributions - First, the thesis complements and clarifies the theoretical framework of working capital assets and working capital management of enterprises Moreover, the thesis systematizes criteria for evaluating the results of working capital management, factors impact on working capital management as well as the impact of working capital management on the profitability and risks of the enterprise - Second, besides the popular criteria such as indicators showing solvency, operating ability, profitability, the thesis has using a group of composite indicators reflecting the effectiveness of working capital management (Ui, Pi, Ei) to comprehensively assess the results of working capital management of the plastic companies listed on the Vietnam stock market - Third, in terms of the variables selected in the research model, in order to be able to comprehensively assess the impact of the working capital management on the profitability and risk of the enterprise, the thesis not only mentions the return on assets ratio (ROA) but other variables reflecting profitability such as ROE, ROC and Tobin's Q are also included in the research model - Fourth, regarding the research model, instead of using a static regression model as in previous studies, the author uses a combination of both static and dynamic regression models in the research In addition, the thesis uses a combination of OLS, FEM, REM, S-GMM methods, and quantile regression method in assessing the impact of working capital management on profitability and risks of enterprises The results of the thesis include: - Empirical results show that the cash conversion cycle harms the profitability of enterprises while net cash flow has a positive impact on the former Besides, companies with available cash flow will improve their profitability by investing in working capital - The Ei index has a statistically significant positive relationship with the profitability of the enterprise Thus, enterprises that effectively use their working capital have high profitability In other words, the effective use of working capital contributes to favorable sales and purchase activities, cost savings, and favorable conditions for the higher profitability of enterprises - Firms that have more risky investment and financing policies for the working capital could get higher profitability However, in this case, they would face greater risk Therefore, enterprises need to choose appropriate investment working capital and financing working capital policy to balance between two goals: both ensuring good profitability and ensuring risks at a level that enterprises can accept - In addition to the successes, the listed plastic joint-stock companies also have some shortcomings in working capital management The first shortcoming is that they determine inventory levels according to their experience As the result, the quantity that they order is often redundant, sometimes goods are in short for production; Second, enterprises face difficulties when the source of raw materials abroad is unstable; Third, a manager only manages receivables by monitoring and collecting debts Calculating and evaluating the effectiveness of credit activities are not used; Fourth, managers have not assessed financial performance in budgeting decisions and cash forecast is not accurate - The thesis has proposed suitable and feasible solutions to improve the working capital management at the plastic joint-stock companies listed on the Vietnam stock market and proposed recommendations to effectively implement these solutions Structure The thesis is structured into four chapters as follows: Chapter 1: Litterature review and methodology Chapter 2: Theoretical background and practice of corporate working capital management Chapter 3: Current status of working capital management of plastic firms listed on Vietnam's stock market Chapter 4: Solutions for improving working capital management at plastic firms listed on Vietnam's stock market CHAPTER 1: LITTERATURE REVIEW AND METHOLOGY 1.1 Litterature review The thesis has reviewed related research works as follows: Research on working capital management and factors affecting working capital management of enterprises In this section, the researcher has reviewed the research results of scientists Polák and Kocurek (2007), Chen Dong and Chen Yunsen (2012), Grzegorz Michalski (2014), Capkun, Humeri and Weiss (2009), N Nemtajela1, C Mbohwa (2016), Thu Hoai (2012), Shehzad L Mian et al (1992), Francis Kakeeto, Muhammad Mehtab Azeem and Akin Marsap (2015), Yilang Zhao (2011)… Research on the relationship between working capital management and firm’s profitability, risk In this section, the researcher has reviewed the research results of Deloof (2003), Eljelly (2004), Padachi (2006), Lazaridis and Tryfonnidis (2006), Raheman and Nasr (2007), Nobanee and AlHajjar (2009), Mathuva (2010), Charitou et al (2012), Naser et al (2013), … Research gap: First, some of the contents in the general theory of working capital have different understandings that need to be clarified Second, in previous domestic and foreign studies, the research model of the relationship between the working capital management and the firms’ profitability, the working capital variables are usually cash conversion cycle, inventory turnover, accounts receivable turnover, accounts payable turnover The impact of net cash flow on the relationship between cash conversion cycle and corporate profitability is a new research direction, only one international empirical study deals with this issue and in this research, the dependent variable is ROA representing the firm performance Third, previous studies focus mainly on the relationship between working capital management and profitability of enterprises in different fields such as pharmaceuticals, foodstuffs, construction, but There have been no studies on the working capital management in plastic enterprises Therefore, an empirical study on the plastic industry may bring discoveries Fourth, some published studies use econometric models to evaluate the relationship between working capital management and profitability, as well as the impact of variables on the working capital management, but no research mentions the relationship between the working capital management and the risk of enterprises in Vietnam On the other hand, the research approach on the impact of working capital management policy on profitability and risks of enterprises is a new research direction in Vietnam Fifth, many criteria are proposed to evaluate the results of the firms’ working capital management such as indicators of solvency, operating ability, and profitability The working capital management indexes (Ui, Pi, and Ei) proposed by Bhattacharya (1997) are new indexes that have only been applied in a few recent studies In this thesis, the researcher used these indexes to evaluate working capital management efficiency and these indexes became variables in the research model In domestic studies, there has been no research mentioning these indicators Sixth, in the previous studies, researchers used OLS, FEM, REM, and S-GMM methods However, there have been no studies in Vietnam using the quantile method in this field In this study, the author used both OLS, FEM, REM, S-GMM, and quantile method to comprehensively evaluate the impact of working capital management on firm profitability and risk 1.2 Methodology The thesis uses a combination of qualitative and quantitative research methods in the research Domestic and international sources are synthesized to systematize theoretical issues on working capital management and some lessons learned in working capital management of the world's leading enterprises In addition, the author synthesizes many different views of domestic and foreign researchers on the impact of working capital management on the profitability and risks of enterprises This is the theoretical basis for the author to build the research model as well as interpret the research results later In order to obtain honest information on the working capital of plastic joint stock companies listed on the Vietnam stock market, the thesis has collected information from 37 out of 42 joint-stock companies with sufficient financial statements to meet the requirements of data analysis In addition, interviews with 10 experts and surveyed 32 were conducted at plastic companies listed on the Vietnam stock market The content of the interview and survey questions revolved is related to the working capital management in enterprises To measure the impact of working capital management on the profitability and risk of enterprises, the thesis has built a quantitative research model and used panel data analysis techniques and suitable methods such as OLS, FEM, REM In the thesis, tests will be performed to select an estimate suitable for the research sample such as Fisher test, Breusch-Pagan test, Hausman test… In addition, to detect and deal with defects of the model, tests were performed to detect multicollinearity, autocorrelation, variable variance, and endogeneity When detecting model defects, the author will use several techniques to handle these defects such as: Using solid standard error estimation, GLS, GMM estimation to obtain estimated results most accurate amount In addition, to see a more comprehensive picture of the impact of the independent variable on the dependent variable, the author uses the percentile regression method of Koenker & Bassett for the models in the study CHAPTER 2: THEORETICAL BACKGROUND AND PRACTICE OF CORPORATE WORKING CAPITAL MANAGEMENT 2.1 Overview of working capital and working capital management The researcher presents some basic content about working capital and working capital management of enterprises The topics presented include: (i) The concept and characteristics of working capital; (ii) Classification of working capital; (iii) The concept of working capital management; (iv) The role of working capital management; (v) Investment working capital management and financing working capital management policy 2.2 Contents of corporate working capital management Working capital management is the study and analysis to make appropriate policies, organize the implementation, and evaluate the results for working capital to help enterprises to achieve the highest business efficiency The researcher presents the three important parts of the enterprise's working capital: cash management, inventory management, and shortterm receivables management 2.3 Evaluation of firm working capital management results 2.3.1 Objectives and results of firm working capital management The ultimate goal of financial management is to maximize the value of the enterprise Therefore, businesses need to find ways to maximize profits associated with sustainable growth and development To achieve this, all management activities, including the working capital management, must also have objectives consistent with the ultimate goals of the enterprise From there, the researcher points out three goals of the working capital management in enterprises as follows: (i) Ensuring that the business cycle of enterprises is carried out smoothly; (ii) Optimizing the level of working capital and reducing costs; (iii) Getting the optimal return on the investment of working capital Thus, the results of the firm working capital management are shown through the evaluation of the effectiveness of using the existing working capital compared to the firm’s targets 2.3.2 Indicators for evaluating working capital management results Based on the objectives of working capital management, the researcher listed the criteria used for evaluating the results of the enterprise's working capital management These indicators are divided into four groups as follows: (i) The indicators for the firms’ solvency evaluation; (ii) The indicators for the firms’ operating ability evaluation; (iii) The indicators for the firms’ profitability evaluation; (iv)The indicators for the firms’ working capital management efficiency (Ui, Pi, Ei) 2.4 Factors affecting working capital management and the influence of working capital management on the profitability and risk of the enterprise 2.4.1 Factors affecting working capital management Factors affecting working capital management include internal factors and external factors - Internal factors include business size, financial leverage, revenue growth, business characteristics, investment in fixed assets, cash flows from operating activities, seasonality in operations, number of years in business, characteristics of the board of directors, and board size, management-related factors, and firm’s credit rating - External factors include GDP growth, inflation, exchange rate, and other macro factors 2.4.2 Impact of working capital management on corporate profitability 14 experience of managers to determine the amount of inventory All surveyed plastic companies listed on the survey use computer software to monitor the amount of imported and exported goods and inventory in the warehouse All surveyed listed plastic joint-stock companies manage inventory risk by various measures Regarding receivables management: Most of the listed plastic companies have applied a trade credit policy (87% of enterprises) to enhance sales activities 100% of enterprises surveyed did not grant trade credit to new customers Among the criteria for evaluating customers before making a credit sale decision of listed plastic joint stock companies, credit status, legal capacity, and solvency criteria are used by all enterprises at the highest importance with an average score of 5, followed by customer reputation, customer net sales 3.2.2 Evaluation of working capital management results of plastic companies listed on Vietnam's stock market in the period 2016-2020 The researcher assesses the results of the working capital management of the enterprises in the research sample by using four groups of criteria: (i) Assessing by the ability to pay; (ii) Assessing by the operating ability; (iii) Assessing by profitability; (iv) Assessing by Ui, Pi, Ei indexes The results of the working capital management of the listed plastic joint-stock companies show that the management results of enterprises in the industry have huge differences While some enterprises have high solvency, good operating ability, profitability as well as very high Ui, Pi, Ei indexes such as BMP, BTG, SFN, other enterprises have bad working capital management such as DAG, NHP, TDP In addition, the rate of return on current assets of the industry has tended to go down in the past years.3.3 Analyzing the impact of working capital management on profitability and risk of plastic companies listed on the Vietnamese stock market 3.3.1 Research model and hypothesis The thesis uses a combination of static and dynamic models in assessing the impact of working capital management on the profitability and risk of enterprises in the sample The impact of working capital management on profitability of enterprises Static models: 15 KNSLit = β0 + β1 CCCit + β2 Salegrowthit + β3 ATANit + β4 DRit + β5 Sizeit + εit KNSLit = β0 + β1 CCCit + β2 Cashflowit + β3 Salegrowthit + β4ATANit + β5DRit + β6 Sizeit + εit KNSLit = β0 + β1 CCCit*Cashflowit + β2 Salegrowthit + β3ATANit + β4DRit + β5Sizeit + εit Dynamic models: KNSLit = β0 + β1KNSLit-1 + β1 CCCit + β2 Salegrowthit + β3 ATANit + β4 DRit + β5 Sizeit + εit KNSLit = β0 + β1KNSLit-1 + β1 CCCit + β2 Cashflowit + β3 Salegrowthit + β4ATANit + β5DRit + β6Sizeit + εit KNSLit = β0 + β1KNSLit-1 + β1 CCCit*Cashflowit + β2Salegrowthit + β3ATANit + β4DRit + β5 Sizeit + εit Table 3.14: Variables in the model showing the impact of working capital management on the profitability of enterprises Variables Measurement Dependent variables ROA Net profit after taxes/Total assets ROE Net profit after taxes/Equity ROC EBIT(1-T)/(Interest bearing debt+equity) Tobin’s Q= Market value of Tobin’s Q assets/Replacement valude of assets Independent variables Day inventory outstanding + Day sales CCC outstanding – Day payable outstanding Cashflow Net cash flow/Total assets Sale growth Natural logarithm of total assets Fixed assets/Total assets Total debt/Total assets Combined effects of cash conversion cycle and CCC*Cashflow firm's net cash flow The impact of the efficiency of working capitalmanagement (Ui, Pi and Ei) on the profitability of enterprises Static models: KNSLit = β0 + β1 Uiit + β2 DRit + β3 SGit + β4 INVESTit + β5 Sizeit + εit Salegrowth Size ATAN DR 16 KNSLit = β0 + β1 Piit + β2 DRit + β3 SGit + β4 INVESTit + β5 Sizeit + εit KNSLit = β0 + β1 Eiit + β2 DRit + β3 SGit + β4 INVESTit + β5 Sizeit + εit Dynamic models: KNSLit = β0 + KNSLi,t-1 + β1 Uiit + β2 DRit + β3 SGit + β4 INVESTit + β5 Sizeit + εit KNSLit = β0 + KNSLi,t-1 + β1 Piit + β2 DRit + β3 SGit + β4 INVESTit + β5 Sizeit + εit KNSLit = β0 + KNSLi,t-1 +β1 Eiit + β2 DRit + β3 SGit + β4 INVESTit + β5 Sizeit + εit Table 3.15: Variables in the model showing the impact of the effectiveness of the working capital management on the profitability of enterprises Variables Measurement Dependent variables ROA Net profit after taxes/Total assets ROE Net profit after taxes/Equity ROC EBIT(1-T)/(Interest bearing debt+equity) Tobin’s Q Tobin’s Q= Market value of assets/Replacement valude of assets Independent variables Performance index of working capital management (PIWCM) Is = Sales index defined as: St / St-1 Wi = Individual group of current assets N = Number of current assets group i= 1, 2, N 17 Utilization Index of working capital management (UIWCM) Efficiency index of working capital management Debt ratio Sale growth (SG) Invest A = Current assets / Sales EIWCM = PIWCM x UIWCM DR=Total debt/Total assets Sale growth Total investment of firm /Total assets Size Natural logarithm of sales Impact of working capitalmanagement policy on profitability and risk of enterprises Research model of the impact of working capital management policy on the profitability of enterprises Static model Dynamic model: Table 3.16: Variables in the model showing the impact of working capital management policy on profitability of enterprises Variables Measurement Dependent variables ROA Net profit after taxes/Total assets ROE Net profit after taxes/Equity ROC EBIT(1-T)/(Interest bearing debt+equity) Tobin’s Q= Market value of assets/Replacement Tobin’s Q valude of assets Independent variables Working capital Current assets/Total assets 18 investment policy (AIP) Working capital financing policy Current liabilities/Total assets (AFP) Research model of the impact of working capital management policy on corporate risk Static model: Dynamic models: Table 3.17: Statistics of variables in the model showing the impact of working capital management policy on corporate risk Variables Measurements Dependent variables ROA standard deviation to the mean ROA over SDROA a 5-year period ROE standard deviation to the mean ROE over a SDROE 5-year period ROC standard deviation to the mean ROC over SDROC a 5-year period Tobin’s Q standard deviation to the mean SDTobin’s Q Tobin’s over a 5-year period Independent variables Working capital investment policy Current assets/Total assets (AIP) Working capital financing policy Current liabilities/Total assets (AFP) 3.3.2 Testing the research model Based on the regression data of the research models, the thesis has presented the results of testing the impact of working capital management on the profitability and risk of listed plastic companies in the period 2016- 2020 as follows: * Regarding the impact of cash flow cycle and net cash flow on the profitability of enterprises: 19 The experimental results have confirmed the theoretical arguments about the relationship between the cash conversion cycle and the profitability of enterprises in the research sample of listed plastic companies Indeed, the higher the cash conversion cycle is, the higher profitability firms may get However, if companies have too low cash conversion cycle, they will have a negative impact on the return on total assets The experimental results also confirm the theory of the relationship between the firm's net cash flow and profitability Accordingly, when the net cash flow of the enterprise increases, the profitability of the enterprise is higher Empirical results show that enterprises with available cash flow benefit from investing in working capital * Regarding the impact of Ui, Pi, and Ei indexes on the profitability of the listed plastic companies in the period 2016-2020: The experimental results show that Ui, Pi and Ei indexes have a statistically significant positive relationship with the profitability of the enterprises Thus, enterprises with good efficiency in the use of working capital will have high profitability * Regarding the impact of the working capital management policy on the profitability and risks of listed plastic companies in the period 20162020: The theory of the relationship between investment policy and financing of working capital has been confirmed through the empirical results Specifically, the investment working capital policy variable has a negative relationship while the financing working capital policy variable shows a positive relationship with the return on assets ratio of plastic enterprises However, if enterprises invest and finance working capital at a high level of risk, they will face many risks such as insolvency, difficulties in purchasing and selling goods, or causing business disruption and negatively affect profitability In terms of risk perspective, the financing working capital policy variable has a positive relationship while the investment working capital policy variable shows a negative relationship with the risk of the plastic industry Therefore, the more risky financing and investing in working capital are, the higher the risks of enterprises are and vice versa 20 3.4 General assessment of the current situation of working capital management at listed plastic companies in the period 2016-2020 3.4.1 Results achieved in working capital management activities In general, the plastic companies listed on the Vietnam stock market have achieved remarkable results in the management of current assets as follows: * Regarding the results of working capital management: Most of the plastic joint-stock companies listed on the Vietnam stock market in the period of 2016-2020 have positive net working capital, the current solvency ratio is greater than In addition, the majority of listed jointstock companies ensure the ability to pay interest on loans The current asset turnover of listed plastic joint-stock companies reached an average of 1.97 and this indicator reached a relatively stable value in the past years The receivables turnover of listed plastic joint-stock companies in the period 2016-2020 reached an average of 6.24 Inventory turnover of listed plastic joint-stock companies in the period 2016-2020 reached an average of 7.33 The cash conversion cycle of plastic companies listed on the Vietnam stock market in the period 2016-2020 reached an average of 148.76 days Most of the listed companies in the plastic industry have a good efficiency index of using current assets * Regarding the working capital management policy: All plastic companies listed on the Vietnam stock market have their own working capital management policies The majority of managers (accounting for 62%) chose an aggressive working capital management policy while 44% of the managers implement a conservative working capital management policy * Regarding working capital management activities: all enterprises set up cash budgets for periodic collection/expenditure; The amount of inventory is enough for production In addition, companies also regularly conduct an inventory of inventory on a monthly or quarterly basis to avoid possible damage and loss; Most of the listed plastic jointstock companies apply a trade credit policy The criteria used in deciding trade credit are the credit history and reputation of the customer Listed plastic joint-stock companies focus on strict management of receivables, whereby enterprises arrange personnel to regularly monitor debts and urge customers to pay debts on time In case 21 of arising overdue debts, enterprises depend on the actual situation to propose handling measures 3.4.2 Limitations in working capital management In addition to the successes, the listed plastic joint-stock companies also have some shortcomings in working capital management The first shortcoming is that they determine inventory levels according to their experience As the result, the quantity that they order is often redundant, sometimes goods are in short for production; Enterprises face difficulties when the source of raw materials abroad is unstable; Secondly, a manager only manages receivables by monitoring and collecting debts Calculating and evaluating the effectiveness of credit activities are not used; Thirdly, managers have not assessed financial performance in budgeting decisions and cash forecast is not accurate 3.4.3 Reasons The researcher points out the subjective and objective reasons for the limitations in the working capital management of plastic joint-stock companies listed on the Vietnamese stock market as follows: * Subjective causes: Managers not clearly understand the benefits and calculation methods of modern models in the working capital management; managers, as well as employees in enterprises, not want to change in working methods; Managers in many businesses apply a loose trade credit policy to enhance their sales Therefore, they only use simple criteria to decide to grant credit to customers without any scientific calculation 22 * Objective reasons: Fierce competition in the plastic industry is one of the causes affecting the management of receivables In order to increase sales, many businesses are forced to implement loosening credit policies and as a result, receivables are also more and the risk of debt recovery is also greater; Primary plastic raw materials depend mainly on foreign suppliers, so the task of selecting suppliers, ordering and transporting goods will be much more difficult than other enterprises; During the epidemic period, businesses faced many difficulties in sales and especially in debt recovery Not only that, the unusual fluctuations of the exchange rate, inflation, or interest rates in the current period are also far beyond the calculations of the managers This situation leads to the inaccurate calculation of managers in planning and forecasting Consequently, the effectiveness of working capital management is reduced CHAPTER 4: SOLUTIONS TO IMPROVE WORKING CAPITAL MANAGEMENT OF PLASTIC COMPANY LISTED ON THE VIETNAM STOCK MARKET 4.1 Growth prospects and development orientations of plastic enterprises 4.1.1 Growth prospects of Vietnam's plastic industry - Vietnam's plastic industry is expected to maintain an average growth rate of 6.5% a year in the period of 2021-2023 Packaging and construction plastics are still a key part of the plastic industry - Nghi Son oil refinery, Long Son petrochemical project and HyoSung petrochemical project come into operation and they are expected to meet 41% of the domestic demand for plastic materials - When the EVFTA Agreement comes into effect, tariffs on most plastic products exported to the EU market will be removed This will be a great advantage to increase the output of export plastic products of Vietnam's plastic industry in the EU market 4.1.2 Orientation for the development of the plastic industry * Development perspective: The development of Vietnam's plastic industry is in line with the master plan for socio-economic development; The development of Vietnam's plastic industry is based on promoting the potential and strengths of each region and each locality; Vietnam's plastic industry is developed in the direction of specialization; The 23 development of Vietnam's plastic industry ensures efficiency, stability, and sustainability associated with environmental and environmental protection * The goals for the development of the plastics industry: The overall goal is to develop Vietnam's plastic industry into a strong economic sector with a high and sustainable growth rate; the Vietnam Plastics industry becomes an advanced industry with high-quality products The specific target for the industry is the industrial production value of the Plastic industry in 2025 to reach VND 390,000 billion (at constant prices from 1994) The growth rate of industrial production value in the period 2021 - 2025 will reach 16.52% * Development orientation: Developing Vietnam's plastic industry towards modernity, increasing automation; Mobilize all domestic and foreign resources to focus on investing in factories producing raw materials, semi-finished products, chemicals, and additives for the plastic industry 4.2 Solutions to improve working capital management of plastic companies listed on Vietnam stock market 4.2.1 Applying EOQ, POQ models combined with ABC goods classification analysis in inventory management After analyzing the characteristics, difficulties, and limitations of listed plastic joint-stock companies in inventory management, the author suggests that enterprises should use EOQ, POQ models combined with ABC classification analysis in inventory management These two methods are not too complicated in the application and the benefits to enterprises when applying these models in terms of economic efficiency are very clear Specifically: Enterprises can reduce damaged goods in the warehouse, save warehousing costs, save purchasing costs, and save labor for warehouse management 4.2.2 Improving the short-term receivables management The researcher makes several proposals to improve the management of receivables of listed plastic companies as follows: - Improving the receivables management department in the enterprise: The researcher recommends that enterprises should specialize in this functional department with specific functions and tasks 24 - Businesses can improve their trade credit policy by applying the theory of costs and benefits to make decisions on credit policies - Listed plastic companies need to improve not only credit policy but also methods and criteria for credit scoring for customers The researcher proposes a credit scoring method and granting credit decisions according to the following steps: Determining the criteria used in credit assessment; Determining the weights for the evaluation criteria based on their importance; Evaluate customers based on the score levels; Calculating the customer's credit score; Grouping customers by the level of risk; Credit decision 4.2.3 Application of the Stone model in determining the optimal amount of reserve money Based on the actual survey results of cash management at plastic companies listed on the Vietnam stock market, the author recommends that enterprises should apply the Stone model in determining the optimal amount of cash reserve This model is suitable for plastic enterprises for the following reasons: Firstly, cash flow in listed plastic joint-stock companies is unstable Secondly, the calculation method of this model is quite simple Hence, it is suitable for the human resource level of companies in the plastic industry in Vietnam 4.2.4 Enterprises need to combine basic criteria with general criteria in assessing the effectiveness of working capital management The researcher suggested that enterprises should use indicators such as net working capital, cash conversion cycle, and EI, PI, UI in analyzing and evaluating the effectiveness of working capital management 4.2.5 Selecting the optimal investment and financing working capital policy by using the gold programming model In fact, investment and financing working capital policies are based on the experience of managers To solve this problem, the author proposes that businesses can use the gold programming model proposed by Aksoy (1990) with the support of computational software such as Excel, Lingo, and Lindo … to make accurate and effective investment and financing decisions 4.2.6 Using modern management software in working capital management 25 Based on the actual survey results and management experience of the leading manufacturing enterprises, it can be seen that the application of modern technology brings practical benefits to the enterprises' working capital management Therefore, the author recommends that plastic enterprises should invest in applying modern technology in their working capital management Specifically, managers should consider applying Enterprise Resource Planning (ERP) in business administration 4.2.7 Minimizing risks in treasury management with exchange rate hedging tools Stemming from the corporate treasury management, the researcher suggested that the listed plastic companies should use derivative financial instruments to prevent exchange rate risks such as Forward trade or foreign call options 4.2.8 Improving supply chain management in plastic enterprises Based on the actual survey results and successful experience in the working capital management of the world's leading enterprises, the researcher proposes solutions to improve supply chain management in plastic companies By using these solutions, enterprises can speed up the cash conversion cycle, save production costs, circulation costs, and lower product prices, increase the profitability and competitiveness of enterprises in the market 4.2.9 Other solutions In addition to the above solutions, enterprises also need to implement some solutions to improve the efficiency of the working capital management such as Training and attracting qualified human resources, closely associating with regional plastic associations, plastic associations of countries around the world through exhibitions, building market strategies of enterprises for each product category 4.3 Some recommendations To improve the efficiency of the working capital management in particular and the business performance of listed plastic companies in general, relevant authorities need to take specific actions to support the development of enterprises in the industry - Recommendations to the Ministry of Industry and Trade: The Ministry should have policies to encourage plastic enterprises to use modern technology in production, invest in developing the raw material 26 market for the plastic industry, and provide financial support for plastic enterprises - Recommendations to the Vietnam Trade Promotion Agency: The agency should support the plastic joint stock companies in developing domestic and international markets through activities such as increasing investment in investigation and research; Researching and forecasting the market; Setting out conditions for businesses to participate in trade promotion programs; promoting export market research; organizing investment consulting centers on product investment and technology - Recommendations to the Vietnam Plastics Association: The Plastics Association should further strengthen its role in advising the Ministry of Industry and Trade to develop industry development policies and protect the legitimate interests of businesses and consumers; Strengthening the role of the Association in the fields of market research, product branding, investment promotion, scientific research and technology transfer, human resource development CONCLUSION Working capital management is always a complex issue and plays an important role in the financial management of all enterprises in general and the plastic firms in particular However, the actual survey shows that the working capital management has not been paid enough attention by corporate managers In the context of increasingly fierce competition among plastic enterprises, the issue of saving costs and lowering product prices is of particular interest to enterprises Therefore, improving the efficiency of working capital management is an indispensable requirement for enterprises Based on the problems in the working capital management of plastic enterprises, the author proposes some solutions to improve the working capital management of enterprises in this industry The thesis has achieved some main results as follows: First, the thesis systematized theoretical issues on working capital, working capital management, investment, and financing working capital policies and criteria for evaluating the results of working capital management of enterprises; analyzing the factors affecting the working capital management, the impact of the working capital management on the profitability and risks of enterprises Second, based on primary and secondary data collected from the plastic companies listed on the Vietnam stock market in the period 27 2016-2020, the author has synthesized, analyzed, and evaluated the current status of the working capital management of the companies Since then, the thesis has pointed out the achieved results, limitations, and causes in the working capital management of these enterprises Third, the researcher used Stata 15 software to test the econometric model of the impact of working capital management on the profitability and risks of enterprises Fourth, based on forecasting the development prospect of Vietnam's plastic industry to 2030, the researcher analyzed the opportunities, challenges of plastic companies in the coming time, and the conclusions of the survey The thesis has proposed a system of suitable and feasible solutions to improve the working capital management in Vietnamese plastic enterprises in the future Moreover, the author made some recommendations to enterprises and appropriate authorities to support businesses in alignment with the industry's development goals and orientations Although the Ph.D student has made great efforts in the research with the expectation of thoroughly solving the research objectives and tasks, this thesis still has limitations in research conditions and the author’s research ability The author looks forward to receiving valuable comments from teachers, scientists, colleagues, and business leaders to improve the thesis 28 THE AUTHOR’SCIENTIFIC STUDIES RELATED TO THE DISSERTATION Nguyen Thanh Huyen, Tran Thi Thu Trang, Le Thanh Huyen (2017), Research on policies to develop e-invoicing to boost the international trade in Vietnam, International conference on “The 4th China – Asean finance and taxation Co-operation Forum”, page: 256-296 Tran Thi Thu Trang, Le Thanh Huyen (2018), A study of Vietnam's leather and footwear companies: Focus on cash conversion cycle and firms' profitability, International conference on "The 5th 2018 IBSM, page 523-532 Le Thanh Huyen, Tran Thi Thu Trang (2018), A study of Vietnam's food processing companies: Focus on Fixed Asset Turnover and Firms' Profitability, International Conference on Contemporary Issues in Economics, Management and Business 1st CIEMB 2018, page 1616-1625 Tran Thi Thu Trang (2018), A study of Vietnamese leather and footwear companies: Focus on cash conversion cycle and firm's liquidity, International Conference on Contemporary Issues in Economics, Management and Business 1st CIEMB 2018, page 1597-1605 Vu Xuan Dung, Tran Thi Thu Trang, Le Thanh Huyen (2019),The impact of ownership structure, capital structure and state's supervisors on financial performance of listed Vietnamese food processing companies, National conference "Finance control in Vietnam in the context of integration", page 484499 Tran Thi Thu Trang, Le Thanh Huyen (2019), A study of Vietnam's leather and footwear companies: Focus on the relationship between liquidity and firms' profitability, International conference on "Contemporary issues in finance banking and accounting”, page 163-170 Tran Thi Thu Trang, Tran Duc Thang, Pham Thi Thu Thuy (2020), The relationship between working capital management and the financial performance of plastic companies in Vietnam, International Journal of Scientific Engineering and Science, page 57-60, Volume 4, Issue 8, ISSN: 2456-7361 Tran Thi Thu Trang (2020), Working capital management efficiency of listed plastic companies in Vietnam, Industry and Trade mangazin (volume 29-30) ISSN: 0866-7756 Le Thi Kim Nhung, Tran Thi Thu Trang, Dang Lan Phuong (2021), Relationship between working capital management efficiency and firm profitability of listed plastic companies in Vietnam, International Journal of Innovation and Research in Educational Sciences, Volume 8, Issue 2, ISSN:2349-5219 ... on Vietnam's stock market Chapter 4: Solutions for improving working capital management at plastic firms listed on Vietnam's stock market CHAPTER 1: LITTERATURE REVIEW AND METHOLOGY 1.1 Litterature... Vietnam in the context of integration", page 484499 Tran Thi Thu Trang, Le Thanh Huyen (2019), A study of Vietnam's leather and footwear companies: Focus on the relationship between liquidity... the profitability and risks of the listed plastic companies in Vietnam? - What solutions are needed to improve the working capital management of listed plastic companies in Vietnam? Research objectives
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