HỌC VIỆN NGÂN HÀNG KHOA TÀI CHÍNH KHOÁ LUẬN TỐT NGHIỆP TÊN ĐỀ TÀI : DETERMINANTS AFFECTING PROFITABILITY OF FIRMS IN OIL AND GAS INDUSTRY LISTED ON VIETNAM STOCK MARKET NHÂN TỐ TÁC ĐỘNG ĐẾN KHẢ NĂNG SINH LỜI CỦA CÁC DOANH NGHIỆP DẦU KHÍ NIÊM YẾT TRÊN SỞ GIAO DỊCH CHỨNG KHOÁN VIỆT NAM Sinh viên thực hiện : Nguyễn Minh Hiếu Lớp : K19CLCTCA Khoá học : K19 Chất lượng cao Mã sinh viên : 19A4010194 Giảng viên hướng dẫn : TS. Bùi Thị Mến Hà Nội, tháng 06 năm 2020 AUTHOR’S APPRECIATION “Determinants affecting Profitability of firms in Oil and Gas Industry listed on Vietnam Stock Market” thesis has been completed thanks to dedicated instructions from Banking Academy and PetroVietnam Securities Incorporated (PSI) I sincerely thank PhD.Bui Thi Men for instructing me during my time pursuing this thesis, who is always willing to orient and advise me to complete this study. I truly appreciate and would like to say thanks to your immeasurable help. I also appreciate all friends, Banking Academy, PetroVietnam Securities Incorporated (PSI) and other people for helping me, especially employees in PSI who have friendly and dedicatedly guided me during my internship time no matter the increasing work pressure.
Nevertheless, due to my absence in specialized knowledge and practical experiences, mistakes and limitation in this study are inevitable. I really hope to receive all comments from Lecturers and PSI to improve this study. Once again, I would like to give to all the Lecturers, friends and employees in PSI the most beautiful and sincere words. Hanoi, May 2020 AUTHOR’S GUARANTEE I guarantee that my study over “Determinants affecting Profitability of firms in Oil and Gas Industry listed on Vietnam Stock Market” is a research under the instruction of PhD.
Bui Thi Men. There is completely no copy during the research. The data and results in this study are truly honest. I am responsible for any disciplines from the university in any problems.
Hanoi, May 2020 Author’s Signature Nguyễn Minh Hiếu CONTENT INTRODUCTION. Research Scope and Subjects. 3 CHAPTER 1 : LITERATURE REVIEW. Capital structure and Profitability.
Fixed assets and Profitability. Dividend payment and Profitability. Government ownership and Profitability. Macroeconomic factors and Profitability.
Research in Vietnam. 13 CHAPTER 2 : THEORY BASES FOR DETERMINANTS AFFECTING FIRMS’ PROFITABILITY IN OIL AND GAS INDUSTRY. Oil and Gas Enterprises in Vietnam. Definition of an Enterprise.
Oil and Gas Industry in Vietnam. Profitability in Oil and Gas Industry in Vietnam. Profitability in Oil and Gas Industry in Vietnam. Determinants affecting profitability of firms in Oil and Gas Industry.
34 CHAPTER 3: DATA AND METHODOLOGY. 39 CHAPTER 4: RESEARCH ANALYSIS. 42 CHAPTER 5: CONCLUSION AND RECOMMENDATION. Utilizing capital structure.
Utilizing government ownership. Utilizing dividend policy. Utilizing other resources. 51 ABBREVIATION Name Meaning HSX Ho Chi Minh Stock Exchange HNX Hanoi Stock Exchange UPCOM Unlisted Public Compannies PVN PetroVietnam PSI PetroVietnam Securities Incorporated ROE Return on Equity ROA Return on Assets PP&E Property, plant and equipment LIST OF TABLES AND FIGURES Figures Page Figure 2.
PetroVietnam Financial situation 21 Figure 2. Exploration situation in Vietnam 22 Figure 2. Return on Assets (ROA) of different enterprises in three 27 sectors Figure 3. Research process 38 Tables Page Table 2.
Descriptions of different key areas of Petroleum Industry 19 Table 2. Financial indicators of several Oil and Gas firms in 2019 26 Table 3. Variable Description 40 Table 4. Descriptive statistics of data 41 Table 4.
Correlation Coefficient 42 Table 4. Results in OLS model 42 Table 4. Hypothesis Testing in Pooled Regression (OLS) 43 Table 4. Results in Fixed Effects Model (FEM) and Random Effects 43 Model (REM) Table 4.
Hypothesis Testing in Fixed Effects Model (FEM) 44 Table 4. Results in Generalized Least Square (GLS) 44 Table 4. Empirical results 45 INTRODUCTION 1. Research motives Oil and Gas industry, or Petroleum industry, has been widely known as one of major motives for society and economy development in Vietnam.
In the developing strategy of Vietnam till 2030, this industry has been emphasized to have an indispensable role in nation’s improvement. Being perpetuated for nearly 35 years in Vietnam, Oil and Gas industry has proliferated and primarily contributed to energy security, exportation, foreign incomes, national budget, motivating industrialization and modernization of the society in general. Therefore, it has been able to help Vietnamese people to alleviate chaos and underperformance, allowing Vietnam to appear in the list of countries with medium-ranged income in the world. Moreover, the upstream activities of the industry engage in national sovereignty.
It would be apparent that the participation of Oil and Gas industry to Vietnam virtually depends on the collaboration of firms and Government. The efficiency of this industry requires diverse factors, leading to a question of which key contributors would affect. Henceforth, a major factor is considered to be the profitability of the firms. However, challenges the firms need to confront are inevitable, including competitiveness, government policies, technology advancement, business management, human and financial resources and other aspects.
Thus, it is vital to manage and consider those determinants influencing the profitability, allowing the managers and administrators to find initiatives to implement an efficient framework. Based on the essentiality of finding the effects of these determinants, this study would focus on analyzing the relationship between different factors and profitability of the firms in Oil and Gas industry in Vietnam, leading to the topic “Determinants affecting profitability of firms in Oil and Gas industry listed on Vietnam Stock Market” 1 2. Research purposes In the backdrop of the continuous development of Oil and Gas industry, the research over factors influencing the profit of the firms in this domain would be essential, resulting in data and fundamental basis for both investors and managers. Econometric models are applied to evaluate the level of influence of different determinants on profitability, hence yielding several recommendations related to business management of these firms.
To obtain this purpose, it is necessary for the study to answer following questions: - Do the determinants affect the profitability of the firms in Oil and Gas Industry? - What type of influence do the determinants have? Negative or positive? - To better the profitability of the enterprises, which methods should the managers and administrators implement? 3. Research Scope and Subjects Research Scope : In terms of space, the study analyzes the impact of several determinants on profitability of the companies in Oil and Gas industry listed on Vietnam Stock Market, including Ho Chi Minh Stock Exchange (HSX), Hanoi Stock Exchange (HNX) and Unlisted Public Company Market (UPCOM). In terms of timing, the data was collected during an eight-year period from 2012 to 2018. Research Subjects : The subjects are considered to be different factors affecting the profitability of the firms listed on Vietnam Stock Exchange, basing on audited financial statements of the firms in Oil and Gas Industry listed during 2012-2018.
Methodolody This research utilized data collected from financial statements during six 2 years from 2012 to 2018 of Oil and Gas firms listed in Vietnam Stock Market and index from Bloomberg. This research covered both qualitative and quantitative methods. In terms of qualitative, the author has classified and sorted from various documents and references in Vietnam and foreign countries. In terms of quantitative, this method was applied in collecting data and information from the financial statements of different listed companies via their official websites Vietnam Stock Market to commence calculation on Excel 2019.
Processed by Stata 14.0, the research has resulted in final conclusion about the influence of distinctive determinants in profitability of the firms in Oil and Gas Industry in Vietnam. Research content Apart from Introduction and References, the research includes five chapters : Chapter 1: Literature Review Chapter 2: Theory bases about determinants affecting profitability of firms in Oil and Gas Industry Chapter 3: Data and Methodology Chapter 4: Research Analysis Chapter 5: Conclusion and Recommendation 3 CHAPTER 1 : LITERATURE REVIEW Measuring profitability tends to be various in different studies, depending on authors’ self-consideration. In a number of researches, profitability has been displayed in financial ratios, mostly including return on assets (ROA) and return on equity (ROE); however, in other studies, authors implement absolute numbers, for example, net profit, revenue, gross profit, etc., to express the profit. This has enlarged the diversity and contributed to create a more adequate background information for later researches.
Capital structure and Profitability Prior to this study, there have been several foreign researches, especially in the relationship between capital structure and profitability of the firms. Apparently, the studies proving the negative association dominates. In terms of Petroleum industry, Vijayakumar (2003) investigated the determinants influencing the performance of Indian Public Sector Petroleum Industry. In this research, the writer involved a range of variables, including leverage, fixed assets turnover ratio and operating expenses, etc.
It was evident that independent variables explained 93% of the variation in the profit collected from Petroleum enterprises in the research. Hence, the study proved that leverage and profit had negative relation, while fixed assets turnover ratio turned to be in a reverse case. Other factors showed mix contribution to the returns of the companies. Patrick (2017) was also interested in identifying the effect of capital structure on profitability, particularly in Oil Marketing Companies in Ghana, exploiting data from registered companies in this industry and limited in two companies, including Ghana Oil Company Limited and Total Petroleum Ghana Limit to answer the question of the research.
The study employed multiple regressions with short-term debt, long-term debt as independent factors representing capital structure and ROA, ROE and net profit margin (NPM) as dependent variables. In the end, it was concluded that financial leverage would possibly hinder companies’ profitability, meaning that the managers should avoid overusing leverage but rather considering 4 it to be the last resort. Therefore, a more optimal decision is to finance their projects with equity and determine a considerate structure level to optimize profit of the companies. However, the study entangled with some drawbacks, including limitation in samples to conclude about the industry.
In a larger sector which is Manufacturing, Raheman et.al (2010) used net operating profit to express profitability of the Pakistan enterprises. In this study, the authors show the impact of different determinants on firms’ performance in Pakistan for the period from 1998 to 2007. The research used 204 manufacturing firms listed on Karachi Stock Exchange, resulting in mixing conclusions for distinguished independent variables. To be particular, capital structure has been illustrated to impede the companies’ performance, meaning that the higher debt, the lower net operating profit a corporation may create.
Additionally, the article listed other factors having the same influence, including cash conversion cycle (CCC), net trade cycle (NTC), inventory turnover in days (ITID). In addition, Abbasali et al. (2012) has investigated “The relationship between capital structure and firm performance evaluation measures: Evidence from the Tehran Stock Exchange”. The study collected data from 400 companies in 12 different industries listed on the Tehran Stock Exchange during five-year period 2006-2010.
Return on assets (ROA) and return on equity (ROE) were decided to measure the firms’performance. The authors suggested that debt ratio (DR) and profitability had a substantial negative relationship, while growth (GROW), assets turnover (TURN), size (SIZE), tangible asset ratio (TANG) resulted in an opposite effect. However, age of the business (AGE) had insignificant relationship with performance. Thus, the writers advised that lower debt ratio would positively adjust the profit of the enterprises, simultaneously motivating shareholder wealth.
Researching in Emerging Asian Country, Melita et al. (2012) had a study about the relationship between firms’ risk and profitability. In this article, the authors covered firms listed on Indonesian Stock Exchange from 1998 to 2010 in specific sectors, including Food and Beverage, Consumer goods, Apparel, etc. due to the important role of these sectors to the Indonesian economy.
It was shown 5 that debt ratio, representing risk of the firms, negatively contributed to return on assets (ROA). Ahmadimousaabad et al.