MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING GRADUATE THESIS FACTORS AFFECTING THE PROFITABILITY OF CHEMICAL MANUFACTURING ENTERPRISES LISTED ON THE VIETNAM STOCK EXCHANGE MAJOR: FINANCE – BANKING CODE: 7340201 NGO NGUYEN ANH THU HO CHI MINH CITY, 2024 MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING GRADUATE THESIS FACTORS AFFECTING THE PROFITABILITY OF CHEMICAL MANUFACTURING ENTERPRISES LISTED ON THE VIETNAM STOCK EXCHANGE MAJOR: FINANCE – BANKING CODE: 7340201 Student’s Full Name: NGO NGUYEN ANH THU Student’s ID Code: 050608200691 Class for activities: HQ8-GE08 SUPERVISOR PhD. DO THI HA THUONG HO CHI MINH CITY, 2024 i ABSTRACT The purpose of conducting the thesis “Factors affecting the profitability of chemical manufacturing enterprises listed on the Vietnam Stock Exchange” is to identify the determinants influencing the profitability of chemical manufacturing enterprises listed on the Vietnam Stock Exchange. The paper provides an overview of the results of previous studies from trustworthy journals in the past few years. Based on the overview, the author suggested six factors that have a possibility to affect the profitability of the chosen enterprises, including firm size, financial leverage, liquidity, firm growth, debt ratio and total assets turnover.
The data which is used for the calculation in the research is collected from the financial statements of 23 companies related to the chemical industry listed on the Vietnam Stock Exchange from 2018 to 2022 and imported to Stata 15.0 to run the regression models and perform tests to find defects of the model. For the result of the final model, the author used the Feasible Generalized Least Squares (FGLS) estimation method to eliminate defects and test the impact directions of factors affecting the firm profitability. According to the result, the only factor that has a positive effect on the changes of the profitability of the businesses, measured by Return on Assets (ROA), is firm growth, while financial leverage and debt ratio are negatively related to the dependent variables. For the remaining variables, including firm size, liquidity, and total assets turnover, their relationships with ROA are not statistically significant in explaining the profitability of listed chemical companies on the Vietnam Stock Exchange.
At the end of the thesis, the author provides recommendations for each factors having statistically impact on the profitability of companies in terms of the analysis results, together with the limitations and new approaches for further studies. ____________________________________________________________ Key word: profitability, factors, chemical, companies, chemical, firm size, leverage, liquidity, growth, debt ratio, total assets turnover ii DECLARATION My full name is: Ngo Nguyen Anh Thu I hereby declare that the graduate thesis “Factors affecting the profitability of chemical manufacturing enterprises listed on the Vietnam Stock Exchange” has been written solely by me under the guidance Ms. Do Thi Ha Thuong and it contains no material previously published or submitted for publication by any other person. The data presented in the report is truthful and the information in the graduate thesis is guaranteed to be adequately cited and referenced the original sources.
I have attempted to accept all the risks related to this research that may arise in conducting this research. Ho Chi Minh City, 25th April, 2024 STUDENT iii ACKNOWLEDGEMENT First of all, I would like to express my sincere gratitude to all of the teachers in Ho Chi Minh University of Banking who have conscientiously taught me useful knowledge and given practical advice based on their experience during the lectures, which are really meaningful for me to have a solid foundation in my major to do this thesis. Additionally, I would like to say my special thanks to Ms. Do Thi Ha Thuong for supporting me throughout the study.
Thanks to her consistent guidance and thoughtful feedback during this project, I am able to complete this graduate thesis as well as possible. Last but not least, I would like to thank my friends and my family from the bottom of my heart. Without their unwavering support, it would have been hard for me to finish my studies over the past four years. Nevertheless, due to my lack of knowledge and experience about this field, it would be inevitable to contain some errors in this research.
I am looking forward to receiving any opinions in order to refine the thesis further. Ho Chi Minh City, 25th April, 2024 STUDENT iv TABLE OF CONTENTS ABSTRACT. iii LIST OF TABLES. viii LIST OF FIGURES.
viii LIST OF APPENDIXES. ix LIST OF ABBREVIATIONS. THE NECESSITY OF THE RESEARCH. SUBJECT AND THE SCOPE OF RESEARCH.
The scope of research. STRUCTURE OF THE THESIS .5 SUMMARY OF CHAPTER 1. 6 CHAPTER 2: THEORETICAL BASIC AND LITERATURE REVIEW. OVERVIEW OF THE CORPORATION’S PROFITABILITY.
The definition of the profitability. Measures of a corporation’s profitability. Return on Equity. Return on Assets.
Return on Investment. Economies of Scale theory. Trade-off theory. FACTORS THAT INFLUENCE ON A FIRM’S PROFITABILITY.
Total assets turnover .16 SUMMARY OF CHAPTER 2. 20 CHAPTER 3: DATA AND METHODOLOGY. Descriptive Statistics Analysis .34 SUMMARY OF CHAPTER 3. 35 CHAPTER 4: RESEARCH RESULTS.
Regression model selection .48 vii SUMMARY OF CHAPTER 4. 51 CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS. For firm growth. For financial leverage.
For debt ratio. LIMITATIONS OF THE THESIS AND NEW APPROACHES. Limitations of the thesis. New approaches for future studies .56 SUMMARY OF CHAPTER 5.
65 viii LIST OF TABLES Table 2.1 - Table of previous researches .1 - The expected impact direction .1 - Descriptive statistics of variables .2 - Correlation matrix of variables .4 - Model Estimation Pooled OLS .5 - Model Estimation FEM .6 - Model Estimation REM .11 – Table of FGLS estimation .12 – Summary of research results .50 LIST OF FIGURES Figure 1.1 - The growth index and export turnover of the chemical industry from 2016 to 2021 .1 - Framework of hypotheses .23 ix LIST OF APPENDIXES Appendix 1 - List of chosen chemical corporations listed on the VNX .65 Appendix 2 – ROA of 23 chemical firms from 2018 to 2022 .67 Appendix 3 – Firm Size of 23 chemical firms from 2018 to 2022 .69 Appendix 4 – Financial Leverage of 23 chemical firms from 2018 to 2022 .71 Appendix 5 – Liquidity of 23 chemical firms from 2018 to 2022 .73 Appendix 6 – Firm Growth of 23 chemical firms from 2018 to 2022 .75 Appendix 7 – Debt Ratio of 23 chemical firms from 2018 to 2022 .77 Appendix 8 – Total Assets Turnover of 23 chemical firms from 2018 to 2022 .79 Appendix 9 – Descriptive Statistics .81 Appendix 10 – Correlation Matrix at P-value = 1% .81 Appendix 11 - Correlation Matrix at P-value = 5% .82 Appendix 12 - Correlation Matrix at P-value = 10% .82 Appendix 13 – Regression Results of Pooled OLS Model .83 Appendix 14 - Regression Results of Fixed Effects Model .83 Appendix 15 - Regression Results of Random Effects Model .84 Appendix 16 – Hausman Test .84 Appendix 17 – VIF Test .85 Appendix 18 – Wooldridge Test .85 Appendix 19 - Breusch and Pagan Test .85 Appendix 20 – FGLS Estimated Model .86 Appendix 21 – Summary of Estimated Models .87 x LIST OF ABBREVIATIONS Abbreviations Full meanings CFM Cash Flow Margin EBIT Earnings Before Interest And Taxes EPS Earnings Per Share etc. et cetera FEM Fixed Effects Model FGLS Feasible Generalized Least Squares JSC Joint Stock Company GAAP Generally Accepted Accounting Principles GDP Gross Domestic Product M and M theory Modigliani–Miller theory NAICS North American Industry Classification System NIM Net Interest Margin NPM Net Profit Margin Pooled OLS Pooled Ordinary Least Squares REM Random Effects Model ROA Return on Assets ROE Return on Equity VSIC Vietnam Standard Industrial Classification 1 CHAPTER 1: INTRODUCTION 1. THE NECESSITY OF THE RESEARCH Profitability is defined as an ability to make profit from all the business operations of an organization or an enterprise with efforts of the business’s management (Dave, 2012). Therefore, it is one of the most important criteria when evaluating a business’s potential from investors and business managers’ perspective.
To help them get a clear picture and make suitable decisions, the author need to figure out the economic factors affecting the profitability, and that is the aim of this study. In the present age, the chemical industry receives a lot of attention from the State and businesses because it plays an essential role not only to the domestic economy but also to the country's industrialization and modernization. As a matter of fact, according to the Ministry of Industry and Trade, the average total amount of Vietnam’s chemical output makes up approximately 11% of the GDP of Vietnam and 13% - 14% of the total industry. Moreover, in recent years, the growth of the export turnover of the chemical industry have increased dramatically to over 30% thanks to the innovative technology during the 4.0 industrial revolution, except for the slumps in 2019 and 2020 because of COVID-19 epidemic.1 - The growth index and export turnover of the chemical industry from 2016 to 2021 Source: General Department of Vietnam Customs 2 There have been many previous studies relevant to investigating the factors affecting the profitability, from domestic studies to overseas studies.
For instance, Tarihoran and Endri (2021) obtained 19 listed companies on Indonesian Stock Exchange from 2015 to 2020 as samples for the study. On the other hand, Alghusin (2015) research was based on the data of almost 25 listed enterprises in Jordanian for the time between 1995 and 2005. In case of domestic studies, there was a research done by Linh and Nga (2022) with the data of 79 companies listed on HOSE and HNX from 2016 to 2020. Trang and Phuong (2018) also used 474 companies listed on HNX and HOSE over the period of 2010 to 2015.
However, as far as I found, there has been no thesis related to factors affecting the earnings power of chemical companies listed on the Vietnam Stock Exchange. This is the reason why the author chooses the topic “Factors affecting the profitability of chemical manufacturing enterprises listed on the Vietnam Stock Exchange” so as to study what and how these economic influences affect the profitability of chemical enterprises and propose some suggestions to improve the businesses’ current financial situation. General objectives The general objectives of the research are to figure out and analyze the determinants that affect the profitability of chemical manufacturing companies listed on the Vietnam Stock Exchange. After that, the author would base on the results to provide some practical suggestions to business administrators and governments in order to enhance the profitability of those chemical manufacturing corporations listed on the Vietnam Stock Exchange.
Specific objectives With the aim of achieving general objectives, the author makes a list of specific objectives that need to be accomplished: 3 To begin with, determining the factors influencing the profitability of chemical manufacturing enterprises listed on Vietnam Stock Exchange. In the next step, evaluating the impact level of the components that affect the profitability of chemical producing enterprises listed on Vietnam Stock Exchange. Lastly, giving some recommendations to increase the profitability of the companies according to the results after evaluating. RESEARCH QUESTIONS Research questions lay the groundwork for the thesis and help the researchers focus on the specific aspects of their subject that they are investigating.
Therefore, the following questions have to be solved in this study: First of all, what are the determinants which affect the earnings power of chemical manufacturing companies listed on the Vietnam Stock Exchange? Secondly, what level of impact do these factors influence the profitability of the chemical enterprises? Last question, what recommendations should be proposed to boost the profitability? 1. SUBJECT AND THE SCOPE OF RESEARCH 1. Research subject The research subjects are the profitability and factors that affect the profitability of chemical producing companies listed on the Vietnam Stock Exchange.