CHƯƠNG TRÌNH CHẤT LƯỢNG CAO HỌC VIỆN NGÂN HÀNG Topic: DETERMINANTS OF FINANCIAL PERFORMANCE BEFORE AND AFTER IPO: AN ANALYSIS OF ENTERPRISES ON THE HO CHI MINH CITY STOCK EXCHANGE (2016-2023) Group of Student : Vu Quoc Khanh Class : K23CLC -TCA Instructor : Tran Ngoc Mai School year : 2023-2024 Hanoi, April 23, 2024 1 Acknowledgement This research project owes its completion to the support of several key individuals and institutions. I am profoundly grateful to the Banking Academy for allowing me to undertake this vital work and providing the necessary resources for its completion. I sincerely thank Ms. Tran Ngoc Mai from the Finance Faculty.
Her expert guidance and mentorship were crucial throughout this endeavor. I am incredibly thankful for her insightful feedback on the research methodology and encouragement during this project's more challenging phases. My thanks also go to all the faculty members at the Banking Academy, whose commitment to teaching and sharing knowledge has created an enriching academic environment. Their dedication has been instrumental in equipping me with the skills required to conduct this research.
Additionally, I must acknowledge the significant contributions of my classmates. Their diverse viewpoints, willingness to collaborate, and insightful feedback have substantially enhanced this research. Engaging in thorough discussions and exchanging ideas with them has been invaluable. Finally, my heartfelt appreciation goes to my parents for their unwavering support and encouragement.
Their constant belief in my abilities has continually motivated me throughout my academic pursuits. 3 Author's statement I affirm that I conducted and presented all the research included in the thesis independently, under the diligent supervision of instructor Tran Ngoc Mai. The facts and findings offered in this thesis are veracious and precise, derived from my knowledge and experience gained via my academic studies and from reputable sources. They are presented in a lucid and unbiased way.
In addition to citing reference sources, I do not replicate any other entities. I assume full accountability for the dependability of the research. 4 Abbreviation Từ viết tắt Tiếng Anh Tiếng Việt Phát hành cổ phiếu công IPO Initial Public Offering khai lần đầu Ho Chi Minh Stock Sở Giao dịch Chứng khoán HOSE Exchange TP. Hồ Chí Minh Tỷ số lợi nhuận trên Tài ROA Return on Assets sản Tỷ số lợi nhuận trên Vốn ROE Return on Equity chủ sở hữu Hệ số vòng quay tổng tài ATO Assets Turnover sản DO Dilution of Ownership Pha loãng quyền sở hữu PM Profit Margin Tỷ suất lợi nhuận OP Offering Price Giá chào bán Capital Expenditure CEG Tăng trưởng chi tiêu vốn Growth TDR Total Debt Ratio Tổng tỷ lệ nợ SZ Firm Size Quy mô doanh nghiệp Association of Southeast Hiệp hội các Quốc gia ASEAN Asian Nations Đông Nam Á 5 Table and Graph used Graph 3.
Event specification Table 3. Author’s Complitation Table 3. Variables used in the study Table 4. Descriptive Statistics Table 4.
Variance inflation factor Table 4. Firms' performance pre-IPO of IPO firms 2017 Table 4. Firms' performance post-IPO of IPO firms 2017 Table 4. Firms' performance pre-IPO of IPO firms 2018 Table 4.
Firms' performance post-IPO of IPO firms 2018 Table 4. Firms' performance pre-IPO of IPO firms 2019 Table 4. Firms' performance post-IPO of IPO firms 2019 Table 4. Firms' performance pre-IPO of IPO firms 2020 Table 4.
Firms' performance post-IPO of IPO firms 2020 Appendix 1 Panel data 6 Table of Contents Acknowledgement .5 Table and Graph used. 9 Chapter 2: Literature Review. Theoretical Perspectives on IPOs. Initial Public Offering (IPO).
The Efficient Market Hypothesis. Pecking Order Theory. Empirical Research on IPOs in Global Markets. Specific Studies on IPOs in Vietnam and Southeast Asia.
Review of empirical research focused on the Vietnamese market. Comparative analysis of Southeast Asian markets regarding IPO impacts. Gaps in Existing Literature .18 Chapter 3: Research Methodology. Firms listed in HOSE in 2017 Performance Changes.
Firms listed in HOSE in 2018 Performance Changes. Firms listed in HOSE in 2019 Performance Changes. Firms listed in HOSE in 2020 Performance Changes .39 Chapter 5: Conclusion and Recommendation. 52 8 Chapter 1: Introduction Initial Public Offerings (IPOs) are a crucial milestone in a company's life cycle, signifying the shift from being privately owned to becoming publicly owned.
This process not only grants companies access to public capital markets but also enforces new obligations and standards of transparency. Internationally, IPOs are acknowledged for mobilising resources, increasing visibility, and advocating for rigorous corporate governance practices. The Vietnamese stock market has substantially transformed in recent decades, significantly advancing its structure and influence within the Association of Southeast Asian Nations (ASEAN) and the broader emerging market landscape. As Vietnam further integrates into the global economy, IPOs are crucial in facilitating corporate growth and attracting public investment.
This research paper aims to analyse the influence of IPOs on the financial performance of Vietnamese companies, a subject of significant economic importance and academic curiosity. This research aims to clarify the uncertain influence of IPOs on the financial well-being and operational effectiveness of companies in Vietnam. Although IPOs are commonly seen to increase capital, promote growth, and establish a more robust market presence, the available empirical evidence for this idea is diverse and often dependent on the specific context. This research aims to analyse the precise results of IPOs in Vietnam, which will address a notable deficiency in the existing scholarly literature and offer detailed insights into the ASEAN economic domain.
The goals of this study are multifaceted: ● The objective is to measure the impact of IPOs on crucial financial performance indicators, such as profitability, leverage, and earnings growth, in Vietnamese companies. 9 ● To assess the broader economic consequences of these findings for the Vietnamese stock market and its stakeholders. The research inquiries that guide this investigation are as follows: ● How does the financial performance of Vietnamese firms change from pre-IPO to post-IPO? ● What are the long-term effects of IPOs on corporate performance in the Vietnamese market? ● What factors are associated with variations in financial performance of IPOs in Vietnam? This study has a broad impact, going beyond academic circles. It provides essential insights for investors assessing new opportunities, regulatory bodies that want to improve market operations, and firms considering going public.
This research aims to provide stakeholders with the essential data to make informed decisions that could impact the future economic landscape of Vietnam and influence regional market dynamics by analysing the financial trajectories after the IPO. This paper is divided into five primary sections: an introductory section that provides context for the investigation, a thorough literature review that establishes the academic foundation, a detailed methodology section that explains the data and analytical techniques employed, a results section that presents the findings, and a concluding section that discusses the implications of the study and provides recommendations for future research and policymaking. Chapter 2: Literature Review Initial Public Offerings (IPOs) are a vital mechanism in financial markets that enable privately held companies to make their shares available to the public for the first time. This process plays a crucial role in the primary capital market, acting as a central event in a company's life cycle and offering a way to raise funds for growth and progress (Dencic- 10 Mihajlov, 2013; Nichkasova et al.
IPOs are a conventional means of financing business expansion, especially in advanced financial markets, and have gained popularity worldwide since the mid-20th century (Meluzín, 2009; Meluzín, 2014). IPOs have a significance that goes beyond simply acquiring capital. Internal capital markets allow companies, particularly family business groups, to support and expand challenging projects, facilitating market access, and achieving growth objectives (Masulis et al. Furthermore, IPOs can play a significant role in fostering the growth of capital markets in emerging economies, underscoring their broader economic significance (Pešterac, 2020).
Nevertheless, the process is intricate and has the potential to result in underpricing, which in turn impacts the amount of capital that is raised (Dencic-Mihajlov, 2013). Moreover, the IPO can affect a company's financial performance, affecting different financial ratios and requiring strategic considerations to prevent potential losses after the IPO. Ultimately, IPOs play a crucial role in corporate funding and the growth of markets. They offer companies the essential funding to facilitate growth and advancement, assist in expanding business conglomerates, and contribute to developing capital markets, especially in developing nations.
To fully take advantage of the advantages of going public, companies must navigate the complexities of the IPO process, which include underpricing and the implications for financial performance (Dencic-Mihajlov, 2013; Hendarsih, 2017; Masulis et al., 2014; Meluzín, 2009; Meluzín, 2014; Nichkasova et al. Theoretical Perspectives on IPOs 2. Initial Public Offering (IPO) As per Vietnamese securities legislation, an initial public offering (IPO) is a mechanism by which a securities issuer may generate funds for its company. Companies have the option to raise capital by either issuing debt or selling shares on the stock market.
Only corporations with a joint stock structure have the authority to issue shares in an IPO, which is only used for the first sale of shares. IPO is when a privately owned business becomes publicly traded by offering shares to the public for purchase. Businesses seeking to become publicly traded entities must undergo a comprehensive preparatory procedure. This 11 included assessing the company's worth, identifying possible investors, drafting legal papers about the IPO process, compiling financial statements, and fulfilling the requisite criteria for becoming public.
The company may generate substantial capital from investors by issuing shares via an IPO. Moreover, it enhances the credibility and transparency of the listed organisation. Moreover, IPOs provide investors with additional opportunities to engage in firms, allowing them to acquire shares and benefit from their growth. The Efficient Market Hypothesis The Efficient Market Hypothesis (EMH) is essential for comprehending IPOs in financial markets.
The EMH states that in efficient markets, stock prices promptly and accurately incorporate all pertinent information, making it difficult for investors to surpass market performance consistently. Studies provide evidence for the effectiveness of IPO markets, where the initial returns are determined by the issuer's fundamentals and a quantitative pricing rule (James & Valenzuela, 2019). Although it has faced criticism after the financial crisis, the EMH remains a fundamental theory in modern finance. It significantly impacts investment strategies and market analyses (Xu, 2021).
Although markets may not always exhibit perfect efficiency, the EMH is a fundamental principle in financial theories and models. It guides various practices, ranging from the valuation of derivatives to the investigation of securities fraud (Frunza, 2016). Progress in artificial intelligence also influences market efficiency through the EMH principles and improves market dynamics (Marwala & Hurwitz, 2017). Signalling Theory Signalling Theory suggests that companies employ specific actions as signals to communicate information about their worth to the market, especially in the context of IPOs.
Firms can communicate their quality through different methods, such as setting prices below market value, selecting a specific underwriter, or buying back shares after the initial offering (Anggraini & Dewi, 2023; Chen et al. Nevertheless, the literature provides a subtle and detailed perspective. While specific studies provide evidence that companies communicate their level of quality through decisions related to IPOs, other studies propose 12 that these signals can be deceptive. For example, companies that announce share repurchases after their IPO have been linked to lower long-term performance, which supports the idea that these announcements may be misleading (Chen et al.
This implies that specific signals related to an IPO may not be trustworthy indicators of a company's future performance. Furthermore, the financial performance of companies after their IPO can be impacted by various factors, such as the reputation of the underwriter and the degree of underpricing. These factors may or may not correspond with the expectations of the Signalling Theory (Anggraini & Dewi, 2023). Signalling Theory offers a framework for comprehending the motivations and consequences of becoming a publicly traded company.
However, the empirical evidence on this matter is inconclusive.