Dissertation submitted in partial fulfillment of the Requirement for the MSc in Finance FINANCE DISSERTATION ON APPLYING CAMEL MODEL IN ANALYZING AND EVALUATING THE BUSINESS PERFORMANCE OF SECURITIES COMPANIES …. LE PHUONG ANH ID No: 21071824 Intake 5 Supervisor: Dr. Bui Huy Trung September 2022 1 17014125817571000000 ACKNOWLEDGEMENTS I would first like to thank my thesis advisor Dr. Bui Huy Trung of the Banking Academy.
The door to Dr. Trung office was always open whenever I ran into a trouble spot or had a question about my research or writing. He consistently allowed this paper to be my own work, but steered me in the right direction whenever he thought I needed it. Finally, I must express my very profound gratitude to my teacher Mrs.
Dang Thi Thao at Banking Academy for providing me with unfailing support and continuous encouragement throughout my years of study and through the process of researching and writing this thesis. This accomplishment would not have been possible without her. Thank you! Author Le Phuong Anh 2 Table of Contents ACKNOWLEDGEMENTS. 5 CHAPTER I: GENERAL THEORETICAL ISSUES ABOUT ANALYSIS AND EFFICIENCY ASSESSMENT OF BUSINESS ACTIVITIES OF SECURITIES THROUGH THE CAMEL MODEL.
Overview of the company's business activities. Definition and characteristics of securities companies. Functions of securities companies. Operating principles of a securities company.
The activities of securities company:. Overview of the company's business performance. The value of business performance analysis. Methods of evaluating business performance.
Overview of CAMELS model. General introduction to the CAMELS model. Contents of CAMEL model applied to Vietnam Securities Company. 21 CHAPTER II: ANALYZING AND ASSESSING BUSINESS EFFICIENCY OF SECTORS THROUGH CAMEL MODEL.
Introduction of securities companies in the study. General introduction about SSI Securities Joint Stock Company (SSI). General introduction about Securities Joint Stock Company Bank for Investment and Development of Vietnam (BSC). General introduction about Asia - Pacific Securities Corporation (APEC).
Analysis of the current state of business performance of securities companies. Limitations and causes. 43 CHAPTER III: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE EFFICIENCY IN BUSINESS ACTIVITIES OF SECUTITIES COMPANIES. Prospects for the development of the securities industry.
Some solutions and recommendations to improve the operational efficiency of securities companies. Solutions for securities companies. Recommendations for state management agencies. Rationale of the research: In July 2000, the Ho Chi Minh City Securities Center was the predecessor of the Ho Chi Minh Stock Exchange.
Ho Chi Minh City Stock Exchange (HOSE) officially opened and opened the first trading session with only 2 stock codes, marking the birth of Vietnam's stock market. Two years later, Vietnam's stock market continued to make new strides with the launch of the Hanoi Securities Center and the Securities Depository Center. At that time, the Hanoi Securities Center, the predecessor of the Hanoi Stock Exchange (HNX), operated under the model of an over-the-counter market (OTC) as a secondary market organization for securities that were not yet available. listed under the agreement mechanism.
In 2017, derivative securities were put into operation with the expectation of helping to diversify investment portfolios, improve the underlying securities portfolio for investors, especially institutional investors, providing tools to hedge risks and promote liquidity on the underlying stock market. For more than 20 years, Vietnam's stock market has continuously improved in structure and developed strongly, becoming a market with a significant size in the region, contributing to the development of the national financial system in the direction of a more balanced, sustainable and become an important capital mobilization channel for the economy. The existence and development of the stock market must include the great contribution of securities companies, an intermediary financial institution performing operations on the stock market. Being involved in many international agreements gives securities companies many challenges and strong competition in terms of scale and experience.
Therefore, the urgent issue now is that securities companies need to have accurate assessments of their business activities to promote their strengths and overcome limitations, thereby developing the financial playing field increasingly harshly. After more than 20 years of operation and development, securities companies have achieved many successes with certain business results. However, in the face of changing requirements for further improvement in business activities and sustainable development, even securities companies with large capitalization to small capitalization need certain metrics to evaluate their performance. business to improve efficiency and competitiveness in the market.
Recognizing the importance of the problem, I chose the topic: "Applying CAMEL model in analyzing and evaluating the business performance of securities companies". Overview of research: There have been many kinds of research on methods of assessing the business performance of financial institutions to draw conclusions about strengths and weaknesses in operations or to give warnings about operational risks, liquidity risks, etc. accounts ,and financial risks. Among them is the CAMELS model, a useful tool to check the soundness and safety of financial institutions.
This is also the main research direction of most of the research done in recent years. The author has summarized those studies and has the following results: Domestic research: Author Nguyen Thi Diem Hien et al (2019) with the study "Application of the CAMELS rating system to evaluate the performance of Vietnamese commercial banks from 2018 to 2012". Many Vietnamese banks have revealed weaknesses in their operations since the 2018 world financial crisis, leading to restructuring. Although commercial banks periodically announce operating results through financial indicators, these indicators have not been correlated in evaluating the performance of commercial banks.
From that fact, the study applied the CAMELS model to evaluate the operation of commercial banks. With the topic "Financial safety of Vietnamese securities companies" by Hoang Thi Bich Ha (2018), the study used the CAMEL model to comprehensively and systematically analyze the current state of financial safety. of Vietnam's securities companies from the period 2012 - 2016 according to each group of evaluation criteria, thereby comparing with Vietnam's evaluation standards and international practices. Moreover, the research has pointed out the causes leading to this situation and proposed a system of solutions to ensure financial safety.
Author Doan Dang Qui An (2010) with the topic "Evaluating the business performance of listed securities companies". The study evaluated the efficiency through the profitability indicators and the group of performance-related indicators from securities companies representing different capital sizes in 2009. The special thing in the study is that The number of securities companies exploded during the research period, so the object of the study reflected the current situation of securities companies quite clearly. However, the study mainly focuses on analyzing the causes and proposing solutions to improve the performance of securities companies.
Foreign Studies:The study by Bawaneh and Dahiyat (2019) provides a comprehensive assessment of the financial situation of commercial banks in Jordan listed on the Amman Stock Exchange using the CAMELS model. Linear regression and other statistical methods were used 6 to measure the impact of factors in the CAMELS model on the financial performance of commercial banks. Guan et al (2019) used the improved G-CAMELS model based on the CAMELS model with the addition of a green index (G) to more effectively assess the competitiveness of commercial banks in China and from that compare the results between the two models. The research results are that compared with the original CAMELS, the new model will raise the ranking of state-owned banks and there will be no significant change in the ranking of joint stock banks.
In addition, a few works have had other research directions to evaluate the reliability of the CAMELS model with the role of activity monitoring and risk warning when compared with other assessment methods. Typically, the study of Babar and Haseeb (2011) examined the relationship between the CAMELS model and the PACRA model for Pakistani banks. The CAMELS model is considered an internal credit rating, so the ratings are not public, while the PACRA rating system assesses external factors and is published monthly. In fact, the research results show that there is no similarity between the two models and the CAMELS model should not be relied on to evaluate the performance of banks, but it is necessary to consider more criteria in the model PACRA.
However, the study of Christopoulos et al. (2011) provided evidence that the CAMELS model had predictive results about the collapse of Lehman Brothers based on the analysis of financial characteristics during the period. Research results show that Lehman Brothers has bad credit and is questionable while management is not ready nor able to change the situation. In addition, the management failed to comply with the regulations of the supervisory authority when managing risk.
Research gaps: Firstly, in general, the researches in the world on assessing the business performance of financial institutions of different countries are very diverse. These studies have shown that the popular method used to evaluate the performance of financial institutions is the CAMEL model. However, most studies focus on evaluating the performance of the banking system, there are not many studies on the business performance of other financial institutions such as securities companies. 7 Secondly, in domestic research works, many authors have mentioned some methods of evaluating the effectiveness of securities companies.
However, there have not been many in-depth studies on the performance of Vietnamese securities companies using the CAMEL model in the period of 2018 - 2020, this is the knowledge gap that the thesis will focus on solving.ance of Vietnamese securities companies using the CAMEL model in the 2018 period. Research objectives: Based on studying general theories about the business performance of securities companies, thereby analyzing and assessing the actual status of operations of securities companies: SSI Securities Company, Investment and Development Bank Securities Joint Stock Company Development of Vietnam, and Asia-Pacific Securities Corporation under the CAMEL framework based on data collected from financial statements, and at the same time comparing performance between securities companies. From there, a number of solutions and recommendations are proposed to improve the business performance of securities companies. Research scope: - Research object: Business performance of securities companies.
- Research scope: + About space: The topic studies the performance of securities companies based on data collected from audited consolidated financial statements and annual reports. + About time: Over a three-year period from 2018 to 2020. Research methodology: - Method of data collection: data collection of financial statements on company websites and other references. - Methods of analysis and synthesis: based on collected data, process and analyze depending on the purpose and object to be analyzed.
- Comparative method: compare financial indicators between securities companies in 3 years 2018, 2019 , and 2020 from which to draw comments. Structure: The desertation consists of three main chapters: Chapter I: General theoretical issues on analysis and evaluation of the business performance of securities companies through the CAMEL model. Chapter II: Analyzing and evaluating the business performance of securities companies through the CAMEL model. Chapter III: Solutions and recommendations to improve the efficiency in business activities of securities companies.
9 CHAPTER I: GENERAL THEORETICAL ISSUES ABOUT ANALYSIS AND EFFICIENCY ASSESSMENT OF BUSINESS ACTIVITIES OF SECURITIES THROUGH THE CAMEL MODEL 1. Overview of the company's business activities 1. Definition and characteristics of securities companies a. Definition: The securities company is an enterprise dealing in securities as a member of the Stock Exchange.
The concept of the securities company has been specified in Clause 1, Article 2 of Decree No. 86/2016/ND-CP as follows: The securities company is an enterprise established and operating under the securities law to perform one, several, or all of the following operations: securities brokerage, securities trading, securities underwriting, investment consulting securities, and be provided with financial services in accordance with the securities law.” The securities company is understood as an intermediary financial institution on the stock market, in the form of a Joint Stock Company or a Limited Company, established and operating in accordance with the Laws, performing one or several securities business operations under direct management.