UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Huynh Phan Chau Anh FACTORS AFFECTING ENTERPRISE FIXED ASSET INVESTMENT MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2014 TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Huynh Phan Chau Anh FACTORS AFFECTING ENTERPRISE FIXED ASSET INVESTMENT ID: 22110001 MASTER OF BUSINESS (Honours) SUPERVISOR: Dr. Pham Quoc Hung Ho Chi Minh City – Year 2014 TIEU LUAN MOI download : skknchat@gmail.com i ACKNOWLEGMENT This thesis is come out as a result of the conjunction of the effort and inestimable help, in different areas, of several people. Their contribution, in a way or another, has allowed me to carry out this work, in which enthusiasm, dedication and, above all, the desires to learn have been the premises prevailing all this time. I would like to point out and thank the Supervisor of this thesis, Doctor Pham Quoc Hung for having given me a chance and confidence to elaborate this research work.
To my supervisor, Doctor Pham Quoc Hung, thank you. Thank you for all your support, encouragement and feedback and for believing in me and in what I could do. To my parents, thank you for long phone call, sympathies and encouragement. I am forever grateful that you are always there for me.
TIEU LUAN MOI download : skknchat@gmail.com ii ABSTRACT Investment in fixed asset of the enterprise are investment in material facilities , technology which enterprise need to make when starting to form and maintain active and expand production. Therefore, the study of factors affecting the investment of fixed asset of the enterprise are carried out in this research. There are many studies conducted in many different countries at different periods, research on fixed asset investment of enterprises. This research has developed models to study the factors affecting the investment of fixed asset of enterprises.
Based on the previous studies around the world related to this issue, this research identified the factors affecting the investment of fixed asset of enterprises: Firm size, Firm age, Growth, Debt, Own, Tobin’s Q. The data used in the study were collected from the financial statements, annual reports of 85 companies listed on HOSE in the period from 2009 to 2012 with 304 observations. Research using SPSS 16 software to conduct Regression to make research results. The results indicate the significant relationship between firm size, firm age and fixed asset investment decision of the enterprise.
Keywords: Firm size, Firm age, Growth, Debt, Own, Tobin’s Q. TIEU LUAN MOI download : skknchat@gmail.com iii TABLE OF CONTENT ACKNOWLEGMENT ……………………………………………………. ii TABLE OF CONTENT ……………………………………………………. iii LIST OF TABLE ………………………………………………………….2 Statement of problem …………………………………………….3 Research objective and research question……………………….4 Scope of the research …………………………………………….
4 Chapter 2: Literature review and hypothesis development………………….2 Fixed asset investment ………………………………………….9 All of the hypotheses discussed above are summarize in the 22 following model …………………………………………………………… Chapter 3: Research methodology …………………………………………. 26 TIEU LUAN MOI download : skknchat@gmail.2 Multiple regression strategy ………………………………. 31 Chapter 4: Data analysis and result ………………………………………… 34 4.1 Checking regression assumption …………………………… 37 4. 40 Chapter 5: Conclusion and implication …………………………………….3 Limitations and future research ………………………………….
47 APPENDIX ………………………………………………………………… 49 TIEU LUAN MOI download : skknchat@gmail.com v LIST OF TABLE Table 3.6: number of enterprises in the sample …………………………….1: Descriptive statistic variable …………………………………….4 Coefficient of determination …………………………………….5 Regression linear results ………………………………………… 40 TIEU LUAN MOI download : skknchat@gmail.com 1 CHAPTER 1 INTRODUCTION 1.1 Research Background Effective procurement and efficient use of finance lead a proper utilization of the finance by the business concern. It is the essential part of the chief financial officer. Hence, the chief financial officer must determine the basic objective of financial management. Objective of Financial Management may be broadly divided into two parts such as: Profit maximization and wealth maximization.
In which, wealth maximization is one of the modern approaches, which involves latest innovations and improvement in the field of the business concern. The term, wealth means shareholder wealth or the wealth of the persons those who are involved in the business concern. Wealth maximization is also known as value maximization or net present worth maximization. This objective is a universally accepted concept in the field of business.
For achieving this objective, chief financial officer (CFO) must carry out important financial decisions. CFO is one of the important role player in the field of financial function. CFO performs the following major function: forecasting financial requirements, acquiring necessary capital, investment decision, cash management, interrelation with other department. The investment decision is a very important and difficult decision to maximize the value of the company as well as to maximize the benefits of shareholders.
CFO must carefully select best investment alternatives and consider the reasonable and stable return from the investment. He or she must be well versed in the field of capital budgeting techniques to determine the effective utilization of investment. CFO must TIEU LUAN MOI download : skknchat@gmail.com 2 concentrate to principles of safety, liquidity and profitability while investing capital. In the investment decision, there is an important decision which made the enterprise must carefully considered before make a decision.
The decision which I mention is the decision of investment in fixed asset. Fixed asset investment is investment in physical asset such as machinery, land, buildings, installations, vehicles, or technology. Normally, a company balance sheet will state both the amount of expenditure on fixed asset during the quarter or year, and the total value of the stock of fixed asset owned. Any enterprise when conducting business, must invest (purchase) to a certain number of labor materials, such as: warehouses, shops, stalls, buildings, vehicles, media measurement, media work .This is the necessary technical facilities for the production process.
Fixed asset is one of the basic parts which make up the infrastructure for the economy in general, and is an important part which determine the survival of enterprises in the production process. Fixed asset is a necessary factor to reduce the labor intensity and growing the labor productivity for enterprises. In the production process of the enterprise which is in whatever area of manufacturing jobs and the economy, especially in terms of economic science developed as it is today, do not take participation of machinery and equipment in the production process of the business. Thus, the equipment in particular or fixed asset in general have an indispensable role in the production process, it is the technical infrastructure of the business, reflect the capacity existing production and technological development trend of the business.
The Fixed asset, especially machinery and equipment manufacturing are important and necessary in the production process of the business. TIEU LUAN MOI download : skknchat@gmail.2 Statement of Problem The fixed asset investment decision is an important decision in the valuation of the firm. Because the importance of the fixed asset, as well as trends of the development of the enterprise require to invest in fixed asset. The enterprise must consider very carefully in investing in fixed asset before making.
In the world, there are a lot of research which have identified different factors which play an important role in the determine of the fixed asset investment of the enterprise and the research made by some of researcher like John.Meyer and Edwin Kuh, K. In Vietnam, the number of research of investment decisions in fixed asset is little. Comes from that problems, the study "Factors affecting enterprise fixed asset investment" to clarify the issues that businesses encounter when they make decision of investment in fixed asset.3 Research objective and research question The main purpose of this research is to identify factors have significant effect to the investment in fixed asset of the enterprise and how their relationship, aim to provide more information to investors in making their decisions. This study will be support for businesses in Vietnam in reviewing the situation of investment in fixed asset of the enterprise to make reasonable adjustments.
It also helps enterprises make the right decision in fixed asset investment. The study focuses on answering two questions: What do factors affect to the investment in fixed asset of companies listed on HOSE? TIEU LUAN MOI download : skknchat@gmail.com 4 How are relationship between these factors and fixed asset investment’s decision? 1.4 Scope of the Research The study focuses on public companies listed on HOSE. The choice of companies is determined by the scope of available data and the representation for stock market. There are 85 companies which are chosen, listed on stock market.
The time scope of the study is limited for 4 years from 2009 and 2012 1.5 Research Structure Chapter 1 – Introduction - provides general introduction about brief background of overview the research with problem statement, research objectives, research questions and scope of the research and research structure. Chapter 2 – Literature Review and Hypotheses development - screens the literature of fixed asset, related previous studies on factors affect to fixed asset investment’s decision of companies. According to these literature reviews, offering hypothesis depends on research objective. Chapter 3 – Research Methodology - presents methods to conduct this research, consisting of justifying the choice of approximations for the analyzed phenomena and introduces the research strategy measurement with items for each factor is provided.
After that is sample & data collection, including dependent variable and independent variables. Chapter 4 – Results - shows result of data analysis process, data summary to provide the information of the sample, aim to regard factors affect to fixed asset investment decision of companies. The method Ordinary Least Square is used to TIEU LUAN MOI download : skknchat@gmail.com 5 estimate the overall regression model, aim to identify some factors affect to fixed asset investment decision of companies. Then, the research presents the result under accepted significant level.
According to results of the research, this chapter shows whether factors affect to fixed asset investment’s decision of companies have a significant positive or negative effect. Chapter 5 - Conclusion and Implications – summaries the results from previous chapter. Besides that, the research also provides implications of results to practical decisions. Then, the research mentions about the limitations and how to develop this research further.
TIEU LUAN MOI download : skknchat@gmail.com 6 CHAPTER 2 LITERATURE REVIEW AND HYPOTHESISES DEVELOPMENT 2.1 Fixed asset Fixed asset, also known as a non-current asset or as property, plant, and equipment (PP&E) are a term used in accounting for asset and property which cannot easily be converted into cash. This can be compared with current asset such as cash or bank accounts, which are described as liquid asset. In most cases, only tangible asset are referred to as fixed. International Accounting Standard (IAS) 16 defines Fixed Asset as asset whose future economic benefit is probable to flow into the entity, whose cost can be measured reliably.
Moreover, a fixed/non-current asset can also be defined as an asset not directly sold to a firm's consumers/end-users. As an example, a baking firm's current asset would be its inventory (in this case, flour, yeast, etc.), the value of sales owed to the firm via credit (i. debtors or accounts receivable), cash held in the bank, etc. Its non- current asset would be the oven used to bake bread, motor vehicles used to transport deliveries, cash registers used to handle cash payments, etc.
Each aforementioned non- current asset is not sold directly to consumers. These are items of value which the organization has bought and will use for an extended period of time; fixed asset normally include items such as land and buildings, motor vehicles, furniture, office equipment, computers, fixtures and fittings, and plant and machinery. These often receive favorable tax treatment (depreciation allowance) over short-term asset. TIEU LUAN MOI download : skknchat@gmail.com 7 It is pertinent to note that the cost of a fixed asset is its purchase price, including import duties and other deductible trade discounts and rebates.