MINISTRY OF EDUCATION STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY GRADUATE THESIS BANKING AND FINANCE MAJOR CODE: 7340201 THE FACTORS AFFECTING THE PROFITABILITY OF ENTERPRISES IN THE STEEL INDUSTRY GROUP LISTED ON VIETNAM’S STOCK EXCHANGE SVTH : Lê Hồng Bảo Trân MSSV : 050606180423 GVHD : Dr. Nguyễn Thị Như Quỳnh Ho Chi Minh City, July 4, 2022 DISCLOSURE My name is: LE HONG BAO TRAN Commitment graduation thesis with the topic "THE FACTORS AFFECT THE PROFITABILITY OF ENTERPRISES IN THE STEEL INDUSTRY GROUP LISTED ON VIETNAM‟S STOCK EXCHANGE" Instructor: Dr. NGUYEN THI NHU QUYNH This graduation thesis is my research work, the contents and data in this thesis are completely honest, in which there is no content previously published or content made by others outside of this thesis. Excluding references to sources.
AUTHOR LE HONG BAO TRAN ACKNOWLEDGEMENT Reality shows that to be successful at work, it is necessary to have the support and help of those around, no matter how much or little that help, directly or indirectly. During the time from the time, I started working on my graduation thesis outline, I have received the attention, guidance and support of teachers, family, and friends around. With a very deep gratitude, I would like to express my sincerest thanks to the lectures of Banking University of Ho Chi Minh City who used their knowledge and enthusiasm to be able to impart capital to me. the most valuable knowledge during the study period at university.
I would like to give my sincere thanks to Ms. NGUYEN THI NHU QUYNH who dedicatedly guided me through each talk and discussion on the research topic. Thanks to those instructions and teachings, my thesis outline has been completed remarkably. Once again, I would like to express my sincere thanks to Ms Quynh.
This thesis was completed within 3 months. At first, I was surprised because my knowledge was limited, so I couldn't avoid making mistakes. Thereby, I look forward to receiving comments from teachers in the school to help my internship outline more and more perfect. Sincerely, thank you! AUTHOR LE HONG BAO TRAN ABSTRACT Today, the steel industry is an industry with great potential for development and is an industry that plays an important role in economic activities and economic growth of countries around the world.
In Vietnam, in the past few years, the steel industry is an industry that tends to have stable growth for a long time, which leads to the prosperity of the domestic economy. In countries around the world in general and in Vietnam in particular, the proportion of the steel industry in the total wealth of the society varies, but generally accounts for about 20 to 30% respectively. Thereby, it can be seen that the steel industry has a relatively large proportion in the economic structure of our country and tends to increase. In the market economy, besides the successes achieved, there are still many difficulties that many enterprises in the steel industry are facing in the process of operation that inhibit growth such as lack of capital, rapidly increasing price levels, policies that are not suitable with the actual situation, the decline of confidence in the market, besides there are also risks such as debt default or inability to pay and ability to pay debts.
The main reason for this situation is the lack of understanding and knowledge around working capital management as well as factors affecting profitability of business operation. For business, profitability plays an extremely important role, because the main purpose of companies is to make a profit, when it is profitable, the company can continue to maintain production and business. The final objective of firm is maximizing the firm value and maximizing the wealth of shareholder, to achieve this goal, the companies usually make profit. Therefore, improving and enhancing profitability is always the top concern of managers, in addition to improving profits, businesses need to ensure solvency to be able to meet debt obligations as they come due.
Therefore, the author chooses the topic "The factors affect the profitability of enterprises in the steel industry group listed on Vietnam’s Stock Exchange" to clarify the extent of impact of micro and macro factors affecting profitability of steel industry enterprises on Vietnam stock exchange. From there, provide necessary recommendations to improve profitability coefficient in the future. To complete the research results, the author proposes the necessary research objectives, including determining the micro and macro factors affecting profitability, assessing the trend and the level of impact of the factors mentioned above and propose appropriate solutions to improve the level of impact of these factors on the profitability of steel enterprises listed on the Vietnam stock exchange. In order to have a complete article, the author proposes a research layout consisting of 5 main chapters, specifically as follows: Chapter 1: Introduction In chapter 1, this present the reason for the thesis through its necessity for the economy.
Besides, this chapter gives an overview of the objectives, methodology and contributions of the thesis. Chapter 2: Theoretical basic and literature review In this chapter, this thesis introduces the concept of profit, profitability, the formula for measuring profit and profitability, refers to the theory of profitability and factors affecting the profitability of steel companies listed on the Vietnam stock exchange. At the same time, this chapter also summarizes empirical studies on the factors affecting the profitability of enterprises in the steel industry. Chapter 3: Methodology Based on chapter 2, this thesis will present the research model, explain the variables in the model and expect the sign of the independent and dependent variables.
Next, this thesis will describe the data collection method, including data from annual report of steel companies and data from World Bank, and the research model estimation method, thereby serving as the basis for the implementation of the next chapter. Chapter 4: Empirical results In this chapter, the author will analyze the results research, including descriptive statistics, running regression models, testing the research model's defects, and resolving the defects. Based on the results of this analysis, the author will evaluate and compare with previous empirical studies. Then, this thesis will discuss the result and give all of the recommendations in the next chapter.
Chapter 5: Conclusion In this chapter, this thesis will summarize the results of the research conducted in the previous chapter and make recommendations to construction industry companies and the State Securities Commission based on the results of the assessment obtained. At the same time, the author also raised the limitations and expanded research direction for future topics. The thesis researches and analyzes the factors affecting the profitability of 25 steel companies listed on the Vietnam Stock Exchange in the period 2012-2020. The mentioned influencing factors include the regulation firm size (SIZE), financial leverage (TDTA), liquidity (LQ), fixed assets investment (TANG), company growth revenue (GR) and inflation rate (INF).
Using panel data methodology, the study shows that firm size (SIZE) and liquidity (LQ) have a positive impact on profitability while variable financial leverage (TDTA) has the opposite effect. In addition, the variables company growth revenue (GROWTH), fixed assets investment (TANG) and inflation (INF) were not statistically significant. Based on the obtained analysis results, the study proposes some recommendations for corporate administrators and state management agencies to improve profitability coefficient in the future. LIST OF ACRONYMS Word English Meaning CPI Consumer Price Index FEM Fixed Effects Model FGLS Feasible Generalized Least Squares Method HNX Ha Noi Stock Exchange HOSE Ho Chi Minh Stock Exchange OLS Ordinary Least Squares REM Random Effects Model SC Shareholding Company TABLE OF CONTENTS DISCLOSURE.iii LIST OF ACRONYMS.
vi TABLE OF CONTENTS. vii LIST OF TABLES. x LIST OF FIGURES. The necessity of the research.
Subject and the scope of research. The scope of research. Structure of thesis. 6 SUMMARY OF CHAPTER 1.
Theoretical basic and literature review. The profitability of enterprises. The meaning of firm‟s profitability. Measuring the firm‟s profitability.
Factors affecting FIRM‟S profitability. Company growth revenue. Fixed assets investment. Gross domestic product.
16 SUMMARY OF CHAPTER 2. Data and methodology. 32 SUMMARY OF CHAPTER 3. 42 SUMMARY OF CHAPTER 4.
The drawback and the next suggest study. 48 SUMMARY OF CHAPTER 5. 54 LIST OF TABLES Table 2.Summary of studies. Explain the variables and expect the sign of each variable.
Descriptive statistics of variables in the model. Correlation matrix between variables in the model. Model Estimation Pooled OLS. Estimating the FEM model.
Estimating the REM model. Model estimation FGLS. 41 LIST OF FIGURES Figure 3. Estimation methodology process.
INTRODUCTION This chapter presents to readers an overview list of research topics such as topic necessary, research objectives, research question, object research and its limitations… 1. THE NECESSITY OF THE RESEARCH Profitability is the ability of a company to use its resources to generate revenues more than its expenses. In other words, this is a company‟s capability of generating profits from its operations. Vietnam is in the process of industrialization and modernization and the development of industry groups is expanding.
Profitability or profit margin is a concept that reflects the relationship between profitability and business size. Profitability tells us how well a business is performing over a given period (Nguyen Van Ngoc, 2018). To improve profitability, or evaluate the production capacity of each enterprise, we need to analyze the factors affecting the profitability of the business to be able to find out strength, weakness, opportunity, threat. Vietnam's steel industry is still very young, built in the 60s of the 20th century, since 1990 Vietnam's steel industry has had many innovations and strong growth.
The establishment of Vietnam Steel Corporation in 1990 made an important contribution to the stability and development of the industry. Vietnam's economy is still heavily dependent on real estate investment and business activities. Besides, the steel industry is cyclical and it is clear that the dependence of the Vietnamese steel industry on the construction and real estate markets when construction demand still accounts for 65% of steel demand in Vietnam. Primary supply of real estate apartments in Vietnam 1 Source: Ministry of Construction Figure 1.2 Structure of steel usage in Vietnam 20% 33% Civil construction Building infrastructure Shipbuilding 15% Industrial building Others 15% 17% 2 Source: POSRI,GSO, estimated CTS In construction activities, industrial construction, infrastructure and residential construction are activities with relatively sustainable growth and less cyclical impacts than construction activities of the business sector real estate.
According to statistics of the State Bank of Vietnam - SBV, credit outstanding for real estate business in 2018 accounted for 7.5% of credit balance of the whole economy. This figure is still lower than the outstanding credit balance for real estate business at the peak of the previous real estate cycle (in 2010) of 9. The difference at the present time compared to the previous period is the development of personal consumption credit, more specifically credit for home purchase and repair, accounting for 6% of the total credit outstanding of the whole economy. If these two credits are added, the amount of credit for real estate is larger than in 2010.
Credit risks are quite obvious, but the author believes that increased credit is a fairly natural factor. However, in today's modern economies, the more developed countries are, the higher the outstanding loans in general and consumer credit outstanding in particular will increase. Under such a scenario, the real estate market will adjust slightly in the coming years and slow down steel consumption growth. Since the outbreak of COVID-19 in many localities across the country, construction demand has decreased, along with the preparation for the rainy season, making domestic steel consumption difficult.
The Vietnam Steel Association (VSA) said that in order to solve these difficulties, businesses in the industry had to find a way to boost exports.