How do intangible assets and financial constraints affect stock returns in Vietnam before and during the COVID‐19 pandemic?

Abstract

We are the first to determine the effect of intangible intensity (INTANG) on cross‐sectional stock returns after controlling financial constraints in the Vietnam stock market. Our sample includes 37,938 firm‐month observations from 488 non‐financial firms from October 2008 to February 2021. We employ Fama and MacBeth regressions and portfolio analysis methodologies to estimate the impact of intangible assets and financial constraints on stock returns. Our findings show that a percentage increase in INTANG empowers stock returns by 0.922%. Meanwhile, the cross‐sectional stock returns decrease by 0.506% when the financial constraints index increases by a percentage point. Moreover, the results suggest that intangible assets in the entire sample and before COVID‐19 empower the stock return cross‐sectionally. Our findings are robust after employing alternative INTANG proxies. Our findings support the risk‐based explanation, the pecking order theory, and prior literature. Our findings suggest governments should promote intellectual property and copyright regulations to encourage Small and Medium Enterprises (SMEs) to expand intangible assets. Furthermore, investors can utilize our suggested models to construct their portfolios efficiently.

Limit to Arbitrage and Distress Risk Puzzle in Vietnam: Does Corporate Bankruptcy Regulation Matter?

“…This table includes a summary of the Vietnamese stock market. The Z-score of Vietnamese manufacturing enterprises is 1.15 on average, which implies that Vietnamese companies have an extremely high level of bankruptcy risk (Duong et al, 2023). The average IVOL value is roughly 9.58%, the 90th percentile is 3.45%, and the 10th percentile is 5.37%, higher than in Taiwan (Duong et al, 2021).…”

“…We follow Fama and French (1992) and Duong et al (2023) to estimate the book-to-market ratio for each month by splitting the previous calendar year's market value by the book value of the common stock.…”