The Determinants of Systematic Risk in Vietnam

Abstract

The capital asset pricing model is generally considered as a cornerstone in modern finance since its inception because it is extensively used in both financial management and portfolio management for estimating a return on equity. Within its framework, a systematic risk, generally termed as beta, plays an essential role. However, the determinants affecting the level of systematic risk of firms have been largely ignored in the current literature, in particular for emerging markets such as Vietnam. This paper is conducted to examine the determinants of systematic risk of listed firms in Vietnam. Data from 532 listed firms in Vietnam are used for the period from 2008 to 2017. The empirical findings from this paper indicate that financial leverage, profit margin on total assets, operational efficiency of enterprises, inflation and economic growth rate have a negative relationship with the system risk of listed firms in Vietnam whereas firm size is positively correlated with a systematic risk. The paper fails to establish a robust link between liquidity and firm growth rate and the level of the systematic risk. Robustness checks have also been conducted by utilizing analyses at the industry level of listed firms. It is the claim of this paper that empirical studies on systematic risks should be conducted at the economy wide level.Findings from this paper indicate that listed firms in Vietnam are encouraged to consider fundamental determinants to ensure that the systematic risk will not cause a major concern for their operations.

The Impact of Liquidity, Solvability, Activity, Profitability, Asset Growth, and Sales Growth to Systematic Risk With Firm Size as Moderating Variable on Consumer Non-Cyclicals Company Listed in Indonesia Stock Exchange 2017-2021

“…The higher the solvability ratio, the higher the company's financial risk and the risk of being unable to pay debts (Kusuma, 2016) . Meanwhile, according to (Nguyen et al, 2019) , companies with high debt levels in favorable business conditions will increase profitability so that the company's prospects are better and the level of risk decreases. In this research, the debt to total asset ratio was used.…”

“…It could be a positive signal for investors that the company will likely be profitable. A research by (Nguyen et al, 2019) showed the negative impact of activity ratio on systematic risk. Based on the literature above, the hypotheses taken are as follows:…”

“…The results of the research (Khamidatuzzuhriyah, 2020) show the positive impact of profitability on systematic risk; the hypotheses are : H4: Profitability has a positive impact on systematic risk 5) Asset Growth Against Systematic Risk An increase in asset growth gives a positive signal that the company will develop to increase profits that will attract an investor to continue to invest in company shares (Jazuli & Witiastuti, 2016) which will decrease systematic risk. Research (Nguyen et al, 2019) shows that asset growth negatively affects systematic risk; the hypotheses are follows: H5: Asset growth have a negative impact on systematic risk 6) Sales Growth Against Systematic Risk Sales growth is a calculated by the company's financial position where the company can compete and maintain its position in the industrial world. The higher the growth rate, the higher the risk of bankruptcy (Prasetyo, 2020) .…”

“…According to research Aruna & Warokka (2013) , asset growth has a positive impact because companies that grow quickly are more susceptible to economic fluctuations and internal pressures. Nguyen et al (2019) has a negative impact. According to Prasetyo (2020) , sales growth has a positive impact indicating that investors do not favor excessive income flows.…”