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Selecting Different Industrial Competitors Influence the Risk Level of Viet Nam Hardware Companies | OMICS International
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Arabian Journal of Business and Management Review
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Selecting Different Industrial Competitors Influence the Risk Level of Viet Nam Hardware Companies

Dinh Tran Ngoc Huy*

Banking University, HCMC-GSIM, International University of Japan, Japan

Corresponding Author:
Dinh Tran Ngoc Huy, MBA, PhD candidate
Banking University, HCMC-GSIM, International University of Japan, Japan
Tel: +81 25-779-1111
E-mail: [email protected]

Received date: November 05, 2015; Accepted date: November 13, 2015; Published date: November 25, 2015

Citation: Huy DTN (2015) Selecting Different Industrial Competitors Influence the Risk Level of Viet Nam Hardware Companies. Arabian J Bus Manag Review 6:182. 

Copyright: © 2015 Huy DTN. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Visit for more related articles at Arabian Journal of Business and Management Review

Abstract

This research shows marketing factors such as business competitors could affect business market risk, from a quantitative point of view. Using a two (2) factors model, this research paper estimates the impacts of not only the size of firms’ competitors, but also leverage in the hardware industry, on the market risk of 22 listed companies in this category. This paper founds out that the risk dispersion level in this sample study could be minimized in case the competitor size remaining as current (measured by equity beta var of 0,067) and leverage down to 20%. Beside, the emprical research findings show us that when financial leverage increases up to 30%, max asset beta value decreases from 1,069 to 1,033 in case the size of competitor doubles. Last but not least, this paper illustrates calculated results that might give proper recommendations to relevant governments and institutions in re-evaluating their policies during and after the financial crisis 2007-2011.

Keywords

Risk management; Competitive firm size; Market risk; Asset and equity beta; Hardware industry

JEL Classification

M00, G3, M3

Introduction

In marketing and business, choosing competitors might affect business strategies, esp., during the crisis period 2007-2009 in which hardware firms experience many risks, although Viet Nam hardware industry is considered as one of active economic sectors, which has some positive effects for the economy [1,2].

This paper is arranged in a systematic way as follow. The research problems and literature evaluation can be covered in subsequent classes 2 and three, for a short summary. Then, methodology and conceptual theories are introduced in session four and 5. Session 6 describes the information in empirical evaluation. Session 7 offers empirical results and findings. Subsequent, session eight covers the analytical outcome. Then, session 9 presents evaluation of enterprise. Ultimately, session 10 will conclude with some coverage recommendations. This paper also helps readers with references, reveals and significant web sources.

Research Issues

For the estimating of influences of the decision of one-of-a-kind industrial opponents on the chance measured via beta for listed hardware firms in Viet Nam inventory alternate, study issues might be recounted as following:

Limitation 1: whether or not the selection of unique opponents makes the chance stage of hardware industry corporations beneath the special changing eventualities of leverage expand or scale back so much.

Limitation 2: whether the choice of doubling size competitor makes the dispersion of beta values grow to be large within the exclusive altering situations of leverage on this enterprise.

Literature Review

Huasheng [3], Litvak [4] and Dinh [5] pointed a large and active theoretical and empirical literature has related financial development to the economic growth process.

Last but not least, Eugene [6] Binomial Leverage – Volatility theorem provides a precise link between leverage and volatility. Chen et al. [7] supports suspicions that over-reliance on short-term funding and insufficient collateral compounded the effects of dangerously high leverage and resulted in undercapitalization and excessive risk exposure for Lehman Brothers [8].

Conceptual Theories

Industrial competitor theories

There are numerous moderate advantages which might be owned by way of industrial competitors. These advantages may also be attributes corresponding to entry to normal assets or particularly trained personel human assets or capital or leverage. Utilizing leverage can aid businesses to receive new technologies which might be a different competitive talents [9,10].

Methodology

On this research, analytical study procedure is used, philosophical procedure is used and specially, scenario evaluation procedure is used. Analytical data is from the hindrance of listed industrial electric industry organizations in VN inventory exchange and utilized current tax price is 25%. The under desk 1 suggests us three circumstances of selecting exceptional rivals (Table 1) [11].

Order No. Company Stock code Competitor size as current Competitor size slightly smaller Competitor size double
1 CMT      
2 SVT TLC as comparable TLC as comparable VIE as comparable
3 VIE UNI as comparable ONE as comparable LTC as comparable
4 HPT TST as comparable TST as comparable ITD as comparable
5 NIS VTC as comparable VTC as comparable ST8 as comparable
6 TST      
7 ST8      
8 TAG      
9 POT      
10 CKV      
11 ONE UNI as comparable UNI as comparable TAG as comparable
12 PMT      
13 SMT PMT as comparable HTP as comparable NIS as comparable
14 UNI      
15 TLC      
16 KST TLC as comparable VTC as comparable VIE as comparable
17 VAT      
18 VTC      
19 ELC ITD as comparable ITD as comparable CMG as comparable
20 SAM      
21 LTC      
22 ITD      

Table 1: Analyzing market risk under three (3) scenarios of changing competitors.

Eventually, we use the outcome to recommend coverage for both these firms, valuable companies and executive.

General Data Analysis

The research sample has total 22 listed companies within the hardware enterprise market with the reside information from the stock trade.

First of all, we estimate fairness beta values of those organizations and use financial leverage to estimate asset beta values of them. Secondly, we change the opponents from what stated in F.S 2011 to these with measurement doubling and decreasing moderately to see the sensitivity of beta values [12,13]. We found out that in both cases of smaller competitors and double dimension opponents, asset beta mean values are reduced to 0,334 from 0,343 if the leverage up to 30%. Also in 3 scenarios of one-of-a-kind competitors, we find out equity beta mean values are relocating in the reverse path with the leverage. Leverage measure alterations definitely has precise effects on asset and equity beta values.

Empirical Research Findings and Discussion

Within the under section, information used are from whole 22 listed hardware industry companies on VN inventory alternate (HOSE and HNX in most cases). In the scenario 1, present fiscal leverage degree is kept as in the 2011 fiscal statements which is used to calculate market hazard (beta) whereas competitor dimension is kept as present, then modified from double size to reasonably smaller size. Then, two (2) FL situations are transformed as much as 30% and down to 20%, in comparison with the current FL measure. In brief, the below Table 2 indicates three situations used for examining the risk stage of those listed firms.

  FL as current FL up 30% FL down 20%
Competitor size as current Scenario 1 Scenario 2 Scenario 3
Competitor size slightly smaller
Competitor size double

Table 2: Inspecting market hazard beneath three (three) eventualities (Made by means of writer).

Market threat (beta) beneath the influence of tax cost, includes: 1) equity beta; and 2) asset beta.

In this case, all beta values of 22 listed firms on VN hardware industry market as following Table 3.

Order No. Company stock code Competitor size as current Competitor size slightly smaller Competitor size double
Equity beta Asset beta (assume debt beta = 0) Equity beta Asset beta (assume debt beta = 0) Equity beta Asset beta (assume debt beta = 0)
1 CMT 0,665 0,326 0,665 0,326 0,665 0,326
2 SVT 0,860 0,651 0,860 0,651 0,212 0,161
3 VIE 0,283 0,054 0,131 0,025 0,263 0,050
4 HPT 0,238 0,063 0,238 0,063 0,113 0,030
5 NIS 0,347 0,165 0,347 0,165 0,487 0,231
6 TST 0,739 0,236 0,739 0,236 0,739 0,236
7 ST8 0,891 0,682 0,891 0,682 0,891 0,682
8 TAG 0,632 0,411 0,632 0,411 0,632 0,411
9 POT 1,046 0,533 1,046 0,533 1,046 0,533
10 CKV 0,604 0,221 0,604 0,221 0,604 0,221
11 ONE 0,551 0,217 0,551 0,217 0,294 0,116
12 PMT 1,234 1,056 1,191 1,019 1,191 1,019
13 SMT 0,934 0,654 0,826 0,578 0,369 0,258
14 UNI 1,186 0,732 1,186 0,732 1,186 0,732
15 TLC 1,066 0,770 1,066 0,770 1,066 0,770
16 KST 0,679 0,386 0,405 0,230 0,168 0,095
17 VAT 1,028 0,485 1,168 0,551 1,168 0,551
18 VTC 0,635 0,431 0,635 0,431 0,635 0,431
19 ELC 0,200 0,100 0,200 0,100 0,542 0,271
20 SAM 1,191 1,069 1,191 1,069 1,191 1,069
21 LTC 1,102 0,329 1,102 0,329 1,102 0,329
22 ITD 0,351 0,132 0,351 0,132 0,351 0,132

Table 3: Market risk of listed companies on VN hardware industry market under a two factors model (case 1) (source: VN stock exchange 2012).

If leverage increases up to 30%, all beta values of total 22 listed firms on VN hardware industry market as below Table 4.

Order No. Company stock code Competitor size as current Competitor size slightly smaller Competitor size double
Equity beta Asset beta (assume debt beta = 0) Equity beta Asset beta (assume debt beta = 0) Equity beta Asset beta (assume debt beta = 0)
1 CMT 0,665 0,224 0,665 0,224 0,665 0,224
2 SVT 0,792 0,543 0,792 0,543 -0,059 -0,040
3 VIE -0,085 0,004 -0,022 0,001 -0,079 0,004
4 HPT 0,041 0,002 0,041 0,002 0,019 0,001
5 NIS 0,243 0,077 0,243 0,077 0,341 0,108
6 TST 0,739 0,085 0,739 0,085 0,739 0,085
7 ST8 0,891 0,619 0,891 0,619 0,891 0,619
8 TAG 0,632 0,345 0,632 0,345 0,632 0,345
9 POT 1,046 0,379 1,046 0,379 1,046 0,379
10 CKV 0,604 0,106 0,604 0,106 0,604 0,106
11 ONE 0,314 0,067 0,314 0,067 0,167 0,036
12 PMT 1,234 1,003 1,191 0,967 1,191 0,967
13 SMT 0,835 0,509 0,738 0,450 0,230 0,141
14 UNI 1,186 0,596 1,186 0,596 1,186 0,596
15 TLC 1,066 0,681 1,066 0,681 1,066 0,681
16 KST 0,544 0,239 0,324 0,142 -0,040 -0,018
17 VAT 1,028 0,323 1,168 0,366 1,168 0,366
18 VTC 0,635 0,369 0,635 0,369 0,635 0,369
19 ELC 0,147 0,051 0,147 0,051 0,397 0,139
20 SAM 1,191 1,033 1,191 1,033 1,191 1,033
21 LTC 1,102 0,097 1,102 0,097 1,102 0,097
22 ITD 0,351 0,066 0,351 0,066 0,351 0,066

Table 4: Market risks of listed hardware industry firms under a two factors model (case 2) (source: VN stock exchange 2012).

If leverage decreases down to 20%, all beta values of total 22 listed firms on the hardware industry market in VN as following Table 5.

Order No. Company stock code Competitor size as current Competitor size slightly smaller Competitor size double
Equity beta Asset beta (assume debt beta = 0) Equity beta Asset beta (assume debt beta = 0) Equity beta Asset beta (assume debt beta = 0)
1 CMT 0,665 0,394 0,665 0,394 0,665 0,394
2 SVT 0,903 0,728 0,903 0,728 0,392 0,316
3 VIE 0,498 0,176 0,292 0,103 0,463 0,163
4 HPT 0,356 0,146 0,356 0,146 0,169 0,069
5 NIS 0,411 0,238 0,411 0,238 0,577 0,335
6 TST 0,739 0,337 0,739 0,337 0,739 0,337
7 ST8 0,891 0,724 0,891 0,724 0,891 0,724
8 TAG 0,632 0,455 0,632 0,455 0,632 0,455
9 POT 1,046 0,636 1,046 0,636 1,046 0,636
10 CKV 0,604 0,297 0,604 0,297 0,604 0,297
11 ONE 0,695 0,358 0,695 0,358 0,371 0,191
12 PMT 1,234 1,092 1,191 1,054 1,191 1,054
13 SMT 0,998 0,759 0,882 0,671 0,467 0,355
14 UNI 1,186 0,823 1,186 0,823 1,186 0,823
15 TLC 1,066 0,829 1,066 0,829 1,066 0,829
16 KST 0,764 0,500 0,455 0,298 0,332 0,217
17 VAT 1,028 0,594 1,168 0,675 1,168 0,675
18 VTC 0,635 0,471 0,635 0,471 0,635 0,471
19 ELC 0,234 0,140 0,234 0,140 0,633 0,380
20 SAM 1,191 1,094 1,191 1,094 1,191 1,094
21 LTC 1,102 0,483 1,102 0,483 1,102 0,483
22 ITD 0,351 0,175 0,351 0,175 0,351 0,175

Table 5: Market risk of listed hardware industry firms under a two factors model (case 3) (source: VN stock exchange 2012).

All three above tables and data show that values of equity and asset beta in the case of increasing leverage up to 30% or decreasing leverage degree down to 20% have certain fluctuation.

Comparing Statistical Results in 3 Scenarios of Changing Leverage

The calculated statistical results are shown in Tables 6-8.

  Competitor size as current   Competitor size slightly smaller   Competitor size double  
Statistic results Equity beta Asset beta (assume debt beta = 0) Difference Equity beta Asset beta (assume debt beta = 0) Difference Equity beta Asset beta (assume debt beta = 0) Difference
MAX 1,234 1,069 0,165 1,191 1,069 0,122 1,191 1,069 0,122
MIN 0,200 0,054 0,147 0,131 0,025 0,106 0,113 0,030 0,083
MEAN 0,748 0,441 0,307 0,728 0,430 0,298 0,678 0,393 0,285
VAR 0,1085 0,0893 0,019 0,1226 0,0894 0,033 0,1392 0,0903 0,049

Table 6: Statistical results (FL in case 1) (source: VN stock exchange 2012).

  Competitor size as current   Competitor size slightly smaller   Competitor size double  
Statistic results Equity beta Asset beta (assume debt beta = 0) Difference Equity beta Asset beta (assume debt beta = 0) Difference Equity beta Asset beta (assume debt beta = 0) Difference
MAX 1,234 1,033 0,201 1,191 1,033 0,158 1,191 1,033 0,158
MIN -0,085 0,002 -0,087 -0,022 0,001 -0,024 -0,079 -0,040 -0,039
MEAN 0,691 0,337 0,354 0,684 0,330 0,353 0,611 0,287 0,325
VAR 0,1538 0,0945 0,059 0,1570 0,0929 0,064 0,2036 0,0985 0,105

Table 7: Statistical results (FL in case 2) (source: VN stock exchange 2012).

  Competitor size as current   Competitor size slightly smaller   Competitor size double  
Statistic results Equity beta Asset beta (assume debt beta = 0) Difference Equity beta Asset beta (assume debt beta = 0) Difference Equity beta Asset beta (assume debt beta = 0) Difference
MAX 1,234 1,094 0,141 0,665 0,759 -0,093 1,191 1,094 0,097
MIN 0,234 0,140 0,094 0,234 0,103 0,131 0,234 0,103 0,131
MEAN 0,783 0,520 0,263 0,759 0,506 0,253 0,759 0,506 0,253
VAR 0,0908 0,0828 0,008 0,1036 0,0847 0,019 0,1036 0,0847 0,019

Table 8: Statistical results (FL in case 3) (source: VN stock exchange 2012).

Based on the calculated results, we find out:

First of all, if competitor size is kept as current, both max and min values of asset beta vary in 3 cases (max values decreasing to 1,033 and increasing to 1,094 when leverage up 30% and down 20%). Secondly, if competitor size is chosen with total asset doubling, max and min values of asset beta vary in all 3 scenarios. Thirdly, if competitor is chosen with total asset slightly smaller, there is tiny change in min values of equity and asset beta in the case of leverage down 20% (for example, min asset beta increasing to 0,103 from 0,030).

Additionally, the below Figure 1 shows us: in the case of doubling competitor size, the risk is less dispersed in case Fl down 20%. Especially, if leverage down to 20%, equity beta var is at 0,084 (equity beta var is minimum in case Fl down 20% and approximate size competitors). On the contrary, in the case of doubling dimension opponents, if leverage as much as 30%, equity beta var increases to 0,210.

arabian-journal-business-management-statistical-results

Figure 1: Comparing statistical results of equity beta var and mean in three (3) scenarios of changing FL and competitor size (source: VN stock exchange 2012).

Last but not least, from Figure 2, we could note that in the case of slightly smaller size competitors, keeping the current leverage degree, asset beta mean value reduces to 0,436 from 0,448 (approximate size competitors). On the other hand, in the case of doubling size competitors, asset beta mean value goes down to 0,381.

arabian-journal-business-management-asset-beta

Figure 2: Comparing statistical results of asset beta var and mean in three (3) scenarios of changing FL and competitor size (source: VN stock exchange 2012).

Conclusion and Policy Suggestion

In general, the government has to consider the impacts on the mobility of capital in the markets when it changes the macro policies and the legal system and regulation for developing the hardware market [14]. The Ministry of Finance continues to increase the effectiveness of fiscal policies and tax policies which are needed to combine with other macro policies at the same time. The State Bank of Viet Nam continues to increase the effectiveness of capital providing channels for hardware companies. Furthermore, the entire efforts among many different government bodies need to be coordinated [15].

Last but not least, these companies might be aware of a minimum value of asset beta mean of 0,334 with either doubling size competitors or smaller competitors (leverage up 30%) and a maximum value of asset beta mean of 0,531 with approximate size competitors if leverage down 20%. In this case, the statement “the riskier the marketing strategy, the lower the market risk” is not totally correct.

Finally, this paper suggests implications for further research and policy suggestion for the Viet Nam government and relevant organizations, economists and investors from current market conditions.

Acknowledgements

I would like to take this opportunity to express my warm thanks to Board of Editors and Colleagues at Citibank –HCMC, SCB and BIDV-HCMC, Dr. Chen and Dr. Yu Hai-Chin at Chung Yuan Christian University for class lectures, also Dr Chet Borucki, Dr Jay and my ex-Corporate Governance sensei, Dr. Shingo Takahashi at International University of Japan. My sincere thanks are for the editorial office, for their work during my research. Also, my warm thanks are for Dr. Ngo Huong, Dr. Ho Dieu, Dr. Ly H. Anh, Dr Nguyen V. Phuc and my lecturers at Banking University – HCMC, Viet Nam for their help.

Lastly, thank you very much for my family, colleagues, and brother in assisting convenient conditions for my research paper.

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