The impact of the micro factors to the liquidity of listed stocks on the Ho Chi Minh stock exchange

Nội dung text: The impact of the micro factors to the liquidity of listed stocks on the Ho Chi Minh stock exchange

1. THE IMPACT OF THE MICRO FACTORS TO THE LIQUIDITY OF LISTED STOCKS ON THE HO CHI MINH STOCK EXCHANGE * * * Vu Thi Thuy Van* - Le Thi Thuy - Tran Thi Thoa - Nguyen Quynh Linh 1 ABSTRACT: The paper aims at investigating the effect of the micro factors on the liquidity of listed stocks on the Ho Chi Minh Stock Exchange. The data of 182 listed companies on the Ho Chi Minh Stock Exchange (HOSE) were used to for this study which covers a period of 5 years from the first quarter of 2011 to the third quarter of 2017. The result shows that company size, market to book value, earning per share and financial leverage have insignificant relation with the liquidity of stocks. Keywords: Liquidity; liquidity stock; listed stocks; micro factors. 1. INTRODUCTION Liquidity is one of the most important factors in assessing the stability and effectiveness of the stock market. The liquidity of the financial market, especially the stock market liquidity is a matter concerned by managers, investors, government, and researchers. In good condition of the liquid share, investors can easily sell stocks to recreate initial funds or easily sell it again and invest in other stocks for profit. On the other hand, if the stock is illiquid, investors may have troubles in the transaction (resulting in transaction costs). So, they may suffer financial loss from non-withdrawal when the stock price falls. Liquidity plays an essential role for a business because it is the position, the prestige, the potential of a business. The stock of firm has good liquidity when it is easy to trade on the market, attracts investors to invest in to seek for profit. Therefore, business has a surplus capital. In contrast, if the stock of a business is illiquid, the business will suffer a lot of negative impact on the performance. That will force them to sale their investment projects, assets. They have to raise capital at expensive fees. Still, the worst is bankruptcy. Therefore, studying about stock’s liquidity, especially, the factors affecting the liquidity is very important. Over the past ten years, the financial market has grown exponentially in Viet Nam. But alsoit contains many inherent risks and potentialities depending on the fluctuation of the macroeconomic and the enterprises themselves. On the stock market, the risk of stock’s liquidity is increasing with more complex trends. Although the liquidity risk on Viet Nam securities market has not been clearly disclosed, this has made difficulties in making investment decisions which is a great concern of policymakers developing the market, public companies and investors. In Vietnam, the number of studies on the liquidity of stocks up to now still has a variety of gaps. Major studies focus on measuring macroeconomic fluctuations, measuring micro factors very little, or just focusing on a particular micro factor. In addition, the results of the research have not come to a uniform conclusion and clarified the impact of micro factors on the liquidity of stocks on the stock market. * National Economics University, 207 Giai Phong street, Hai Ba Trung district, Hanoi, Viet Nam.
2. 352 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA Starting from the need for research, the research team decided to select the topic “The impact of micro factors on the liquidity of stocks of listed enterprises on the Ho Chi Minh Stock Exchange”. 2. STUDY OVERVIEW 2.1. Measures of liquidity Liquidity is an abstract concept, with various definitions by researchers and professional investors. In the simplest sense, liquidity is the low level of trading a certain stock. Previous research mainly focused on developing liquidity measures from developed markets to emerging ones. A number of measures have been introduced to choose how to measure the liquidity of a stock from a variety of perspectives and various liquidity concepts. Typically is Amihud (2002) that measured liquidity via price sensitivity, Lesmond et al. (1999) measuring liquidity based on the frequency of the zero-yielding day, or Roll (1984) measuring liquidity based on bid and ask price. Liquidity is such a broad definition of many different aspects that only one measure cannot cover all. Domestic writings by authors such as Tran Thi Hai Ly (2015) have used four liquidity measures which are the relative price differences, stock turnover, price sensitivity measure, the frequency of zero-yielding transactions day to consider the impact of monetary policy on the liquidity of the Vietnamese stock market. In addition to adoption of the above measures, the study by Le Dat Chi and Hoang Thi Phuong Thao (2015) uses two additional measures, which are the implied price difference and market depth to increase the soundness of the study on “The impact of the global financial crisis on the liquidity of Vietnam’s stock market”. 2.2. Impacts of factors on stock liquidity of listed companies 2.2.1.Factors of company size According to previous studies in the world, the size of an enterprise’s operation is primarily measured by the level of market capitalization. In the process of their development, enterprises have a tendency to expand their sizes to diversify their production activities; the larger the size of their capital is, the easier it is to attract institutional or professional investors. Proper liquidity means high likelihood to attract investors to put money into investment opportunities in order to make profits in the market. The results of studies in developed and developing countries are also consistent with the mentioned rationale above, given that the size of the business is in mutual relation to the liquidity of the stock. (Woon Gyu Choi, David Cook (2005); Shuenn (2007); Madyan et al. (2013); Wasfi A. Al Salamat (2016); Sedeaq Nassar (2016). However, while examining the determinants of 1048 US companies from 1971 to 1994, Opler et al. (1999) have shown that the relationship between company size and stock liquidity is inverse. The author argues that larger companies with better access to capital markets will hold less cash, which in turns makes the liquidity index worse. 2.2.2. Factors of market to book value The market to book value (MB) is an indicator to determine the real value of a company by comparing the book value (book value) with the market value of the company. This coefficient determines whether the stock price of the company is above or below the value by comparing the market value with the book value. If the ratio is greater than 1, it means that the market value is greater than the book value. Thus, investors are assessing the value of the company higher than the book value. If the stock price is rising and being traded in a large amount in the market, liquidity will increase. Conversely, if the coefficient is less than 1, then the market price is lower than the book value, which means a decrease in stock price or the reduction in liquidity. Investors use this ratio as a factor in determining whether or not to invest in the stock. The research conducted by Madyan et al. (2013) shows the direct correlation between the book to market value and the liquidity of the stock. However, the results were inverse in the studies by Wasfi A. Al Salamat (2016) and Sedeaq Nassar (2016).
3. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 353 2.2.3. Factors of business performance According to previous studies, business performance of an enterprise is usually measured by three main indicators: return on assets (ROA), return on equity (ROE), earnings per share (EPS), providing information on the performance of businesses on the financial side and attaching to the economic interests of investors. With regards to the perspective of equity holders, ROE and EPS are specially paid attention to because they reflect how much return after tax is earned for each equity invested. On the corporate managers’ side, ROA is a notedindicator as it shows the efficiency of asset management and usage to generate profit (each asset to generate how much return after tax). Stocks of proper business performance, high profitability and high- income levels will attract investors to exploit profit opportunities and thus increase the liquidity of stocks. Studies conducted by Wasfi A. Al Salamat (2016), Woon Gyu Choi and David Cook (2005) contend that earnings per share (EPS) are directly related to stock liquidity. However, a study by Sedeaq Nassar (2016) suggests that there is a negligible relation among ROE, EPS and liquidity of stocks. 2.2.4. Factors of financial leverage The leverage of the business includes operational leverage and financial leverage. Among previous studies of factors affecting stock liquidity, all have used financial leverage to reflect the leverage of an enterprise. According to the study conducted by Opler et al. (1999) experimenting the factors affecting the liquidity of 1048 US companies from 1971-1994 and Ferreira and Vilela (2004) and Sedeaq Nassar (2016) reveals that the inverse relation between liquidity and leverage. While based on what is shown in Wasfi A. Al Salamat (2016), financial leverage has a direct proportion with liquidity. In Vietnam, some authors considered liquidity at the market level and found that the liquidity of the stock market in Vietnam is not high (Do Duc Minh (2010), Nguyen Thanh Phong (2012)). The number of previous researches on the stock liquidity of listed companies on the stock market is relatively small, most of which focus on the use of macro-measurement models, those that thoroughly study the influence of micro variables on liquidity have not been properly paid attention to. The lack of an evaluation of this micro-factor system will be a shortcoming in objective measurement of stock liquidity. A research by Nguyen Dinh Thien, Nguyen Thi Mai Tram and Nguyen Hong Thu mentioned the impact of the following factors: (1) P / B ratio = Price / Book value, (2) ROA = returns / Average Asset, (3) Debt Ratio = Debt / Total Assets on liquidity of listed companies in Vietnam, using secondary data extracted from financial statements of listed companies on Vietnam stock market and calculated in the period of 2007 - 2013. The second study by Tran Thi Hai Ly (2015) has looked at the effect of monetary policy on the liquidity of the Vietnam stock market in the period from September 2007 to November 2014, through two variables of monetary policy including money supply growth and interbank interest rate. The third study by Le Dat Chi and Hoang Thi Phuong Thao (2015) discusses the methods of measuring liquidity and the empirical model of examining the impact of the global financial crisis. 3. METHOD OF RESEARCH 3.1. Data Analysing The sample size is chosen based on the listing time requirements of enterprises. In particular, the calculation requires that the data sequence be long enough. Therefore, after the screening process, 182 listed enterprises were selected for the study.
4. 354 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA This paper is concentrated on researching for non-finance enterprises. Data used in this paper contain 182 companies listed in the HOSE from January 2011 to September 2017. Data is supplied by Stoxplus – a company focusing on gathering and analysing financial data in Vietnam. 3.2. Researching Variables Basing on the literature reviews, this paper is analysed “the influence of the micro factors on the liquidity of HOSE’s stock”, using following regression model: LQTit = β0 + β1 SIZEit + β2MBit + β3EPSit + β4LEVit + ui + εi (1) In this model: LQT : Liquidity SIZE: Company size MB: Market to book value EPS: Earning per share LEV: Financial leverage βi (beta): The coefficients of liquidity βi Table 1. Independent Variable. Factors Calculation Definition The company size is primarily measured by the level Company size Size = Ln (Total Assets) of total assets The market to book value is an indicator to determine Market to book MB = Market Value Of Firm / the real value of a company by comparing the book value Book Value Of Firm value (book value) with the market value of the company. Earnings per share is the portion of a company’s Business EPS = Earnings After Tax / Total profit allocated to each outstanding share of common performance Outstanding Shares stock. Earnings per share serve as an indicator of a company’s profitability. Financial leverage is the degree to which a company Financial leverage LEV = Total Liabilities / Total Assets uses fixed-income securities such as total liabilities and preferred total assets. Source: Author’s summary The coefficients β1 to β4 are showed the effect of micro factors on the liquidity of listed firms. With a defined level of statistical significance, if the coefficients are zero, it means that the coefficient is not statistically significant, meaning the factor is not affect the liquidity of stocks of listed firms on the HOSE. To base on that, the authors propose the following hypotheses: 3.2.1. Company size The size of an enterprise’s operation is primarily measured by the level of market capitalization. In the process of their development, enterprises have a tendency to expand their sizes to diversify their production activities; the larger the size of their capital is, the easier it is to attract institutional or professional investors.
5. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 355 Proper liquidity means high likelihood to attract investors to put money into investment opportunities in order to make profits in the market. In addition, shares of large-scale enterprises can be traded more easily, more quickly. The results of studies in developed and developing countries are also consistent with the mentioned rationale above, given that the size of the business is in mutual relation to the liquidity of the stock. (Madyan et al. (2013); Wasfi A. Al Salamat (2016); Sedeaq Nassar (2016)). Inheriting these studies, the research team makes one hypothesis about the impact of company size on stock liquidity: Hypothesis 1: The company size influences positively on the listed stock’s liquidity on the HOSE 3.2.2. Market to book value The market to book value (MB) is an indicator to determine the real value of a company by comparing the book value (book value) with the market value of the company. If a company has a market price of stocks higher than its book value, this is usually a sign that the company is doing well, earning a high return on its assets. Investors use this ratio as a factor in determining whether or not to invest in the stock. According to a study by Madyan et al. (2013), Nguyen Dinh Thien et al. (2014) showed a direct correlation between market to book value and stock liquidity. The authors propose hypothesis (2) that the market value of the book value will affect the liquidity of the stock. Hypothesis 2: The market to book value of the firm has a positive impact on the liquidity of listed stocks on the HOSE 3.2.3. Business performance Hansen, S., & SungSuk, K. (2013); Sedeaq Nassar (2016); And national research showed that the relationship between business performance and stock’s liquidity was a positive impact. This can be explained by the fact that if a business has good business results and high profitability, then high-interest shares will attract investors to exploit profit opportunities and thus increase the liquidity of the stock. In terms of business performance, in a similar way to ROA, ROE, and R, the research team suggest that EPS is likely to have a positive impact on the liquidity of stock. This view is also verified in studies by Wasfi A. Al Salamat (2016), Woon Gyu Choi & David Cook (2005). Hypothesis 3: Earnings per share have a positive impact on the liquidity of listed stocks on the HOSE 3.2.4. Financial leverage The leverage of the business includes operational leverage and financial leverage. Among previous studies of factors affecting stock liquidity, all have used financial leverage to reflect the leverage of an enterprise. The use of leverage is a double-edged sword. For high growth companies, as most companies are state-owned, it is often easy to receive preferential terms without considering the effectiveness of using (or otherwise, this is a state-sponsored company, so its risk is very low even if the business uses leverage). For low-growth companies (often without governmental factors), it is feared that borrowing increases the likelihood of bankruptcy, thus not leveraging the investment. However, it should be noted that during the research period from 2011 to 2017, the market saw a lot of difficulties. Opportunities for businesses were less, and the risks were higher. If business leverage at a high level will be a disadvantage, investors will not venture to take part. This suggestion was also mentioned in the study by Nguyen Dinh Thien et al. (2014) or Opler et al. (1999). Applying test results in the above studies, the hypothesis (4) on the effect of financial leverage on the liquidity of stocks:
6. 356 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA Hypothesis 4: Financial leverage has the opposite effect on the liquidity of stocks listed on the HOSE Fig.1. Study hypothesis. 4. CONCLUSIONS 4.1. Descriptive statistic and Matrix of correlation Table 2. Descriptive Statistics of Variables. Variables Observations Mean Standard Dev Minimum Maximum Size 4914 27.98338 1.279983 25.37816 32.95373 MB 4914 0.8026956 0.6898522 0.07061 9.159143 EPS 4914 642.1008 949.9543 -6054.714 19608.96 LEV 4914 0.4972366 0.2070515 0.0014605 0.9768643 Turnover 4914 0.0361323 0.0884772 0 2.501797 Zeros 4914 0.2509428 0.1399984 0 0.9230769 Source: Calculation of authors In the Table of Descriptive Statistics of Variables, the index SIZE has a minimum fluctuation value of 25.378 to a maximum of 32.95 and has an average value of 27.98 and a standard deviation of 1.23 indicates a large difference between the companies and the scale of them. Therefore, there are some companies with large assets, while some companies have small assets throughout the study period. MB of about 0.07 indicates that at least one stock is valued lower than the book value, to 9.1 the stock price is greater than the book value implies that the business is expected to thrive. Future. The average value of 0.8 and the standard deviation 0.68 show no significant change in the market-to-book ratio across firms. EPS has ranged from -6054.7 to 19608.96, meaning that while there was a profitable return per share for investors up to 608,896 dong, there was another business that resulted in a stock loss of 6054.7 dong. The average value is only 642 dong and the standard deviation is 49 dong. LEV has values ​ranging from 0.001 to 0.98, which means that the total debt to total assets ratio is very small for some businesses, indicating that a number of other firms depend heavily on Equity funds to finance their assets while total debt is approximately equal to total assets, meaning that some companies rely heavily on debt to finance their assets. This index has a significance of 0.5 in the market with leverage level is still no risk and the standard deviation 0.2 there is a large fluctuation between financial leverage of enterprises in this period. Turnovers have ranged from 0 to 2.5; 3.6% on average, while the difference was 8.8%. Although there was no big difference between liquidity in firms, average liquidity was not high.
7. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 357 The Zeros measure has a value from 0 to 0.92, with an average value of 25%, a standard deviation of 13.9%, and no significant fluctuation of the index between firms during the study period. Table 3. Correlation result between Size and MB, EPS, LEV, Turnover, Zeros. Size MB EPS LEV Turnover Zeros Size 1.0000 MB 0.2235 1.0000 EPS 0.0774 0.2144 1.0000 LEV 0.2720 -0.0713 -0.1777 1.0000 Turnover 0.0974 -0.1652 0.1029 -0.0228 1.0000 Zeros -0.3260 -0.1167 -0.0940 0.0270 -0.2666 1000 Source: Calculation of authors The result shows that the highest correlation coefficient is between the leverage ratio and the variable scale that is positive while the lowest correlation coefficient is between return on equity and Turnover. Further, it can be seen from the Table of Correlation result between Size and MB, EPS, LEV, Turnover, Zeros that no correlation coefficient greater than 0.3 means that there is no multi-collinearity between independent variables with one of the dependencies. 4.2. Selecting an appropriate model Initially, the authors used the Hausman test to select either the fixed-effects model (FEM) or the random-effects model (REM) for the data set to be studied.  A measure of liquidity Turnover Table 4. Hausman test result. Test: H0: difference in coefficients not systematic chi2 (3)= 92.84 Prob> chi2= 0.0000 Source: Calculation of authors According to a test result, the p-value of the test is 0.000 which is smaller than the statistically significant level, so it is eligible to reject Ho, i.e the choice of the fixed-effect model is appropriate. Table 5. FEM result. Turnover Estimation coefficient (β) T P_value SIZE 0.0232064 5.68 0.000 MB 0.0349849 14.09 0.000 EPS 0.0000112 7.20 0.000 LEV -0.0241892 -1.70 0.090 C -0.6365153 -5.70 0.000 Confidence interval 95% Source: Calculation of authors Table 5 has shown the results of the fixed-effect model. The result has shown that only LEV was not statistically significant at 5% significance level.
8. 358 HỘI THẢO KHOA HỌC QUỐC TẾ KHỞI NGHIỆP ĐỔI MỚI SÁNG TẠO QUỐC GIA  A measure of liquidity Zeros Table 6. Hausman test result. Test: H0: difference in coefficients not systematic chi2(3)= 26.57 Prob> chi2= 0.0000 Source: Calculation of authors According to a test result, the p-value of the test is 0.000 which is smaller than the statistically significant level, so it is eligible to reject Ho, i.e the choice of the fixed-effect model is appropriate. Table 7. FEM result. Zeros Estimation coefficient (β) T P_value SIZE -0.0155789 -2.75 0.006 MB -0.0294767 -8.55 0.000 EPS -3.68e-06 -1.70 0.089 LEV 0.0968585 4.89 0.000 C 0.6647563 4.29 0.000 Confidence interval 95% Source: Calculation of authors Table 7 has shown the results of the fixed-effect model. The result has shown that only EPS was not statistically significant at 5% significance level. According to both test results, the choice of the fixed-effects model is appropriate for all liquidity measures. The result has shown that impacts of factors on liquidity measures are also significant. First of all, SIZE that represents the factor of company size indicating a positive effect on the measure of liquidity and negative effect on the measure of illiquidity, implying that the larger the size of their total assets is, more increasing the liquidity of stocks is. This result is consistent with the results of the study of Woon Gyu Choi, David Cook (2005); Shuenn (2007); Madyan et al (2013); Wasfi A. Al Salamat (2016); Sedeaq Nassar (2016) and the author’s expectations. MB has a consistent with the impact on liquidity measures, implying that the impact of the ratio of the market value per share to the book value per share increases the stock’s liquidity. This result is consistent with the results of the study of Madyan et al. (2013), Nguyen Dinh Thien et al (2014) and the author’s expectations. EPS influences the measure of liquidity Turnover. Therefore, the result has shown the positive effect between earnings per share and the stock’s liquidity. This result is consistent with the results of the previous studies in the world and the author’s expectations. Financial leverage influences the measure of illiquidity Zeros, financial leverage has a positive effect on illiquidity, means that the higher the financial leverage is, the lower the stock’s liquidity is. The result is consistent with the author’s expectations. The result of quantitative analyzing shows that relations between liquidity of stocks and micro factors are existing and statistically meaningful. Especially, with a 95% confidence interval, both of company size and market to book value have expected, significant, and consistent effects on liquidity for all liquidity
9. INTERNATIONAL CONFERENCE STARTUP AND INNOVATION NATION 359 measures. The rest of earnings per share and financial leverage are negligible impact on the stock’s liquidity, which has been found to be statistically significant in one out of two liquidity measures. 5. CONCLUSION From the quantitative analysis of the impact of micro factors on the liquidity of the listed stocks. The authors found that the improving liquidity for listed stocks, especially, the listed code on the HOSE is essential. Improving liquidity can be based on the indirect impact on financial factors in the affected enterprises, as was demonstrated in the quantitative analysis. Accordingly, the authors propose a number of solutions and recommendations: Firstly, to improve the business performance. The enterprise shows lots of growth is always a desire of the investors. Therefore, improving the performance and profitability of enterprises not only makes sense in improving the liquidity of stock of enterprises (according to the results of the research model, earnings per share positive effect on the liquidity of stocks) but also helps enterprises viable and thrive in turbulent conditions of the economy. Secondly, to improve leverage efficiency besides to control the situation ensure payment or to increase the financial leverage for these listed firm; the first thing to be recognized that increase efficiency as well as to take advantage of loans capital. When mobilized a certain amount of loan capital that it is the time to make sure arm leverage, which is placed on a precise fulcrum to gain better profitability. However, using lots of debt, not only pressure on repayment but also increase settlement risk. Therefore, control risk and take advantage of the financial leverage that the tax shield is enough to compensate for incurred costs, so not only the profit’s enterprise improving but also attracting the interest of investors. Thirdly, to ensure sustainable growth. I.e if growth at a too fast and no commensurate with the development resources was needed so the level of risk is too high. A small fluctuation of the market may also be made to be bankrupt enterprises. REFERENCES Lê Đạt Chí & Hoàng Thị Phương Thảo (2015). Tác động của khủng hoảng tài chính toàn cầu lên thanh khoản của thị trường chứng khoán Việt Nam. Phát Triển & Hội Nhập, 26 (36), 53-59. Tạ Thị Thanh Thủy (2016). Nghiên cứu tính thanh khoản và biến động giá của các cổ phiếu trên thị trường chứng khoán Việt Nam. Luận án Tiến sĩ, Trường Đại học Kinh tế TP.HCM. PGS.TS. Nguyễn Thị Ngọc Trang & Trang Thúy Quyên (2013). Mối quan hệ giữa sử dụng đòn bẩy tài chính và quyết định đầu tư. Tạp chí Phát triển và Hội nhập, 9(19), 10-15. Nguyễn Thị Hồng Thảo (2017). Tác động của thanh khoản đến quyết định đầu tư: bằng chứng tại các công ty niêm yết trên thị trường chứng khoán Việt Nam. Luận văn thạc sĩ kinh tế, Trường Đại học Kinh tế TP.HCM. Trần Thị Hải Lý (2015). Chính sách tiền tệ và thanh khoản của thị trường chứng khoán Việt Nam. Tạp chí Phát triển kinh tế, 26(6), 2-22. Nguyễn Đình Thiên, Nguyễn Thị Mai Trâm, Nguyễn Hồng Thu (2014). Các yếu tố tác động đến khả năng thanh khoản của doanh nghiệp niêm yết tại Việt Nam. Tạp chí Đại học Thủ Dầu Một, 6(19), 24-32. Nguyễn Thị Kiều Hạnh, Hoàng Thị Minh Duyên (2016). Tác động của các nhân tố đến rủi ro hệ thống của các doanh nghiêp chế biến thưc phâm niêm yết trên thị trường chứng khoán Việt Nam. Nghiên cứu khoa học sinh viên, Đại học Kinh tế Quốc dân. Nguyễn Năng Phúc (2013), Giáo trình Phân tích báo cáo tài chính, NXB Đại học Kinh tế quốc dân. PGS. TS. Vũ Duy Hào và ThS. Trần Minh Tuấn (2016), Giáo trình Tài chính doanh nghiệp, NXB Đại học Kinh tế quốc dân.
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