FINANCE DISSERTATION ONIMPORTANT FINANCIAL FACTORSAFFECTING THE PROFITABILITY OFLISTED REAL ESTATE COMPANIES INVIETNAM

46 List of table Table 1 The highest profitable real estate firms listed in Vietnam in 2017...5 Table 2 Top ten listed real estate firms with fastest increasing in profit...5 Table 3 Top

Dissertation submitted in partial fulfillment of the

Requirement for the MSc in Finance

FINANCE DISSERTATION ON

IMPORTANT FINANCIAL FACTORS AFFECTING THE PROFITABILITY OF LISTED REAL ESTATE COMPANIES IN

VIETNAM

NAME OF STUDENT: DUONG TUAN MINH

ID No: 17047710 Intake 1

Supervisor: Prof Dr DO THI KIM HAO

September 2018

I would like to express my grateful attitude to Dr Do Thi Kim Hao, for her guidance andsupervision She has provided many useful advices and suggestions for this dissertation.Additionally, I would like to reveal my thankful to all the teachers participating in the Master

of Finance program, because they have always helped me in absorbing the knowledge in themost effective way and building the logical thinking as well as the problem-solving skills.Last but not least, I would like to express my sincere thankful to my family, especially mywife, for their continuing encouragement

Chapter 1: Introduction 1

1.1 Rationale of dissertation 1

1.2 Conceptual Basics 8

1.3 Research methods of the dissertation 10

1.4 Organization of the dissertation 10

1.5 Purposes of the dissertation 12

1.6 Methods of collecting data 12

Chapter 2: Literature review 13

2.1 Review of related literature and researches 13

2.2 Review for related literature and researches in Europe 14

2.3 Review for related literature and researches in Asia 16

2.4 Review for related literature and researches in Africa 19

2.5 Review for related literature and researchesin Vietnam 20

Chapter 3: Methodology of research 22

Data collection methods 22

Dependent variable and independent variables: 22

2.1 Dependent variable: 22

2.2 Independent variables: 22

Data analyzes process 26

3.1 Overview of panel data used for regression model 26

3.2 The formula of panel data 26

3.3 Techniques for estimating panel data: 27

3.4 Testing for the significance of statistics: 29

Chapter 4: Analyzing the researched data and presenting the findings 33

Testing for significant of statistics 34

1.1 Testing for individual significance of statistics 34

1.2 Joint significant testing 39

Testing for autocorrelation 43

Testing for multicollinearity 44

Chapter 5: Conclusion and recommendation 47

Conclusion 47

Recommendations 49

iv

List of Figures

Figure 1: GDP, GDP Growth and inflation of Vietnam from 2009 to 2019 1

Figure 2: The Durbin-Watson value based on Bhargave (1983) 44

Figure 3: The result for testing of multicollinearity 46

List of table Table 1 The highest profitable real estate firms listed in Vietnam in 2017 5

Table 2 Top ten listed real estate firms with fastest increasing in profit 5

Table 3 Top listed real estate firms with declined profit in 2017 comparing to 2016 7

Table 4 Top listed real estate firms with the highest inventory in 2017 comparing to 2016 7

Table 5: The regression model on independent variables 73

Table 6: The regression model after eliminating X2, Payable turnover 73

Table 7: The regression model after eliminating X4, Short term debt over total debt 74

Table 8: The regression model after eliminating X5, Current Ratio 75

Table 9: The regression model after eliminating X6, Gross Domestic Products 75

Table 10: Theregressionmodel after eliminating X9, Inventory Turnover 76

Table 11: Theregressionmodel after eliminating X10, Interest CoverageRatio 77

Table 12: Theregressionmodel for joint significant testing 77

Table 13: Theregressionmodel for testing of autocorrelation 78

Table 14: Theregressionmodel for testing of multicollinearity 79

Chapter 1: Introduction

This chapter reveals the reasons for choosing the subject of the dissertation, the conceptualbasic of profit and profitability, objectives of the dissertation, methods of collecting data andorganization of the dissertation

1.1 Rationale of dissertation

According to “Investing in Vietnam in 2018” of KPMG, since the financial crisis in 2008,Vietnam macroeconomic has experienced a swift recovery leading to considerable growth inreal estate sector Specifically, Vietnam’s real GDP reached the increasing rate of 7.3% inaverage during the period from 2005 to 2008 before plummeted to 5.3% in 2009 due to thefinancial crisis in 2008 The recovery of Vietnamese economy started in 2012, with GDPgrowth steadily going up and achieving 6% in 2014 GDP per capita in 2017 was $2,385 androse by 10% comparing with the numbers in 2016, based on “Q42017 Quarterly MarketBriefing Viet Nam” of Savills Vietnam The growth rate is predicted to increase at practically6.5% from 2018 to 2019

Figure 1: GDP, GDP Growth and inflation of Vietnam from 2009 to 2019

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The consumer price index (CPI) reached a new peak at 22.9% in 2008 due to the financialcrises before recovering in a slower pace at 7.4% in 2009 as the result of many solutions ofthe government such as tightened monetary and credit policies After that, the economyexperienced a wide fluctuation in inflation rate during 2011 to 2016 from 18.1% in 2011 to2.7% in 2016 as various inflation control methods from the Government became effective.However, the swiftly rising in demand for goods and services, reducing credit and growinginvestment from the economic growth of the country resulting to an upsurge in inflation rate

to 4.1% in 2017, according to World Bank The average rate of price rises during the periodfrom 2016 to 2020 is predicted to keep steady at 4%

In 2017, the Foreign Direct Investment (FDI) capital from foreign investors in Vietnam set anew record, 35.9 billion USD, including increased capital and newly-registered capital,increasing by 44.4% comparing to 2016 The capital from foreign investors was invested in

19 different industries and the real estate industry ranked third with $3.05 billion, aftermanufacturing, distribution and power generation

The total trading value of merger and acquisition in real estate field was $8 billion in 2017and the investors prefer to make investment to property companies in Ho Chi Minh City withgreater transparency in financial statements The Vietnamese real estate market continues toconsiderably fascinate to foreign investors, roughly by merger and acquisition Joint venturesare gaining the popular among foreign investors who have robust financial equity and theywill follow record then co-operate with local developers who own lands as well as have strongintegration with the local government and community According to “Overview on Mergerand Acquisition activities in Vietnam in 2017” of JLL company, there are many sectors in realestate industry will be invested million dollars such as office, residential, hospitality,industrial and retail Investors stay optimistic on real estate market in Vietnam with increasingnumber of investors searching for transparency land In 2017, Vietnam real estate market

recorded the highest number of foreign equity investors, mainly private capital funds,searching to reimburse their capital in swift and efficient manner.

The demand for hiring operating office buildings in core location continue to increase Theconsiderable need to invest in Vietnam market is in accordance with growing requests forproperty in Asia - Pacific in which the amount of investment in the area from January toSeptember in 2017 rose by 12%, $97 billion, comparing with the figures in 2016

According to “1Q18 Vietnam Property Market Brief’ of JLL Company, there wereapproximately 127,000 newly found enterprises during 2017 which was higher by 15.2%comparing with 2016 The newly registered capital of these companies in 2017 was 45.4%higher than the figure in 2016 and the average capital in 2017, at 10.5 billion VND At the end

of 2017, the number of enterprises putting an end to their business activities declined by 0.2%comparing with 2016

Moreover, Vietnam was one of the top ten fastest developing tourist destination in the worldbased on the numbers of visitors with many newly hospitality accommodation, according toColliers International In 2017, there were more than 13 million international visitors and thisnumber is 30% higher than 2016 The hospitality accommodation continued to growth swiftlywith more than 25,000 accommodations with more than 100 five-star hotels, 250 four-starhotels and nearly 500 three-star hotels

In general, the country’s economic growth will be strengthened by increasing consumption,rising direct investment from foreign investors, better export performance, strongerintegration with international economy and enhancing in the administration and regulationsystem With a stable political environment, low labor and operating costs, the continuoussupport from the Government as well as promised development of economic, Vietnam isconsidered as a dynamic country and an ideal investment for both foreign and domesticprivate investors to contribute in the growth of economy

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Company name Sales revenue (million USD) After-tax profit (million

This rapid recovery in economy has enabled an uptrend for the real estate industry where thedemand, supply and price are continued to rise since 2012 The real estate field has increased

by 4.07% which was the highest rate since 2011 and accounts for 0.21% of total GDP growth.Based on the report of Vietnam Real estate Association, the proportion of credit for tradingand construction of real estate companies in 2017 was approximately 15% which was lowerthan the number in 2016, 17.1% The consumption credit of the consumers continued to grow

in 2017 as the credit outstanding balance for purchasing houses for living, hiring houses,building and repairing houses for living or buying land to build houses was 52.9% in 2017,which was increased by 3.4% comparing with 2016 This indicates the growing demands fromthe customers in the market

The real estate market has enjoyed the high liquidity from many suppliers and giant projectsalong with the support from City Governments There are consistency robust demand frominvestors in the real estate markets due to the improved income and demographic shift fromcountryside to modern and developed cities The number of transactions of apartments hasincreased dramatically along with the drop in real estate inventory The growing trend in realestate market allows real estate developers to have promising development and profitablebusiness

According to the report of Vietnam Real Estate Association, the number of real estatecompanies increased considerably by 62% comparing with 2016 Additionally, according toVietnam Investment Review, in 2017, 59 large listed companies in Vietnam stock exchangehad considerable profit in their financial statements, around 155.093 trillion VND (6.8 billionUSD) which was higher by 39% than the numbers in 2016 Specifically, the consolidatedsales revenue of Vingroup rose significantly to 3,97 billion USD and increased by 57% incomparison with 2016 The sales revenue of Vingroup accounted for 58% of the total salesrevenue earned by all listed real estate companies Therefore, the consolidated net profit ofVingroup reached a new peak at 186.6 million USD and grew by 74% comparing to 2016

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Table 1 The highest profitable real estate firms listed in Vietnam in 2017

Vingroup Joint

StockCompany

Table 2 Top ten listed real estate firms with fastest increasing in profit

(decrease) (%)VRC Real Estate and Investment Joint

stock company

Source: Financial statements of listed companies and Vietnam Investment ReviewNovaLand Group came second in the top most profitable real estate companies with salesrevenue of $511.2 million and after tax profit of $90.58 million which increased by 58% and22.5% comparing with 2016, respectively Vincom Retail Joint Stock Company, onesubsidiary of VinGroup, is listed on Ho Chi Minh Stock Exchange and ranked third in the topfirms by earning around $240 million of revenue and $88 million of net profit

Among these 59 companies, there were 13 companies had increased their profit in 2017 morethan 100% VRC Real Estate and Investment Joint Stock Company ranked first in these 13companies with their profit up by 33 times comparing with 2016 Van Phu Invest Companycame second in the top fastest development real estate companies in Vietnam, as their profitincreased by 22 times in comparison with 2016 De Tam Company ranked third in the list

with the net profit was 3.6 billion VND in 2017

De Tam Joint Stock Company 3.67 0.2 1,771.94

Quoc Cuong Gia Lai Joint Stock

Company

Long Giang Investment & Urban

Development Joint Stock Company

Khang Phuc House Trading Investment

Company Limited

Hoang Quan

Consulting-Trading-Services Real Estate Corporation

Sai Gon Telecommunication &

Technologies Corporation

Investment and Trading Of Real Estate

Joint Stock Company

Cuu Long Petro Urban Development &

Company name After-tax profit (billion VND)

(decrease) (%)

Source: Financial statements of listed real estate companies and VietstockAccording to the report of Ministry of Planning and Investment, during 2017, the newlyregistered capital, 388.376 billion VND, rose by 66.5% in comparison with 2016 andaccounted for 30% of the total newly registered capital The average registered capital of 1company in real estate sector is highest comparing with other sectors, around 76.7 billionVND The listed companies went up from 11 in 2016 to 66 in 2017

However, there were 12 real estate companies witness a remarkable reduction in revenue in

2017 comparing to the numbers in 2016 and 6 companies experienced losses in 2017 To bemore specific, Viet Property Investment Joint Stock Company had the highest net loss, 146billion VND because their cost of goods sold was too high, 633 billion VND comparing withtheir sales revenue, 549 billion VND Additionally, there were 12 real estate enterpriseswitnessed the tremendous drops in their revenue in 2017 For instance, Song HongConstruction Joint Stock Company had the highest decline in revenue by 93% in 2017 orVietnam Mechanization Electrification & Construction JSC experienced their profit reducegradually year by year since 2014

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Table 3 Top listed real estate firms with declined profit in 2017 comparing to 2016

VRC Real Estate and Investment Joint

stock company

De Tam Joint Stock Company 381.88 1,014.34 (62.35)

Quoc Cuong Gia Lai Joint Stock

Hoang Quan

Consulting-Trading-Services Real Estate Corporation

Sai Gon Telecommunication &

Technologies Corporation

2,016.44 2,436.56 (17.24)

Investment and Trading Of Real Estate

Joint Stock Company

Cuu Long Petro Urban Development &

No Va Land Investment

Group

Corporation

26,886.3 15,789.64 70.28Kinh Bac City Development Share 8,322.63 8,243.70 0.96

Source: Financial statements of listed real estate companies and Vietstock

More importantly, total liabilities of listed real estate companies in Vietnam in 2017 wasmore than 105,500 billion VND which increased by 12% comparing with 2016 Especially,Short-term borrowings and finance lease liabilities of these companies was around 41,000billion VND which rose by 72% in comparison to 2016 Moreover, total inventory of the

industry was 155,600 billion VND which grew up by 13% comparing with 2016

Khang Dien House Trading and

Investment Joint Stock Company

4,620.86 4,617.79 0.07

Sai Gon Thuong Tin Real Estate Joint

Stock Company

4,031.10 3,606.25 11.78

Nam Long Investment Corporation 3,884.01 3,689.43 5.02

Song Da Urban & Industrial Zone

Investment & Development Joint Stock

Company

3,603.05 2,659.75 35.47

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Source: Financial statements of listed real estate companies and VietstockThe profitability as well as the chances of suffering losses of these companies is impacted bymany factors Therefore, the study analyzing the influence of the financial factors on theprofitability of Vietnamese real estate companies is an urgent demand and crucial forinvestors who are intend to make successful investment to listed Vietnamese real estatecompanies as well as for the management of the companies to utilize the companies’resources to gain more profit Moreover, the dissertation would also provide theoretical andpractical contribution for regulators and government of Vietnam to develop the real estatemarket in Vietnam From all the reasons mentioned above, the chosen topic of the dissertation

is “Important financial factors affecting the profitability of listed real estate companies inVietnam”

1.2 Conceptual Basics

According to Adamu Yahaya in 2016, Profit is the surplus of revenues over related expenses

of an activity during a period of time Profitability means ability of the companies to generateprofit from their business activities In other words, profitability is an ability of the company

to generate profit as an outcome from the initial investment based on the resources of thecompany It illustrates the efficiency the management to generate profit by using all the

resources available in the companies Although a company is able to produce profit, thiscannot guarantee that the company can be profitable and owners as well as financial managerscannot only rely on the profit Therefore, the financial managers need to analyze theprofitability in order to evaluate the ability of the company to utilize its capital investment andresources Specifically, profitability ratios can be used to evaluate an ability of a company toearn profit against its related expenses In majority of these ratios, higher ratios mean higherability to generate profit and this indicates the how well is financial performance of thecompanies.

The ratio of profitability is normally express by Return on Asset and Return on Equity Return

on Assets (ROA) is evaluated by the costs and expenses relating to profit, and the profit isanalyzed against assets to assess the effectiveness of a company in utilizing assets to generatesales revenue, gross profit and finally net profits When companies use more assets, theyshould generate more sales revenue and more net profits The cost of the company would belower and the profit margins would increase, therefore the profit might grow at a faster pacethan assets leading to increasing in return on assets or profitability Return on Equity (ROE) isassessed by the ability to earn returned profit based on the initial equity investment Return onEquity could grow enormously without making additional equity investment because thecompany just needs to utilize the invested equity to gain higher profit

Profitability of listed real estate companies in Vietnam could be depended on many financial and financial factors, such as organizational culture, corporate social responsibility,innovation and financial management The financial management of real estate companies isrepresented by financial ratio of the companies such as account receivable cycle ratio,inventory ratio, account payable ratio, debt ratio or current ratio Therefore analyzing thesefinancial ratios would help to identify which factors are significantly correlated withprofitability

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1.3 Research methods of the dissertation

The profitability, the dependent variable would be measured by Return on Assets (ROA) andthe independent variables are receivable turnover (RT), payable turnover (PT), Short termdebt over total debt (TOTAL_DEBT), company size (SIZES), current ratio(CR),macroeconomic factor measured by Growth rate of Gross Domestic Products (GDP), FirmGrowth (FGR), Sales to capital employed ratio (SCE), inventory turnover(INVENTORY_TURNOVER) and interest cover (INTEREST_COVER) The correlationbetween these dependent and independent variables would be tested by using Ordinary LeaseSquares model

The null hypotheses are:

- H0: Independent variables cannot explain the profitability of Vietnamese real estatecompanies

- H1: Independent variables can explain the profitability of Vietnamese real estate companiesThe hypotheses would use the multiple regressions and the econometric model for theestimation of the regression is as follows:

ROAi,t =α +β1X1,t+ β2X2,t+ β3X3,t+ β4X4,t+ β5X5,t + β6X6,t + β7X7,t + β8X8,t + β9X9,t + β10X10,t ++Uit

The results from the regression would show the negative or positive correlation between thedependent variable and independent variables as well as which independent variables havemore influence on dependent variable

1.4 Organization of the dissertation

To resolve the proposed objectives of the dissertation, the dissertation would be organized as

5 chapters and the specific content of each chapter are as following:

Chapter 1: Introduction

This chapter illustrates the reason choosing the subject of the dissertation, the necessity of thedissertation, reveal the general economic condition of Vietnam as well as the overallcondition of Vietnam real estate market and financial condition of Vietnam real estatecompanies, conceptual basics for the definition of profit and profitability, objectives of thedissertation, methods of collecting data and research methods of dissertation as well as thestructure of the dissertation.

Chapter 2: Literature review

This chapter shows the prior literatures related to financial performance of international anddomestic listed real estate companies by summarizing and analyzing the initial researches topoint out the reasons why these financial indicators are chosen in explaining the profitability

of the companies

Chapter 3: Research Methods of the dissertation

This chapter reveals the definition and measurement of dependent and independent variablesand shows the econometric model with hypotheses After being measured, the principle andmethod of analyzing the data resources would be presented

Chapter 4: Analyze the researched data and present findings

This chapter shows the results of research and gives explanation for the results The results ofthe research would include descriptive statistics, analysis for correlation between thedependent and independent variables, verify whether the hypotheses of the research model arecorrect or not and identify to what extend the independent variables can explain the dependentvariable

Chapter 5: Conclusion, limitations and recommendation of the study

This chapter conclude what financial factors impacting the profitability of real estatecompanies based on the collected results of the study, deliver several recommendation for thegovernment to improve the effectiveness of real estate market in Vietnam as well as the

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financial condition of real estate industry and for the real estate companies to improve thefinancial performance, the limitations of the study and orientation for next researches.

1.5 Purposes of the dissertation

The specific purposes of the dissertation are:

- To examine the correlation between profitability and related financial indicators

- To identify which financial factors have stronger impacts on profitability based on theoutcome of coefficients from the tests

- To verify the suitable strategies to improve the profitability of the real estate companies inVietnam

1.6 Methods of collecting data

The financial statements of 53 listed real estate companies with different sizes as small,medium and large sizes from 2013 to 2017 would be collected from Vietnam stock exchange

or their official website Then the financial ratio, financial indicators would be calculatedbased on the numbers from these financial statements After that, these financial ratios would

be used as independent variables and dependent variable for running multiple regressions byapplying Ordinary Least Square method and fixed effects of Cross Section

Chapter 2: Literature review

2.1 Review of related literature and researches

The most vital objective of managing the companies technically is generating net profit andthe efficiency in operation of the companies is measured by net profit Moreover, profit isdeterminant for the survival of the companies as well as the potential to development andexpansion of the companies According to Gabriela Loagă (2010), in order to be able to gainmuch profit, the companies must have the balance and combine the following crucial factors:the effective process in production, the satisfaction of the owners as well as the clients, theresearch and innovation and the growth or expansion of the companies Therefore, thecompanies must develop thorough understanding about the business environment, the factorsdetermining the profitability by performing the measurement carefully

Profitability is the capability of the companies in generating profit from the operating ofcompanies This can be evaluated by many methods and criteria and based on result offinancial performance According to Costea Valentin (2012), the research had distributed thedeterminants of profitability of the companies into two categories: modern determinants andclassic determinants Modern indicators are concerned to the value added to the companies asthe results of the production process such as added economic value and market value of thecompanies, investment ratio such as dividend payout ratio, price-earnings ratio, market tobook ratio, dividend per share, and earnings per share For classic indicators, this is related toother ratio such as gearing ratio including debt ratio, borrowing ratio, interest cover andprofitability ratios including gross profit margin, operating profit margin, net profit margin,return to capital employed, return on Equity Among these ratios, researching based on theprofitability ratio is the most popular method used to identify the profitability of thecompanies Based on Eubica Lesáková (2007), profitability ratios demonstrate the capability

of the companies in creating profit, return on initial investing as well as delivering the signalfor good financial health and managing the assets in an effective way

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To measure profitability of the companies, according to Vijaykumar (2011), net profit marginwas used as dependent variable to evaluate the profitability of the companies Net profitmargin is measured by net profit divided by sales revenue The research used regressionmodel with panel data from 18 automobile companies to point out that sizes of the companies,financial leverage, inventory day ratio and tangibility are significant determinants ofprofitability Moreover, based on Basha and Islam (2014), the gross profit margin was used asthe dependent variable to verify the profitability of the companies However, the limitation ofthe study has been pointed out as the profitability ratio including gross profit margin or netprofit margin is only used for short period of time and the profitability ratio is affected bymany objective factors such as seasonal, inflation, leaders of the industry, different inoperating and accounting practices causing different ways to recognize profit Therefore,other factors must be used to measure profitability of the companies The following part willpresent besides profitability ratio, which financial indicators could be the most helpful andaccurate in measuring the profitability of the companies.

2.2 Review for related literature and researches in Europe

According to Valentine Cosmin Saracin (2012), the most important financial factorsimpacting the profitability of the real estate firms in Romania have been pointed out such asfinancial leverage, proportion of fixed assets in total assets, gross margins, receivable turnoverand payable turnover, inflation and gross margin The paper has indicated the strongcorrelation between these independent variables and the dependent variable, Return onEquity Moreover, the financial conditions are impacted by financial risks If companies havethe obligation to pay the regular debt, they have to decrease their available financial resourcesfor business hence leaving impacts on profitability The profitability is also affected by grossmargin as if this factor is rather low, the market competition will be very high therefore theprofitability is also quite low Financial performance of the companies are positively

correlated with the number of rotation days for receivable and payable as the companies

rapidly collect debts and make payment to the suppliers punctuality, the financial health of thecompanies would enjoy the upward trend There is also negative correlation between theprofitability and inflation.

As Klaus Hammes and Yinghong Chen (2005) stated, the profitability measured by profitbefore tax was heavily correlated with debt ratio, tangibility, companies sizes and companiesages For the majority of the countries in Europe apart from Sweden, profitability has negativerelationship with the debt ratio because larger debt would be related to negative profit beforetax Sizes of the companies leave positive impacts on profitability in almost all countriesexcluding Sweden because larger companies could have higher borrowing comparing tosmaller companies and their fixed costs are low comparing to the cost of smaller companies.Meanwhile tangible assets have negative influence in general profit level and earning ability

in many European countries The effect of age of the firm is fluctuated among countries such

as positive in Finland and negative in France

In addition, based on Klaus Hammes and Chen (2005), we can conclude that the pace ofassets’ rotation, interest rate, firms’ ages and companies’ size are strongly correlated with thefinancial performance of real estate firms Specifically, Companies sizes are positivelycorrelated with profitability and the debt ratio, tangibility and firms’ ages are negativelycorrelated to financial condition of companies, as older firms don’t have many chances tocompete for profitable investment Moreover, according to Kim Hiang Liow and Ho Kim HinDavid (2009), the stock returns of the companies are strongly related to market to book ratio,companies sizes, return on equity, debt ratio, cost of equity, spread, fixed tangibility andearnings retention ratio Specifically, in many countries in Asia and Europe, the impacts ofcompany sizes and sustainable growth rate on profitability are considerably positive revealingthat larger and higher developing real estate companies are related with higher rate of return(Return on Assets) However, these variables are also positively and insignificantly correlatedwith profitability for North American real estate companies Tangibility of Asian and North

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American enterprises is positively correlated with profitability but the correlation is not strong

as the European real estate companies Last but not least, the profitability of every real estatecompanies in all regions demonstrated the negatively relationship with capital structurebecause higher debt ratio could have negative contribution on financial performance ofcompanies and interest of borrowing is the first factors impacting the profit of companies.Moreover, as Goddard, Molyneux, and Wilson (2005) stated, by applying the positivecorrelation between Gross Domestic Products and Profitability of around 600 EuropeanCommercial Banks Or as Doma Rema Marak and Sirion Chaipoopirutana (2014) researched,the profitability of the companies is positively related to the economic growth of the country.Additionally, the negative relationship between inflation rate and profitability of thecompanies are also revealed in this study Meanwhile, based on Houssem (2013), thenegative correlation between Consumer Price Index and profitability of the firms are indicated

by using panel model

2.3 Review for related literature and researches in Asia

Furthermore, based on Farah Margaretha and Nina Supartika (2016), the indicators impactingprofitability are examined such as size of the firm, firm age, sales growth rate, pastprofitability, labor productivity measure by value added comparing with number ofemployees, and industry affiliation which is the ratio of sales minus cost of goods sold ofSmall and Medium Companies listed in Indonesia Stock Exchange The results reveal thatfirm size, sales growth rate, past profitability, labor productivity and value added by ratio ofsales minus cost of goods sold enormously impact on profitability On the other hand, thevariable namely age of the firms does not statistically considerably impact profitability Theoutcomes of the regression model in the paper also illustrate that the independent variable size

of the firm, sales growth rate, past profitability are negatively correlated on profitability,meanwhile the independent variable namely labor productivity and industry affiliation are

positively correlated with profitability Therefore, to continue to improve the company’s

financial performance, the manager could identify a suitable strategy to maximize theprofitability by focusing on productivity of labor forces and industry affiliation which is theratio between sales and cost of goods sold.

Additionally, according to John Francis T Diaz and Martha Christianie Tjokro Hindro(2017), the research analyzes the correlation between financial factors and the profitability of

47 listed real estate Indonesian companies from 2010 to 2014 with different sizes from small,medium to large companies The multiple linear regression estimation was used in theresearch in order to verify the influences of these following factors on the profitability:receivables days ratio, inventory days ratio, payables day ratio, company sizes, tangibility,debt ratio, current ratio and sales growth ratio The results of the research indicate that thereceivables day ratio and inventories day ratio are negatively correlated with profitability ofcompanies except for real estate firms with medium and small sizes in Indonesia Howeverthe correlation between this ratio and profitability of large real estate companies is positive,due to the liquid assets of larger firms as well as their ability to offset the expenses formaintenance of inventories of real estate firms Both size of the companies and increasing rate

of sales are positively correlated to profitability except for medium real estate companies inIndonesia Moreover, current ratio is positively correlated with profitability in real estatecompanies with large sizes whereas the correlation is negative for small real estate companies,because smaller real estate companies normally have the lower current asset Additionally,tangibility is negative correlated to profitability of large real estate firms, meanwhile thecorrelation is positive for medium real estate firms

In Dr Anupam Mehta (2014), the key findings of this study are that there exists a significantnegative relationship between the profitability, measured through Return on Assets and thelength of the firm’s cash conversion cycle Longer the cash conversion cycle, lesser is theprofitability The paper further explores that amongst cash conversion cycle, whichcomponent (Days in sales outstanding, days in inventory outstanding and Day’s payables

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outstanding) is having the most significant influence on the profitability The study brings outthat the day’s payables outstanding is inversely related to profitability, this means the soonerthe companies make payment to creditors, the better it will be for the overall profitability This could also indicate that the less profitable concerns take more time to make the payment.Consistent with previous studies, the firms can improve profitability by reducing the number

of days the required to convert the inventory into sales The Liquidity also has inverserelationship with profitability Higher the funds are tied up in current assets lesser will be theprofitability The study also brings out that the Size of the concern is immaterial forenhancing the profitability Thus the study concludes that the UAE’s real estate andconstruction companies can significantly increase their profitability by giving focus onmanagement of the working capital and shortening the length of the cash conversion cycle byeffectively managing the working capital components especially the payables and Inventories.Furthermore, in the research of Mahmood and Rozimah (2007), this paper analyzes theprofitability and capital structure among real estate firms and construction companies inMalaysia from 1996 through 2003 The results indicated that real estate companies inMalaysia can have larger size and are able to gain more profit due to their capital gearing anddebt equity ratio were reducing The results also revealed that the debt of constructioncompanies is considerably high and the demand to follow the obligation of this debt is veryhigh leading to quite low profit margin The results are similar to the outcomes on theindustrial market in Hong Kong showing that capital gearing have shown the negativecorrelation with price earnings ratio and profit after tax margin for real estate and constructionindustry because the companies with significant capital gearing have to fulfill their debtobligations in which would make their profit margin and price earnings ratio decline,irrespective of their business sizes Generally, the study illustrates that the amount of debtover equity is negatively correlated with the ratio of net profit to total profit and priceearnings ratios for property developers

2.4 Review for related literature and researches in Africa

Additionally, in the study of Basman Al Dalayeen (2017), the paper has illustrated the effects

of working capital management as the current ratio, debtor turnover ratio and inventoryturnover ratio, which are independent variables on profitability of real estate firms, which isdependent variable and measured by Return on Capital Employed The investigation on thedata indicated that debtor turnover ratio and current ratio are positively correlated with theprofitability and the effects are significant However, the remaining independent variables arepositively but not strongly correlated with the profitability of real estate companies asinventory turnover Moreover, in the research of Fidelis Ifeanyi Emoh and Ikhuoshio Uzuanje(2015), the research indicates that real estate companies earn revenue through renting andusing borrowing sources to generate the income of equity investment in which createsfinancial leverage This leverage is reasonable for real estate firms as long as the rate of return

of the companies is higher than the cost of capital This study on the other hand, indicated thatthe growing cost of capital of Nigerian Real estate companies during the recent 5 years causednegative rate of return Because capital for the development of real estate companies isextremely intensive, along with the poor condition of the economy in Nigeria, many realestate investors cannot have enough investment capital only by personal income thereforethey need to borrow and create a financial leverage for the development The high lendingrate from financial institutions creates a significant amount of cost of capital which makes theincome flow decreased and lead to the negative rate of return on investment In general, thisstudy indicated that the growing cost of capital leaves negative impacts on the profitability

In the study of Jane Nduku (2015), the paper has shown that capital structure leaves an impact

on profitability of real estate companies, but the statistically relationship between these factors

is quite weak Specifically, the ratio of short term debt over total debt leave the mostsignificant impact on the profitability of the real estate firms, measured by Return on Assets(ROA), the proportion of net profit before tax over total assets However, other factors of

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capital structure have weak effects on profitability of the companies such as long-term debt tototal debt or debt to equity ratio Therefore there are other major indicators impactingprofitability of the real estate firms other than capital structure and the real estate firms shouldfocus more on current debts over total debts because this has the most remarkable impactscomparing to other the variables.

2.5 Review for related literature and researches in Vietnam

In Vietnam, many studies have been done to indicate the important factors determining theprofitability of companies, such as the study of Duy Nguyen (2017) This paper reveals thatthe structure of assets, size of bank and the diversification do not affect the profitabilityconsiderably The quality of asset and the ability to reduce the administration expense are themost important factors determining the profit in the period Banks having higher investedcapital could generate lower profit than using financial leverage Performance of bankingindustry is remarkably correlated with macro-economic factors such as inflation rate oreconomic conditions Banks with high level of equity would provide the positivelyrelationship with Return on assets but the relationship is not statistically considerable.Besides, the relationship with Return on equity is enormously negative For real estate market

in Vietnam, according to Hoai, N N., & Thanwadee, H (2015), the profitability of real estatecompanies also depends on many similar financial indicators like banking industry, such asGross Domestic Product per capita, saving ratio, consumer price index, deposit interest rate,taxes and fees, land cost and construction cost, expected profit of developers, debt to equityratio Specifically, there is considerable positive correlation between Gross Domestic Productper capita and profitability of companies On the other hand, there are remarkable negativecorrelations between Consumer price index, construction cost, deposit interest rate, taxes andfees, land cost and construction cost, debt to equity ratio and the profitability Moreover, inthe research of Thi Kim Nguyen (2013), from 2003 to 2009, in the normal economic

conditions, real estate securities underperformed market shares Despite the fact that Vietnam

shares can deliver a high rate of return, it is just the compensation for the significantunderlying high risk and eventually leaded to the reducing in risk-adjusted return than thereturn of bonds In addition, Vietnam property securities outperformed the real estatesecurities of many developed markets such as United States, United Kingdom or Australiafrom 2003 to 2009 and the beginning period global financial crisis but underperformed threebenchmark markets in the period near the global crisis in 2009 This paper also considers theefficient frontiers, the best possible return for investment portfolios of real estate companies

in Vietnam from 2003 to 2009 The analysis reveal that real estate securities alwaysunderperformed bonds and the real estate companies securities do not offer the high profit forinvestment portfolio The reason for this result is the unstable return of emerging market asVietnam

In general, based on the above literature review and initial researches, in this dissertation,Return on Assets (ROA) will be chosen as the measurement of profitability of the listed realestate companies in Vietnam There are several explanations for this action Firstly, Return onAssets, Return on Equity and Return on Investment have significant correlation during thetime however the Return on Assets remain mostly unchanged over the period of time.Additionally, not like Return on Equity, the Return on Assets used for analyzing includes allkinds of assets and owner equity from the shareholders and the owners or shareholders want

to evaluate the using of resources invested in the companies Moreover, Return on Assets can

be used to trace the using of assets in internal companies and manage the performance of thecompanies, then increase sales revenue and productivity as well as reduce the operatingexpenses and cost of goods sold The independent variables are identified as Receivableturnover, payable turnover, sizes of the companies, current ratio, firm growth rate, sales tocapital employed, inventory turnover, interest coverage ratio and tangibility

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Chapter 3: Methodology of research

1 Data collection methods

During the period from 2013 to 2017, there were 56 listed real estate companies in Vietnamand the data were collected and analyzed from 53 companies based on the availability of thedata and the companies with different sizes The data of the dissertation are collected from theyearly published financial statements of the listed real estate firms in websites of thecompanies, reports and information in published newspaper, or the official website of Ho ChiMinh Stock exchange market or Hanoi Stock exchange market Then the financial ratio,financial indicators would be calculated based on the numbers of the obtained financialstatements

2 Dependent variable and independent variables:

2.1 Dependent variable:

Profitability of listed real estate companies in Vietnam is measured by Return on Asset which

is related to Total Assets This would reveal that to what extent the total assets are utilized togenerate profit Return on Asset is calculated by the formulation:

NetincomeReturn on Assets = ——— -—

Total Assets

2.2 Independent variables:

Receivable turnover ratio:

The receivable turnover ratio measures the efficiency of the companies in collecting theliabilities from their customers in a timely manner A high receivable turnover reveals anaggressive collecting debts policy as well as a high credibility customers The receivableturnover is calculated as follows:

Sales revenueReceivable turnover = -— -;———

Average Trade receivables

Payable turnover ratio:

The payable turnover ratio evaluates the ability of the companies in paying their liabilitiesduring a period of time Additionally, the ratio can reveal how many times in average thecompanies pay their creditors during the fiscal year Therefore, a high payable turnover ratioindicates the instant payment being made to vendors for purchasing on credits The ratio iscalculated as follow:

CostofgoodssoldPayable turnover = -— -——

Average Trade payablesSize of the companies

According to “Factors Affecting the Profitability of Indonesian Real Estate Publicly-listedCompanies” of Dr John Francis and Martha Hindro, the size of the companies are measured

by total assets of the companies as large companies can utilize their economic of scale andwould be able to generate more profit based on their bigger total assets Size of the companiescan be calculated by using Logarithm Neper of total assets of companies and the total assets

of the companies is available in the balance sheet of the companies

Sizes of the companies = Ln(Total assets)Short term debt over total debt

The short term debt over total debt ratio reveals to what extent of the short term debts areincluded in the total debt of the companies The high ratio indicates that the companies need

to maintan their liquidity assets in order to to fulfill the urgent debt obiligations in the shortterm Therefore the companies might not be able to invest in other current opportunities andreduce their profitability in the short term The ratio is calculated as follow:

Short term debtShort term debt over total debt ratio = ———1 1 1 -X IOO

Total debtCurrent ratio

The current ratio indicates the liquidity of the companies or the ability of the companies to

finance their obligation in short term and long term Specifically, the current ratio reveals the

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ability of the companies to pay back their liabilities with the high liquidity assets such as cash,short term account receivable, short term investment and inventory Additionally, the currentratio shows to what extend the companies has operated effectively to turn their productioninto liquidity assets If companies having troubles in collecting their receivables or reducingtheir high inventory turnover, they may encounter the liquidity problems as the companiescannot meet the short term debt obligations in a timely manner.

Current assetsCurrent ratio = -, 1 1 1.ι.—

Current liabilitiesFirm Growth Rate

According to “Factors Affecting Profitability of Small Medium Enterprises (SMEs) FirmListed in Indonesia Stock Exchange”, the growth rate of the firm can be measured by thegrowth rate of sales revenue over the years Sales growth rate is the main indicators of theprofitability of the real estate companies The companies with high growth rate of sales canhave high financial performance because they have high ability to generate profit.Specifically, the sales growth rate over the years can be calculated as follows:

Salesrevenueinyeart-SalesrevenueinyearCt-I)Firm Growth Rate = -— -; -— -

Sales revenue in year (t — 1)Sales to Capital Employed Ratio

Sales to Capital employed ratio evaluates to what extent the companies effectively employtheir capital to generate sales revenue Capital employed is the total amount of equity investedinto the companies.The higher the ratio, the more effective the capital is employed andtherefore the more profit companies can generate However if the ratio is too high, thecompanies cannot have enough financial resources to finance their sales activities The ratio iscalculated as follows:

Sales revenueSales to Capital Employed ratio = ———; - —— - -——

Total equity + Longterm debt

Inventory turnover

The inventory turnover ratio indicates the Capablity of the companies in to what extent thecompanies can rapidly sell and replace their inventory during the financial period The lowerratio reveals the weak sales and significant amount of inventory in stock location, thereforethe profitability of the companies will reduce Otherwise, if the ratio is too high, the

companies had launched effective sales compaign or they had offered large discounts to theircustomers to boost their sales revenue The inventory turnover is calculated as follows:

CostofgoodssoldInventory turnover = -;—■——

Average inventories heldInterest Coverage Ratio

The ratio reveals to what extent the companies are able to pay their financial expenses inoutstanding liabilities by their earnings This ratio indicates the safety of financial condition

of the companies The higher the ratio, the less the companies is covered by financialexpenses in outstanding debts Otherwise, if the ratio is lower than 1, the companies canencounter the financial distress and reduce the profitability of the companies The interestcoverage ratio is calculated as follows:

Operating profitInterest Coverage Ratio = —77 - —

Finance costsGross Domestic Product

According to Dr S Ghosh (2007), “GDP or Gross domestic product, is the market value ofall final goods and services produced in a country in a given time period” Gross DomesticProducts is the measurement of the growth rate of economic as the growth rate of economic isthe changes in percentage of the quantity of final goods and services produced during a period

of time The growth rate of economic has significant impacts on the profitability of the firmstherefore the dissertation analyzes the growth of Gross Domestic Product in two consecutiveyears The growth of Gross Domestic Product is available in the official website of GeneralStatistics Office of Vietnam

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3 Data analyzes process

3.1 Overview of panel data used for regression model

In general, the common kinds of data used for regression model are panel data, cross-sectiondata and time series data For cross-section data, the researchers would collect and analyzedata at specific place and during a specific point of time, for instance, inflation rate inVietnam in 2017 Meanwhile, the time series data would allow the researchers to analyze thevariables during the period of time, such as fuel prices of Asian countries from 2013 to 2017

or the development of Vietnamese economic since joining World Trading Organization in

2008 until 2017 Panel data is the combination of time series data and cross-section databecause the data must be collected for many variables with different conditions and for manydifferent periods of time According to Marno Verbeek (2004), the panel data would allow theanalyzers to supervise the non-statistical variables such as cultural factors in business,different companies’ rules or variables changing over different period of times but not acrossdifferent sectors Additionally, panel data would allow the analyzers to have significant points

of data in which the degree of freedom is increased and the multicollinearity betweendifferent variables is dropped considerably Moreover, panel data would provide general viewfor economic issues in which that cannot be solved using cross-section data or time series dataand the differences between cross-section variables can be found by using panel data

Therefore, in this research, the panel data with fixed cross-section would be used to collectdata from different listed real estate companies in different period of time and analyzed forregression model

3.2 The formula of panel data

According to Grunfeld (1958), the panel data was used with the following formula:

with a is the ath cross-sectional

b is for the bth time period

Y is the dependent variable

α is the independent variables

β is the regression coefficient of independent variables

U is the error term of the model

3.3 Techniques for estimating panel data:

Different types of estimation method for regression model of panel data are Ordinary LeastSquares (pooled model), fixed effects model and random effects model

For pooled model, all variables are fixed and remain unchanged for the period of time and thedifferences between each variable or individual are almost zero Meanwhile the coefficientDurbin Watson of this regression model is too low indicating that there are correlationsbetween the variables The formula used for this model is:

Y ab = β i α ab + U ab

For fixed effects model, the individual heterogeneity observed during the period of time isallowed to have correlation with error term In fixed effects model, the essence of thevariables does not vary during the time period and this model could be very helpful inanalyzing the fluctuation of the variables’ value in the period Specifically, the correlationbetween the variables and the error term is existed and the specific effects of time-invariantfeatures are eliminated Then the net effect of the independent variables on the dependentvariable can be estimated Additionally, these time-invariant features are unique and don’thave any correlation to other characteristics of individual The most important point in thefixed effects model is that any changes of dependent variable are caused by independentvariables because the unobserved variable or the error term does not change during the period.Comparing to Ordinary Least Squares method, each variables have different impacts on thedependent variable, and the formula of this model is:

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Y ab =α ab + Σ β i α ab + U a b

For random effect model, there are many similar features to the fixed effects model However,the correlation between the independent variables, the observed variables and the unobservedvariables or the error term must not be existed Specifically, in the random effects model, thespecific effects of each individuals are random and dependent variables that are uncorrelatedwith the explanatory variables during the period

However, the fixed random effect model is used widely to evaluate the factors havinginfluence in profitability In the research of Hindro and Diaz (2017), three multiple regressionmodel were used to analyze the panel data namely Ordinary Least Square methods, fixedeffects model and random effects model The result of this study indicates that fixed effectsmodel is the most suitable method for analyzing the determinants of profitability The sameresult can be concluded from Sami and Mohamed (2010), in which the fixed effect model wasused to identify which independent variables have correlation with the profitability ofcommercial banks The similar outcome can also be obtained from Masood and Ashraf (2012)

as the panel data and fixed effects model are also used to verify the correlation between themacroeconomics independent variables and the profitability of the specific banks Therefore,

in this research, the fixed effects model is used to evaluate the relationship between thedependent and independent variables Moreover, the interceptions of the model are assumed

to be consistent about the time period and location The slope coefficients remain unchangedduring the time whereas the error term would change over the time period and the individualsare used with suitable approach which removes the dimensions of space and time from thedata of pool model In general, the formula used for this dissertation is:

Y ib =α + ∑ β i X it + U it

Where i stands for the ith cross-section unit

t stands for the tth time period

Y stands for dependent variable

Xi stands for the dependent variable

β stands for the coefficient of the independent variables

U stands for the error term

3.4 Testing for the significance of statistics:

After gathering data, the inference of statistics could provide assessing to evidence or generaldeclaration about the population The methodology for inference used to accept or rejectdeclaration on the sample population is the tests of significance

3.4.1 Testing for the significance of variables:

By applying the null hypothesis and panel data, α and β are constant during the period of time,space then the simple t-test is applied With each coefficient of the independent variables, β,this study would build null hypothesis to evaluate whether the independent variables can beable to explain the changes of the dependent variable The null hypotheses are as follows:

H0: βi =0 is not significant, meaning that there is no relationship or correlation betweendependent variable and independent variables Therefore the independent variables are unable

to explain any changes of the dependent variables

H1: βi ≠ 0 is significant meaning that there is a relationship or correlation between dependentvariable and independent variables Therefore the independent variables are capable ofexplaining any changes of the dependent variables

These null hypotheses are tested by comparing P-value of independent variables withsignificant level α, where confident level is 95% After comparison, if the p-values ofindependent variables are lower than significant level α, these null hypotheses will berejected From different point of view, if the p-values of independent variables are higher thansignificant level α, these null hypotheses will be accepted

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3.4.2 Testing for joint significance of variables:

By applying the F-test, the null hypotheses with multiple parameters would be evaluated Thenull hypotheses are as follows:

HO: β1= β2= β3=0

HI: β1≠ β2≠ β3≠0

After comparison, if the p-values of independent variables are lower than significant level α,these null hypotheses will be rejected Otherwise, these null hypotheses will be accepted

3.4.3 Testing for multicollinearity:

When using regression model with Panel data, Multicollinearity between the variables oftenappears The existence of correlation between independent variables can be found in normalcondition, however if the correlation is too high, the multicollinearity will happen So thiswould cause problems because the current econometric used for regression model is:

to estimated value Therefore, in order to evaluate the correlation between the variables,firstly the correlation between independent variables would be examined, and if thecorrelation coefficients are higher than 0.8, then the multicollinearity would be existed Theformula for regression model for one by one independent variable would be as follows:

XI= β1+ β2 X2+Ui

HO: β2 =0, meaning that there is no correlating relationship between X1 and X2

H1: β2≠0, meaning that there is correlating relationship between X1 and X2

After comparison, if the p-value of significant independent variables is higher than the

significant level α =0.05, then the null hypothesis will be accepted Otherwise, the null

hypothesis will be rejected

3.4.4 Testing for Heteroskedastieity

Heteroskedasticity is variance of Ui, this could be illustrated as error terms appearing in thepanel data, when the changes in variances exist during a short period To be more specific,heteroscedasticity can be identified in which the variation, or the standard deviation, of theerror term monitored over the period of time does not remain constant across the observation.The heteroskedasticity is caused by several following reasons:

- There is an outlier of panel data, meaning that there is an significant distance between thelowest value and highest value

- The shortage of redundant variables

- The data is collected from cross sectional rather than longitudinal

However, in this research, the heteroskedasticity is assumed not to happen because the

reasons causing this phenomenon don’t appear Firstly, the data is collected from cross

sectional of 53 real estate listed companies in the stock market rather than the longitudinalwith 5 years Secondly, according to James H Stock and Mark W.Watson (2008), when usingpanel data, the heteroskedasticity will appear and the research had tried to solve these

problems with panel data, however it’s nearly impossible to totally eliminated

heteroskedasticity because testing this phenomenon would could the bias to the final results.Therefore the recommendation is that this problem should be put as limitation of the studyand this dissertation would not test this phenomenon

3.4.5 Testing for autocorrelation:

Autocorrelation relates to the correlation of time series data with its own value in the past andfuture This phenomenon, sometimes can be referred as “lagged correlation” or “serial

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correlation”, can be illustrated as the correlation between participants of a series of numbersarranged during the time period In general, the panel data is examined with no correlatedrelationship with error term Ui The formula for correlation would be as: Cov(ui ,u2i)=0 orCov(ui.,U2i) ≠0.

If this phenomenon appears in the model, several problems could be caused For instance, thedependent variable could be incorrect, or the true variance can be underestimated.Furthermore, the null hypotheses can be rejected even when these hypotheses are true.Therefore, to point out the existence of this phenomenon, this dissertation would use Durbin-Watson index to examine the result with the following condition must be satisfied:

- The model must have the intercept α and doesn’t include the lagged and unclear variables.The conclusion about the autocorrelation using Durbin-Watson test can be made as follows:

- 1<d<3: There is no autocorrelation in the model

- 0<d<1: There is positive correlation in the model

- 3<d<4: There is negative correlation in the model

The additional examination for testing of the result of autocorrelation based Durbin-Watsonindex can be performed as follows: For number of observations N= 265 and number ofindependent variables k,=k-1, level of significance α = 0.05 and Dl and Du are the criticalvalue of Durbin-Watson index based on k’, α and N, the first null hypotheses are:

H0: P-value = 0 and H1: P-value > 0

If Durbin-Watson index (D) < Du then H0 will be rejected and there is positive correlation

If Du<D<Dl then the test is inconclusive The second null hypotheses are:

H0: P-value = 0 and H1: P-value > 0

If 4-D < Du then H0 will be rejected and there is negative correlation in the model If Du<D<Dl

then the test is inconclusive The third null hypotheses are as follows: H0: P-value = 0 and H1:P-value # 0 If D<Du or 4-D < Du then H0 will be rejected with 2α and there is negative orpositive correlation in the model and if Dl<D<Du then the test is inconclusive

Chapter 4: Analyzing the researched data and presenting the findings

In this chapter, the explanations for the specific results of the test used in the model are madefor identifying the indicators impacting the profitability of the listed real estate companies inVietnam stock market Additionally, due to the significance and complexity of the panel data,the software namely “Eviews” is used to perform the testing and to evaluate the relationship

or the correlation between the dependent variable, profitability, and independent variables, thefinancial ratio and macroeconomic indicators as well as to what extent the independentvariables can explain the changes of the dependent variable The panel data include 53 listedreal estate companies in Vietnam Stock Market during the 5 years period of time from 2013 to

2017 with 265 observations and each unit of cross sectional has the similar time series ofobservations

The econometric model used to test the data is as follow:

ROA i,t =α +β 1 X 1,t + β 2 X 2,t + β 3 X 3,t + β 4 X 4,t + β 5 X 5,t + β 6 X 6,t + β 7 X 7,t + β s X s,t + β 9 X 9,t + β 10 X 10,t + β 11 X 11,t +U it

The variables in model are:

- ROA: Return on asset, the dependent variable, in which is used for measure the profitability

of the real estate company i at the time period t

- α is the intercept of the model, in which is the value of Return on Asset, if the value of otherindependent variables are 0

- Uit: the error term of the model, in which is the other determinants affecting the dependentvariable, Return on Assets, but are not mentioned in this model

- βi , t: the regression coefficient of the respective independent variables reveals that if otherindependent variables are fixed, then for each change of 1 unit in independent variable Xi,t,the dependent variable changes for βi ,t unit, on average

X3 ,t: Sizes of the companies

X4 ,t: Short term debt over total debt

X5 ,t: Current ratio

X6 ,t: Growth rate of Gross Domestic Products

X7 ,t: Firm growth rate

X8 ,t: Sales to Capital Employed

X9 ,t: Inventory turnover

X10 ,t: Interest Cover

1 Testing for significant of statistics

1.1 Testing for individual significance of statistics

At first, this dissertation uses Eviews to executive the regression model with Fixed CrossSection for Return on Asset, the dependent variable on the independent variables and thesignificance of each variables are tested individually The equation is estimated using PanelLease Square method with fixed cross-sections and the P-Value of each independent variable

is generated in the following table The null hypotheses for the estimation are as follows:

i HO=Xtt=O

{ H 1 =Xι,t≠ 0

The regression model on independent variables is as follow: