18 t3 hochiminh stock exchange 2016 2020 full 210321

Topic Impact of dividend policy on market value of listed firms on the Hochiminh stock exchange in the period 2016 2020 ACKNOWLEDGEMENT First, I would like to express my best appreciation to my parent[.]

Topic: Impact of dividend policy on market value of listed firms on the Hochiminh stock exchange in the period 2016-2020

First, I would like to express my best appreciation to my parents and myfamily for their supports on spirit and material as well as advice andmotivation from relatives, friends and colleagues

Second, I am deeply thankful to my teachers for supporting me toovercome many challenges throughout this research

Third, I definitely acknowledge to all Lecturers as well as administrativeboard from …… University with the initial lectures

Finally, I would like to show my recognition to all tourist participated inthe survey This thesis would be never completed without them

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Dividend policy of a joint stock company determines the after-tax profitpaid to shareholders and the retained profit for reinvestment Dividendpolicy along with investment and financing policies are one of threestrategic financial policies that have a decisive influence on the value ofthe business as well as the existence and development of the company.The importance of dividend policy has attracted the attention ofeconomists, it is not accidental that the world has formed the theory ofdividend policy The debates on worldwide dividend policy are stillongoing This shows the richness and complexity of the dividend policytheory However, these theories have laid the foundation and suggestivefor the construction of dividend policies in the practice of joint stockcompanies in countries around the world Currently, the main dividendpolicies in practice commonly applied by joint stock companies in othercountries are: dividend stabilization policy, dividend surplus policy, fixedpayout ratio policy, policy of paying small dividends during the year andpaying additional dividends at the end of the year Along with thedevelopment of the economy, joint stock companies in other countriesincreasingly find solutions to complete dividend policy towards theBalance current dividends to shareholders and future growth of thecompany to maximize company value

ABBREVIATION

LIST OF FIGURES AND TABLES

Table 3.3: Variable summary and sign expectation

Table 4.1.1: Number of listed companies by year

Table 4.1.2: Listing scale as at 31/12/2020

Table 4.1.3: Descriptive statistics of indicators related to researchsamples (2016-2020)

Table 4.2.1: Correlation matrix between the dependent variable and theindependent variable

Table 4.2.2: Evaluate the suitability of the model

Table 4.2.3: The results table of regression weights

CHAPTER 1 INTRODUCTION

1.1 Reasons for choosing topic

In recent years, the decline in economic growth due to the impact of theglobal economic crisis has made Vietnam's stock market more volatile;especially stock prices have erratic changes Stock price is an issue thatmany investors and society are very concerned about, is the mostimportant issue for businesses To add value to the business, ensuring thebusiness operates at a loss-free and highly profitable business, managersmust make important long-term business and financial decisions with thegoal of maximizing enterprise value Therefore, the improvement ofcorporate value through the most influential factor, the dividend policy,

is of great significance to companies listed on the stock market ofVietnam

Dividend policy determines the distribution of a company's after-taxprofit, what percentage will be retained for reinvestment, and whatpercentage is used to pay shareholders in the form of dividends (NguyenMinh Kieu, 2009) No matter how dividends are paid, it will reduce thecompany's retained earnings If a company's retained earnings are

reinvested promising a future stream of income for shareholders,dividends are the steady stream of income that shareholders receive as areward for the outcome your investment The decision to pay dividendaffects the capital structure of the business, and the informationcontained in the dividend payment, dividend rate (Dividend Yield),dividend payout rate (Dividend Payout) and how Dividend paymentmethod affects stock price fluctuations of listed companies, directlyaffects the reputation of the company In recent years, dividend incomehas begun to be of interest to investors in the Vietnamese stock market;However, most companies are not properly aware of the importance ofdividend policy, do not have clear, long-term directions for profitdistribution policy The delay in paying dividends and debt dividendsoccurs in many companies Investors, especially individual investors, arealways passive in stock price fluctuations, making it difficult to set upinvestment plans in banking and banking in order to achieve the settargets.

Therefore, the researcher chose the topic: "The impact of dividend policy

on market value of listed firms on the Hochiminh stock exchange in theperiod 2016-2020"

1.2 Research objectives

Objective of research is the dividend policy on market value of listed

firms on the Hochiminh stock exchange.

1.3 Research subject and scope

This research is carried with the expectation to find answers for threemain questions listed herein below:

- How does dividend policy effect on market value of listed firms onthe Hochiminh stock exchange?

- What are impacts of companies listed on the HCMC Stock Exchange

by dividend policy?

Research scope is as below:

- Space scope: Using a data set including 133 companies listed on theCity Stock Exchange In Ho Chi Minh City (HOSE) from 2016 to2020

- Time scope: from 2016 to 2020

1.4 Research Methodology

This study examines the relationship between the dividend policy andthe market value of companies listed on the Vietnamese Stock Exchangethrough either a cash dividend or a stock dividend

The thesis uses a combination of qualitative methods, quantitativemethods and survey methods to clarify the research problems posed inthe thesis:

Qualitative research method: The thesis uses a combination of researchmethods such as interpretation, inductive, statistical analysis,comparison, comparison, synthesis, to consider, analyze and evaluateabout dividend policy of companies listed on the stock market exchangeHochiminh In addition, qualitative research is used to select variables inthe research model of factors affecting the dividend policy of firms andthe impact of dividend policy on firm value

Quantitative research method: The thesis uses SPSS software for tabledata (Pannel Data), uses regression models to identify factors affecting

dividend policy and the impact of policies dividends to corporate value ofcompanies listed on the Hochiminh stock exchange.

1.5 Significance of the study

Based on the representation theory of Jensen and Meckling (1976) andthe theory of free cash flow by Jensen (1986), the authors argued thatunder underdeveloped financial market conditions as in Vietnam,payments Dividends can deplete businesses of cash and lead to the risk oflacking the ability to invest in profitable projects or having to raisecapital from the market at high costs This cost can neutralize the benefits

of paying dividends mentioned by financial theories and preventdividend policy from having an impact on firm value in Vietnam Using adata set including 133 companies listed on the City Stock Exchange In HoChi Minh City (HOSE) from 2016 to 2020, the data analysis shows thatthere seems to be no relationship between dividend policy and listed firmvalue in Vietnam

This research contributes to the research treasure trove of the impact ofdividend payment policy on firm value in Vietnam in two main points.Firstly, this is the first study on this topic in Vietnam using System-GMMestimation method with dynamic model, with the advantage of being able

to solve endogenous problems and produce a consistent estimate andmore effective than other estimation methods, to study the abovementioned relationship Second, this study is also the first to use therepresentative theory of Jensen and Meckling (1976) and the free cashflow theory of Jensen (1986) to explain the empirical results observed atVietnamese market

1.6 Research structure

CHAPTER 2 LITERATURE REVIEW

2.1 Theoretical basis for dividend policy

2.1.1 Dividend concept

Normally, after a process of business activities, joint stock enterpriseswill gain a certain amount of profits; From this profit, the business willhave to conduct the profit distribution After paying corporate income tax

to the state, the remaining profit is the after-tax profit, which willbasically be divided into two parts:

 The portion of the profits reserved to the current shareholders ofthe business is called dividends or dividends

 The portion of profits that are retained for reinvestment purpose

is called reinvestment retained earnings

Dividend means the net profit paid for each share in cash or other assetsfrom the remaining profit of the joint-stock company after the fulfillment

of financial obligations (According to Clause 3, Article 4, Law onEnterprises 2014)

In fact, there are many ways that joint stock businesses distribute money

to shareholders, such as businesses using money to buy back shares forcertain purposes, but only called dividends if the amount of cash that istaken from profits Therefore, the source of dividends is the realizedprofit after tax of a joint stock enterprise

2.1.2 Concept of dividend policy

Currently, there are many scientists giving different conceptions aboutcorporate dividend policy On the basis of theoretical and practicalstudies, the author believes that: Dividend policy fixes the relationshipbetween dividends paid to shareholders and reinvested profits in thedistribution of after-tax profits of a joint stock company

The goal of the dividend policy that a joint stock company is aiming for is

to create a balance between current dividends to shareholders and futuregrowth of the company so as to maximize the company's share price

2.1.3 Dividend payment procedure

The timing of dividends varies by firms in different countries, as theUnited States typically pays dividends quarterly, while businesses inother countries may pay dividends on a semi-annual basis fiscal year orend In Vietnam, most businesses choose to pay dividends every half ayear Choosing to pay high-frequency dividends will make the company's

shares highly appreciated, but it will make it more difficult to manage thecompany's cash flow due to financial arrangements to make showing thedividend payment Therefore, enterprises need to consider thecharacteristics of their business lines, capital turnover rate, the need torepay debts when choosing the number of times to pay dividends in ayear.

The Board of Directors of the business will decide the dividend payment.Enterprises will publish information on the mass media about thepayment of dividends After announcing the dividend payment, about 2weeks is the time that the enterprise will come to the securitiesdepository center to close the list of shareholders entitled to dividends.Depending on the clearing system between the equity accounts and theaccounts of the buyer and seller in each country, a certain clearing period

is required, for example in the payment system T + 2, the transactiontoday will be cleared after two days These results in the ex-right date,which means that on the ex-right date, the buyer will not be entitled todividends while the seller is entitled to dividends because on the closingdate of the list of shareholders The stock is listed in the list ofshareholders again About two weeks later will be the date of dividendpayment to shareholders

 Dividend announcement date: is the date the Board of Directorsannounces the dividend rate or the dividend rate to be paid, theform of dividend, the date of closing the list of shareholders and thedate of dividend payment This date is very important becauseinformation about the increase, decrease or maintenance ofdividends will be published, thereby the market can seeinformation about the financial situation of the business

 Ex-right date: If the buyer enters the stock the ex-right date will notreceive dividends, while the reseller receives dividends becausethe reseller is named in the list of shareholders entitled todividends Depending on the country's securities clearing andsettlement system, usually after two trading days, a newshareholder is on the list of shareholders entitled to dividends.Theoretically, the market value of each share would be reduced by

an amount equal to the dividend that the buyer would not receive

on the ex-date date

 Closing date of the list of shareholders: The date the securitiesdepository center will close the list of current shareholders toenjoy dividends and send a list of shareholders to the business

 Dividend payment date: Normally, after 2 weeks from the date ofclosing the list of shareholders, the enterprise will pay dividends toshareholders either in the form of direct cash or transfer money tothe shareholders' accounts at Securities Company

With the process of paying dividends in shares, basically like the process

of paying with money The time from the date of closing the list ofshareholders to the date of dividend payment may be longer, or whenselling stocks, shareholders can sell their right to receive dividends to thebuyer on the ex-right date

2.1.4 Types of dividend payment

Form of dividend payment: The form of dividend payment is a partialdemonstration of the dividend policy of a joint stock company In the2016-2020 period, the main form of dividend payment used by listedcompanies is to pay cash dividends; Some companies have used stock

dividends Some companies combine cash dividends with stockdividends.

Number of times to pay dividends: In the period from 2016 to 2020, thelisted joint stock companies implementing the number of times to paydividends in the year are also not small differences A majority of listedjoint stock companies pay dividends twice a year; Some companies havesome years paying dividends up to 3 times or even 4 times a year Somecompanies do not pay dividends for certain objective and subjectivereasons in a number of years

2.1.5 The importance of dividend policy

First, the dividend policy directly affects the interests of shareholders.The majority of shareholders who invest in the company want to receivedividends

Second, the dividend policy affects the company's sponsorship policy.Third, the dividend policy also has a certain impact on the company'sinvestment policy

Fourth, dividend policy is also a sign of information about the company'sperformance to the outside market, thereby affecting investors' decisions

as well as the company's stock value

2.1.6 Factors affecting the corporate dividend policy

External factors: Legal regulations, tax policies, inflation and interestrates, economic growth, investor sentiment, stock issuance costs

Internal factors: Profitability, cash flow and solvency of the company,stability in corporate profits, growth prospects and investmentopportunities, company control, leverage, size of business and industry

Empirical studies have shown that firms' dividend policy depends onmany factors These factors can be divided into the following groups: (1)Company characteristics and financial situation (size, time of operation,profit, financial leverage, solvency); Corporate governance / agency costs(board member structure, board independence, ownership structure, andinvestor ownership concentration); (3) Business environment (marketrisks, investment opportunities, taxes ).

Many empirical studies have been carried out to investigate dividendpolicy issues, especially since Miller & Modigliani (1961) theory waspublished Most studies focus on factors affecting corporate dividendpolicy The results of these empirical studies show that corporatedividend policy is influenced by many factors, including:

Earnings per share (EPS) and profitability (ROA, ROE) of a company: Thesource of cash to pay dividends depends on the income and the level ofreturn that the company achieved in that fiscal year The higher theirincome and profitability, the more opportunities they have to choose and

be more proactive in making decisions related to dividends The researchresults of Lintner (1956) and Brittain (1964) show that ROA and ROEhave a positive influence on dividend policy (measured through thevolatility of annual dividends) of public companies American company inthe period of 1919-1960 Research by Naeem & Nasr (2007) in Pakistanand Bose & Husain (2011) in India found similar results In Vietnam,research by Le Thao Vy et al (2010) also shows that earnings per share(EPS) and ROE profitability are positively correlated with corporatedividend policy Meanwhile, the study of Franklin & Muthusamy (2010)negates this view and concludes that an inverse relationship (-) existsbetween these factors and the dividend policy

Growth opportunities: Usually, fast growing businesses often have largecapital requirements to finance new investment opportunities Therefore,businesses often retain most of their profits to re-invest and limitdividends as well as avoid issuing new shares to the public because it isboth costly and costly and takes time and effort Moreover, mobilizingexternal capital is always more expensive than capital funded from theprofit of enterprises However, in many cases, when businesses achieverapid revenue growth that means strong growth in income, businessesalso consider paying high dividends to shareholders and investors.Experimental research by Saxena (1999) conducted on 333 companies inthe period 1981-1990 in the US or the experimental results of Bose &Husain (2011) have verified this Meanwhile, the research results ofFranklin & Muthusamy (2010) in the Indian market showed an oppositetrend.

Market price / earnings per share (P / E): This indicator is calculated bythe ratio of the market price of a security to its EPS in the fiscal year Ahigh P / E ratio can be seen as a sign of low risk of the company and ahigh dividend payout ratio in that year But there is also a view that thishigh coefficient will reflect growth opportunities, so businesses tend tokeep profits Friend & Puckett (1964) has shown a positive relationshipbetween P / E and dividend policy (measured through the rate ofdividend payout) On the contrary, Franklin & Muthusamy (2010) arguethat this relationship is inverses

Size of enterprise: The larger the size of the enterprise, the higher thecredibility of the credit market Therefore, large enterprises often find iteasier to access outside capital Therefore, retaining profits to expand

production and business and finance projects is often not the only optionfor large-scale enterprises (unlike the case of small-scale enterprises).Financial structure of enterprises: Enterprises whose main source ofcapital is financed by debt are businesses that have to bear pressure topay interest and pay principal The pressure of large liabilities hassqueezed the real cash flow that can be used for profit distribution,resulting in often low cash dividend ratios for these companies Theempirical research results of Asif et al (2011) showed the relationshipbetween financial leverage and dividend policy of Pakistani listedcompanies in the period 2002-2008.

2.2 The effect of the dividend policy on the market value of the company

2.2.1 Literature review

There have been many studies to serve as a premise, the theoretical basis

to explain the relationship between dividend policy and stock pricevolatility There are two schools of theory that are independent and non-independent of dividend policy The theory of the independence ofdividend policy states that a firm's dividend policy does not affect itsshare price and its cost of capital This theory is based on the perfectcapital market assumptions, rational investor behavior and the certainty

of future returns Supporting this theory includes studies by MertonMiller and Franco Modigliani, 1961; Brennan, 1971; Hakansson, 1982.Dividend policy non-independence theories such as: The bird in the palmtheory, signaling theory, agency cost theory, the client group effecttheory According to the bird in hand theory, an investor prefers cashflow from dividends to cash flow from capital gains Because the cash

flow from dividends is the cash flow that investors inevitably receiveimmediately, while the capital return on successful results from acompany's reinvestment in the future is not certain shield (Gordon, 1962;Diamond, 1967; Lintner, 1956; Water, 1963) The signaling theory, alsoknown as the information content hypothesis, states that the dividendpayment carries information, which is the signal for investors Becauseinformation asymmetry exists, investors always hold less informationabout the company than management; therefore, they assume thatdividends carry the information that managers want to convey(Bhattacharya, 1979; Aharony and Swary, 1980; Asquith and Mullins,1983) The agency cost theory arises when there is a conflict of interestbetween managers and shareholders in the company, the other is theowner of the property, and the other is the user of the property (Jensen,Solberg & Zorn, 1992; Holder, 1998; Saxena, 1999) The customer groupeffect assumes that a company has different customer groups and thesecustomer groups have different preferences, so a change in dividendpolicy may result in a predominant group of customers satisfaction,negatively affecting stock prices (Yoon, 1997; Lewellen, Stanley & Lease,1978; Dhaliwal, Erickson, & Trezevant, 1999).

Leading direct research on the relationship between stock price volatilityand dividend policy has the study of Black and Scholes (1974) In theirresearch Black and Scholes created 25 New York stock exchangeportfolios considered between 1936 - 1966 Using the capital assetpricing model to study the relationship between Dividend policy and thereturn an investor receives after adjusting for risks and taxes Thevariable representing price fluctuations is put into the model by the

author in the form of the risk that the investor must face to obtain thedesired return The author concludes that there is no relationshipbetween dividend policy and stock price volatility.

2.2.2 The effect of the dividend policy on the market value of the company

The study of the impact of dividend policy on stock prices on the currentmarket is still controversial and there are two contradictory flows.According to many studies around the world, dividend policy does notchange company value, so does not affect stock prices The arguments ofthese studies are based on dividend theory that has no relation to firmvalue by Miller & Modigliani (1961) However, in practice, companymanagers often only pass on positive information about business results

to shareholders and hold back bad information until regulations orrestrictions exist financial means they have to disclose such information

to the public This is reflected in the studies of: Ball et al (1979), Baker et

al (1985) and Baker & Powel (1999) Partington (1985) also concludedthat managers in Australia viewed paying dividends to shareholders as aprice support channel for stocks

The second viewpoint says that there is a relationship between dividendpolicy and enterprise value, including an increase or decrease in thevalue of the enterprise, leading to changes and fluctuations in stockprices (Gordon, 1959; Merton and Rock, 1985; Miller and Scholes, 1978)Many empirical studies prove that dividend policy affects market value(Kanwal Iqbal Khan, Aamir and Arslan, 2009) By applying regressionanalysis, Amihud and Murgia (1997) studied the effects of dividends andearnings disclosures on the German market to examine price fluctuations

in relation to dividends and earnings, based on a sample of 200companies for the period 1988-1992 They find that extraordinarydividends and earnings can account for stock price fluctuations Althoughthe earnings announcement precedes the dividend announcement inGermany, the Amihud and Murgia results imply that the dividendannouncement is a larger signal than the previous earningsannouncement of the current income Dyl and Weigand (1993) provideevidence that cash dividends show that firm returns and cash flow areless risky That is, there is a strongly statistically significant relationshipbetween a firm's dividend policy and market value.

Kanwal, Arslan, Nasir & Maryam Khan (2011) through the fixed andrandom effects model explained the effect of dividend policy on stockprices and came to the conclusion: Dividends, earnings per shareearnings per equity, and earnings after tax are positively correlated withstock prices, while retained earnings are negatively correlated with stockprices and significantly explain changes in share prices These resultsemphasize that dividend policy plays an important role because dividendpolicy provides signals about a company's success

The above studies all said that the theory of independence of dividends isnot realistic and the dividend policy affects the market value ofenterprises

CHAPTER 3 RESEARCH METHODOLOGY

3.1 Research Procedure

Data collected are secondary data, obtained from financial informationprovided on the stock market through the Financial Statements andDividend Payments of listed companies Companies selected for thesample must satisfy the following requirements:

- Enterprises listed on the HOSE from 2016 to 2020 and are stillactive in stock trading until the end of 2020

- By the time of the study, the companies are done notice to paydividends in 2020

- Financial statements and Notice of dividend payment for the 5years from 2016 to 2020 are available on stock websites or oncorporate websites

After looking at all the joint stock companies listed on the Ho Chi MinhCity Stock Exchange (HOSE), the author found that there are 133companies that satisfy all the above mentioned criteria and this companywas selected by the author in the research sample

3.2 Research Data