ĐẠI HỌC KINH TẾ THÀNH PHỐ HÒ CHÍ MINHBÁO CÁO TÔNG KẾT ĐÈ TÀI NGHIÊN cứu KHOA HỌC THAM GIA XÉT GIẢI THƯỚNG ‘’NHÀ NGHIÊN CỨU TRẺ UEH” NĂM 2024 THE IMPACT OF ACCOUNTING INFORMATION ON FINA
Reason for choosing research
Vietnam, rich in mineral resources, is focusing on sustainable development within its mining industry The U.S Geological Survey (USGS) highlights that Vietnam holds the world's second-largest rare earth reserves, approximately 22 million tons, second only to China As global demand for minerals, particularly rare earths essential for high technology and defense, continues to rise, the industry must expand extraction activities and invest in modern equipment and technological advancements However, the mining sector faces challenges in adhering to strict government regulations and securing significant investment capital, as relying on traditional funding sources may prove inadequate Consequently, the stock market emerges as a promising avenue for companies to raise capital for large-scale projects.
The stock market serves as a crucial mechanism for businesses to raise capital, making it a top priority for enterprises Investors heavily rely on accounting information from financial statements, such as earnings per share and return on assets, to guide their investment decisions in the stock market Numerous studies in developed markets have explored the correlation between accounting data and stock prices For instance, Ball & Brown (1968) investigated this relationship on the New York Stock Exchange, revealing that stock prices are significantly influenced by profits reported in financial statements Ohlson (1995) built upon this model, addressing previous research's limitations to provide a more comprehensive understanding of the dynamics between accounting information and stock market valuations.
(1968) study, he researched the relationship between accounting information and
The findings indicate a significant correlation between accounting information and stock prices, underscoring its importance in financial analysis Following this, numerous studies have utilized Ohlson's model to explore and validate these results across diverse stock markets and contexts.
Collins and colleagues (1997) conducted a comprehensive study utilizing the Ohlson model, analyzing profits and book values of equity in the United States over a span of 40 years to investigate how financial statement variables influence changes in stock values.
In Vietnam, various studies, including those by Nguyen Viột Dũng (2009), Nguyen Thị Hằng Nga (2016), Đặng Ngọc Hùng et al (2018), and Ha et al (2022), have explored the relationship between financial statement information and stock prices across different markets These studies reveal that accounting information affects stock prices differently depending on the context, timeframe, and location Consequently, it is crucial to continuously assess and update the relationship between financial statements and stock prices to reflect the evolving dynamics of time and space.
In Vietnam, companies adopt various accounting organization methods tailored to their specific industry operations, resulting in accounting information that reflects the unique characteristics of each sector Despite this diversity, there has been limited research on how accounting information influences stock prices in Vietnam, particularly in specific fields This underscores the necessity for comprehensive studies examining the relationship between accounting information and stock prices across different industries to gain a clearer understanding of these dynamics.
In recent years, the Vietnamese stock market has experienced notable fluctuations driven by the global Covid-19 pandemic These changes in stock prices highlight the uncertainty and economic challenges posed by the ongoing crisis.
Recognizing the importance of that, the research team decided to study the topic: "The Impact of Accounting Information on Financial Statements on
Stock Prices of Listed Companies in the Mining Sector in Vietnam."'
Research objectives and research questions
Research objectives
This study aims to analyze how accounting information influences the stock prices of mining companies listed on Vietnam's HNX and HOSE exchanges The findings will offer recommendations and policy suggestions for management to develop effective business strategies, enhance financial reporting quality to attract investment, and improve competitiveness in the mining sector.
This study evaluates how book value per share (BVPS), earnings per share (EPS), return on assets (ROA), and debt-to-equity ratio (DE) influence stock price fluctuations in mining companies listed on the HNX and HOSE By analyzing these financial metrics, we aim to understand their significance in determining stock performance within the mining sector.
To enhance the impact of accounting information in financial statements on the stock valuation of mining companies in the Vietnamese stock market, it is essential to implement strategies that support informed financial decision-making for both managers and investors.
Research questions
To address the research objective, it is necessary to answer the following questions:
The fluctuations of stock prices for mining companies listed on the HNX and HOSE are significantly influenced by key financial metrics such as book value per share (BVPS), earnings per share (EPS), return on assets (ROA), and the debt-to-equity ratio (DE) A higher BVPS indicates stronger asset value relative to shares, potentially attracting investors Meanwhile, robust EPS reflects a company's profitability, which can lead to increased stock demand Additionally, a favorable ROA demonstrates efficient asset utilization, positively impacting investor confidence Conversely, a high debt-to-equity ratio may raise concerns about financial stability, potentially leading to stock price volatility Understanding these metrics is essential for analyzing stock price movements in the mining sector.
To enhance the influence of accounting information on financial statements in determining stock prices of mining companies in the Vietnamese stock market, several measures can be implemented These include improving transparency and accuracy in financial reporting, adopting international accounting standards, and providing detailed disclosures on operational performance and risk factors Additionally, fostering investor education and engagement can help relevant user groups better understand the implications of accounting data on stock valuation By implementing these strategies, stakeholders can ensure that accounting information serves as a vital tool for informed investment decisions in the mining sector.
Subject and scope of research
Research subject
Earnings per share (EPS), book value per share (BVPS), return on assets (ROA), and debt-to-equity ratio (DE).
Research scope
Space: the authors conducted research on accounting information on financial statements and stock prices of listed companies in the mining industry listed on HNX and HOSE.
Time: Data was researched by the authors over a 4-year period from 2019-2022.
Research method
Data Collection Method: The study utilized data from the websites www.vietstock.vn and https://cafef.vn/, comprising basic information and secondary data of companies in the mining sector listed on the HOSE and HNX exchanges from 2019 to 2022.
The study utilized panel data from 2019 to 2022, focusing on the number of companies in the mining sector listed on the HOSE and HNX exchanges Four models were applied to analyze the data: Ordinary Least Squares (OLS), Random Effects Model (REM), Fixed Effects Model (FEM), and Generalized Least Squares (GLS) To ensure the accuracy and reliability of the findings, the research team employed OLS alongside the other three models All analyses were conducted using STATA 17 software, followed by tests to identify the most appropriate model for real-world applications in the Vietnamese stock market.
Contributions of the Study
Practical Implications
This article assesses how accounting information impacts stock prices in Vietnam's mining sector, offering valuable insights for investors, managers, and financial analysts By analyzing data from financial statements, it aims to enhance the ability to predict stock prices and inform financial decision-making in the market.
Structure of the Study
Apart from the introduction and conclusion, the study comprises 5 chapters:
In Chapter 1 of the Literature Review, the author presents a comprehensive overview of prior experimental studies conducted both domestically and internationally, focusing on the influence of accounting information on stock prices, the primary dependent variable.
• Chapter 2: Theoretical Framework: This chapter presents concepts, theories, and models serving to identify and clarify the research factors used in the topic.
• Chapter 3: Research Methodology: In this chapter, the author presents the research process, proposed research model, and analytical and evaluation methods used.
Chapter 4: Research Findings discusses the outcomes of selecting the regression model and the Generalized Least Squares (GLS) model It highlights how the GLS model addresses the limitations of the chosen regression model while evaluating the statistical significance and correlation relationships among the independent variables.
• Chapter 5: Recommendations: In this chapter, the author summarizes the research findings, provides recommendations for interested parties, and discusses the limitations of the study.
RESEARCH OVERVIEW
International Research Overview
Research has consistently shown a significant relationship between accounting information and stock prices across various countries and time periods A seminal study by Ball and Brown (1968) titled "An Empirical Evaluation of Accounting Income Numbers" analyzed data from 1946 to 1966 for all companies listed in Standard and Poor's Compustat This study identified stock prices as the dependent variable, with earnings per share and after-tax income as independent variables Utilizing quantitative methods, the findings confirmed that accounting information plays a crucial role in influencing stock prices.
Another foundational study is the research by Professor James Ohlson (1995) He developed his own model (commonly known as the Ohlson model) based on the
The Residual Income Model, introduced by Preinreich in 1938, laid the groundwork for analyzing the connection between accounting information and stock prices using two key variables: Earnings Per Share (EPS) and Book Value Per Share (BVPS) Research findings demonstrate that both EPS and BVPS have a direct influence on stock prices.
Ohlson model is viewed as a robust theoretical foundation with strong influence on subsequent studies in the field.
The study by Collins and colleagues, grounded in the Ohlson model (1995), explored the connection between stock prices and two key accounting variables—Earnings Per Share (EPS) and Book Value Per Share (BVPS)—for companies listed on the US stock market from 1953 onward.
In a 1993 study titled "Changes in the value-relevance of earnings and book values over the past forty years," researchers analyzed a sample of 11,154 observations of stocks listed on NYSE, AMEX, and NASDAQ The findings revealed that earnings per share (EPS) and book value per share (BVPS) accounted for 54% of the variability in stock prices within the US market, demonstrating a consistent relevance over time without any decline or alteration.
A study by King and Langli (1998) examined the impact of accounting diversity on firm valuation across three European countries—UK, Germany, and Norway—using the Ohlson model The research revealed that accounting information significantly affects stock prices, with explanatory powers of 70% for the UK, 60% for Germany, and 40% for Norway Notably, the importance of various accounting metrics fluctuated over time; in Germany and Norway, book value per share (BVPS) was more influential than earnings per share (EPS) in explaining stock price changes, while the UK market showed the opposite trend, favoring EPS.
Graham and King (2000) investigated the influence of accounting information on stock prices across six Asian countries—Thailand, Malaysia, the Philippines, South Korea, Indonesia, and Taiwan—during the period from 1987 to 1996 Their research focused on the correlation between stock market value, residual income, and book value per share (BVPS) The findings revealed significant variations in the impact of accounting information on stock prices, with increases of 16.9%, 27.7%, 30.8%, 39.7%, 68%, and 68.3% across the different markets The study concluded that the unique characteristics of each stock market contribute to the differing effects of financial statements on stock prices.
In the early development of China's stock market, the Ohlson model (1995) was employed to analyze stocks on the Shanghai and Shenzhen exchanges from 1991 to 1998 Chen et al (2001) conducted regression analysis using time series and cross-sectional data, revealing a positive correlation between earnings, book value, and stock prices Their study found that this correlation diminished significantly for companies with frequent losses, particularly among smaller firms Furthermore, the research indicated that accounting information played a more significant role in explaining stock price fluctuations for companies with high liquidity.
In Mexico, Durán et al (2007) similarly built upon Ohlson's model (1995)
The study improved the existing model by incorporating a third variable, cash flow from operations, to assess the influence of accounting information on financial statements and stock prices in the Mexican stock market Utilizing regression models with panel data from companies over a 13-year span (1991 - 2003), the findings revealed that the adjusted R² of the enhanced model offered a superior statistical explanation, achieving an explanatory power of 67% compared to the original model.
Prazak and Stavarek (2017) investigated the impact of financial ratios on stock prices of energy companies listed on the Prague Slock Exchange and the Warsaw
Stock Exchange during the period from 2006 to 2015 The financial ratios examined included the dcbt-to-cquity ratio (D/E), liquidity ratio (L2), financial leverage ratio
The study explored the relationships between financial leverage (LEV), return on equity (ROE), and return on investment (ROI) using the generalized method of moments Key findings revealed that financial leverage positively influences stock prices, while the liquidity ratio (L2) negatively affects stock prices across both stock exchanges.
Sutopo et al (2018) examined the impact of Sustainability Reporting Awards (SRA) on the relevance of financial statements by analyzing a sample of 220 companies—110 that received the SRA and 110 that did not—over the period from 2008 to 2016 The study found that information related to firms winning the SRA enhances the usefulness of financial statements, particularly in terms of earnings per share.
Earnings per share (EPS), earnings per share change (EPSC), and book value per share (BVPS) are important metrics related to stock prices A comparison between SRA and non-SRA companies indicated a positive correlation between EPS and stock prices However, the study revealed that the value relevance of BVPS to stock prices was lower for SRA companies compared to non-SRA companies This research highlights the significance of financial reports for SRA-winning companies, particularly emphasizing the importance of EPS and EPSC information.
Ligocká and Stavárek (2019) investigated the correlation between financial ratios and stock prices of selected European food companies listed on stock exchanges Focusing on Central Europe, their study analyzed a sample of 20 companies, comprising 4 from Austria, 10 from Poland, and 6 from Switzerland The financial ratios examined included quick ratio, current ratio, net working capital, return on assets, return on equity, return on capital employed, debt ratio, equity ratio, and leverage The authors employed the GMM method for parameter estimation in their research.
The study utilizing the Generalized Method of Moments revealed that in Austria, stock prices of companies were significantly influenced by the Return on Equity (ROE) ratio In contrast, Polish companies' stock prices were affected by ROE, Return on Capital Employed (ROCE), and Net Working Capital (NWC) Notably, Swiss companies' stock prices showed no correlation with the examined financial ratios Ultimately, the research concluded that the most robust relationship between financial ratios and stock prices was found in Polish food companies.
Rusdiyanto et al (2020) conducted a study on the influence of earnings per share (EPS) and return on assets (ROA) on stock prices of manufacturing companies listed on the Indonesia Stock Exchange from 2015 to 2017 Utilizing multiple linear regression analysis, the research revealed that EPS positively impacts stock prices, making it a reliable predictor, whereas ROA showed no significant effect on stock prices.
Asikin, Saudi, and Roespinoedji (2020) conducted a panel data regression analysis to assess the influence of earnings per share (EPS), return on assets (ROA), and return on equity (ROE) on the stock prices of advertising, printing, and media companies listed on the Indonesia Stock Exchange (IDX) from 2015 to 2019 Their study, titled "Influence of Return on Assets (ROA), Return on Equity (ROE), and Earnings Per Share (EPS) on Stock Price," involved multiple regression analysis of 55 companies The findings revealed that ROE and ROA had a significant impact on stock prices, while EPS did not influence the stock prices of these companies during the specified period.
ROE, and EPS together contributed up to 88.2% to the influence on stock prices.
Domestic Research Overview'
In Vietnam, research on the relationship between accounting information in financial statements and stock prices remains limited A significant early study addressing this topic is by Nguyền Việt Dung.
In 2009, researchers utilized the Ohlson model (1995) alongside the price adjustment method introduced by Aboody et al (2002) to develop theories and models that explore the connection between accounting information and stock prices.
This study examined the influence of earnings per share (EPS) and book value per share (BVPS) on the stock prices of companies listed on the Ho Chi Minh City Stock Exchange (HOSE) from 2003 to 2007 The findings revealed a low level of statistical significance, with an explanatory power of at least 40% During this period, the Vietnamese stock market was still developing, characterized by incomplete accounting information disclosure and regulatory gaps Consequently, the study's limited dataset of 306 observations resulted in reduced explanatory power compared to the current stock market conditions.
Nguyen Thị Hang Nga (2016) examined the influence of financial statement information on the stock prices of publicly listed companies in Vietnam Utilizing an adjusted version of the Ohlson model (1995), the study analyzed how accounting information affects the stock prices of these companies.
Exchange The method used to measure the impact of variables was the fixed effects (FE) method During the period from 2011 to 2014, the author collected a sample of
A study of 224 companies listed on the Ho Chi Minh City Stock Exchange revealed that both book value per share (BVPS) and residual income (RI) derived from financial statements significantly influence stock prices positively.
Specifically, residual income had a stronger impact on stock prices compared to book value per share on the slock exchange.
Dặng Ngọc Hùng and colleagues (2018) explored "the Impact of Accounting Information on Financial Statements to the Stock Price of the Energy Enterprises
Listed on Vietnam's Stock Market" using Ordinary Least Squares (OLS) regression and quantile regression models They examined variables such as return on assets
This study examines the impact of return on assets (ROA), capital structure (LV), enterprise size (SIZE), current ratio (CR), and accounts receivable turnover (TR) on stock prices The analysis is based on data from 44 energy companies listed on the Vietnam Stock Exchange, covering the period from 2006 to 2016.
(VNX) Among the observations, 154 showed the electricity sector accounting for
The study revealed that 44.13% of the observations pertained to oil and gas companies, with findings indicating that four out of five accounting factors significantly influenced stock prices, accounting for 48.47% of the explanatory power These factors positively impacted stock prices; however, the research concluded that capital structure (LV) did not have a significant effect on stock prices The authors noted that while capital structure exhibited a counteractive influence on stock prices, this effect was not statistically significant within the energy sector's stock market.
Hà et al (2022) explored the relationship between accounting information in business financial statements and stock prices using the LASSO method They improved upon existing research models by integrating the frameworks of Ohlson (1995) and Aboody et al (2002) Their study utilized a linear regression model, with stock price as the dependent variable and 52 accounting-related variables as independent factors, focusing on companies listed on the stock exchange.
Vietnam Stock Exchange during the period 2018-2019 According to the research findings, several variables, including book value, company size, profitability, and liquidity ratios, significantly and positively impacted stock prices statistically
Book value emerged as the most influential factor affecting stock prices, accounting for 25.8%, aligning with findings from Ohlson (1995) Next, company size contributed a substantial 25.3% to stock price fluctuations Profitability metrics, including return on assets (ROA), earnings per share (EPS), and gross profit margin, also played a significant role in influencing stock prices.
Author, Year Title of Study Methodology Research Findings
“An Empirical Evaluation of Accounting income Numbers”
OLS Earnings and post-tax profit impact stock prices and serve as useful information for determining stock prices James Ohlson
"Earnings, Book Values, and Dividends in Equity Valuation"
OLS EPS and BVPS have an impact on stock prices, and the study provides a solid theoretical foundation for subsequent research
“Changes in the value relevance of earnings and book values over the past forty years"
OLS EPS and BVPS have a positive impact on stock prices over time.
“Accounting diversity and firm valuation"
REM The role of book value is more significant than profit in explaining price changes in Germany and Norway, whereas the opposite holds true for the
Furthermore, the explanatory power of book value and profit varies over time across the European countries studied.
“Accounting practices and the market valuation of accounting numbers: Evidence from Indonesia, Korea, Malaysia, the
REM BVPS, ROE, and EPS have different impacts on stock prices in each country, with varying degrees of influence.
“Is accounting information valuerelevant in the emerging Chinese stock market?”
Companies experiencing frequent losses often show a significant negative correlation between their accounting information and stock prices, particularly among smaller firms Furthermore, for companies with high liquidity, accounting information is crucial in explaining fluctuations in stock prices.
“Value relevance of the Ohlson model with
OLS EPS, BVPS, and ROA positively impact slock prices
"The Effect of Financial Ratios on the Slock Price
GMM There is a positive impact of financial leverage on slock prices and a negative impact of liquidity ratio on stock prices in both stock exchanges studied.
“Sustainability Reporting and Value Relevance of Financial Statements”
Companies that receive Reporting Awards (SRA recipients) show a positive correlation between earnings per share (EPS) and stock prices, similar to non-SRA recipient companies However, the impact of book value per share (BVPS) on stock prices is less significant for SRA recipient companies when compared to their non-SRA counterparts.
“The relationship between financial ratios and the stock prices of selected european food companies listed on stock exchanges"
In Austria, the stock prices of companies are significantly influenced by the Return on Equity (ROE) index, while in Poland, stock prices are impacted by ROE, Return on Capital Employed (ROCE), and Net Working Capital (NWC) Conversely, the stock prices of companies in Switzerland remain unaffected by these financial indices.
"The effect of earning per share, debt to equity ratio and return on assets onstock prices: case study Indonesian"
OLS Earnings per share (EPS) positively impact stock prices, while return on assets (ROA) does not affect stock prices.
" Influence of Return on Assets (ROA), Return on Equity (ROE), and Earning Per Share (EPS) of Stock Price (Survey on
OLS Return on equity (ROE) and return on assets (ROA) both significantly impact stock prices, while earnings per share (EPS)
Corporate Advertising, Printing, and the Media listed on the Indonesia stock exchange Period 2015-2019)” does not affect stock prices.
” The relationship between financial reporting information and stock prices:
Applying modern theories to the case of Vietnam."
The variables EPS and BVPS have a positive impact on stock prices.
“The impact of financial reporting information on the stock prices of listed companies”
FEM, REM The book value per share
(BVPS) and retained earnings (RI) collected from financial statements have a positive impact on the dependent variable, which is the slock price. Đặng Ngọc
“Impact of Accounting Information on
Financial Statements to the Stock Price of the Energy Enterprises Listed on Vietnam's StockMarket”
OLS The return on assets
(ROA), company size (SIZE), current ratio (CR), and accounts receivable turnover (TR) have a positive effect on stock prices However, the capital structure (LV) does not affect stock prices.
LASSO Among the 52 factors studied, the book value per share has the most
Business Financial Statements and the Stock Price: A Study with LASSO Method significant impact on slock prices, followed by company size and the profitability group.
Summary of Previous Studies
From the synthesized studies, the research group has identified several issues:
• Studies on the relationship between accounting information and stock prices have been conducted in various spatial and temporal contexts.
Research on the link between accounting information and stock prices has predominantly centered on developed economies, leaving a gap in studies related to emerging markets like Vietnam Given the relatively nascent stage of the Vietnamese stock market, there is a scarcity of comprehensive research in this area.
Recent global studies have enhanced the original Ohlson model by integrating various additional variables, including Book Value Per Share (BVPS), Earnings Per Share (EPS), Dividends Per Share (DPS), Return on Equity (ROE), and Return on Assets (ROA) These studies frequently focus on assessing the influence of these factors on stock prices within specific industry sectors.
However, in Vietnam, research mainly applies the Ohlson model to assess the scale of enterprises, with very few studies focusing on specific industry sectors, especially the mining industry.
The research group has recognized the necessity for further investigation into the influence of accounting information on stock prices of mining companies listed on the Hanoi Stock Exchange (HNX) and the Ho Chi Minh City Stock Exchange (HOSE) This study aims to equip investors with a stronger foundation for their investment decisions Utilizing variables derived from the original Ohlson model, such as Book Value Per Share (BVPS), Earnings Per Share (EPS), Return on Equity (ROE), and Debt-to-Equity Ratio (DE), the research explores their effects on stock prices, thereby innovating the study and enhancing the model's significance.
In Chapter 1, the authors synthesized previous research from both international and domestic sources regarding the influence of accounting information on stock prices, drawing from reliable studies published in reputable journals This comprehensive analysis allowed the authors to summarize findings and identify research gaps, thereby establishing a solid foundation for the subsequent phases of their study.
THEORETICAL FRAMEWORK
Introduction to the Stock Market
2.1.1 Overview of the Stock Market
As economies develop, the demand for capital for consumption and investment rises, prompting the mobilization of idle funds into profit-seeking investments and the formation of financial markets These markets are categorized based on the duration of capital circulation: the money market handles short-term financial instruments exchanged within a year, while the capital market focuses on medium and long-term financial instruments.
The stock market plays a crucial role within the capital market by facilitating the buying and selling of securities As noted by Bach Duc Hien (2009), it serves to convert small savings from individuals into substantial capital for long-term financing, benefiting enterprises, economic organizations, and the State This mobilization of funds is essential for fostering production development, driving economic growth, and supporting various investment projects.
The stock market consists of two main segments: the primary market and the secondary market The primary market is where new securities are issued under the oversight of the State Securities Commission, allowing entities like companies and governments to raise capital This process is essential for establishing the foundation of the secondary market.
Securities are traded freely on the secondary market, where their attractiveness to investors drives buying and selling based on supply and demand This diversity of securities offers numerous investment options, while these transactions serve as indicators of ownership changes and the overall health of the economy.
According to Bach Duc Hicn (2009), securities can be defined as follows:
Securities serve as proof of ownership rights and interests in the assets or capital of issuing organizations The stock market today features a diverse range of commodities, and securities can be categorized into three main types based on their capital mobilization characteristics.
• Equity securities (common stocks): issued by joint-stock companies to raise capital, reflecting shareholders' ownership rights, the company's assets held by shareholders.
Debt securities, commonly known as bonds, serve as financial instruments that establish the connection between lenders and borrowers In this arrangement, the issuer acts as the debtor, obligated to repay the principal amount along with interest to the creditor at the specified time Bonds provide essential details, including the loan amount, interest rate, term, and maturity date, ensuring transparency in the lending process.
Derivative securities are financial contracts that grant the rights to buy or sell underlying assets, establishing the rights and obligations of involved parties at present These contracts facilitate transactions that are set to occur at a predetermined time in the future.
2.1.2 Roles of the Stock Market
The stock market plays a crucial role in the economy, significantly contributing to economic growth Its importance can be encapsulated in five key functions.
Firstly, it serves as a platform for capital mobilization for investment in the economy Through the primary activity of buying and selling various securities, the
SM channels idle funds from investors into productive business activities at enterprises At the same time, the government and state organizations can also mobilize capital.
The stock market fosters a healthy investment environment by offering a diverse range of securities that cater to varying levels of profitability and risk, enabling investors to make choices aligned with their personal financial goals.
Liquidity is a key factor that enhances the attractiveness of securities, as it allows for easier buying and selling The liquidity of a security is affected by several elements, including the total number of shares available and the current market price.
Liquidity is enhanced in dynamic and efficiently operating SMs.
The stock market serves as a crucial tool for assessing business value and economic conditions, with a company's health often mirrored in its stock price This provides a comprehensive and accurate measure of a business's worth Additionally, stock market indicators respond sensitively to economic dynamics, reflecting both current situations and future expectations; for instance, stock market indices tend to decline amid concerns of economic recession or crisis.
The stock market serves as a vital instrument for government regulation of the economy, enabling the implementation of fiscal policies—such as tax adjustments and government spending—as well as monetary policies that manage the money supply and interest rates These regulatory measures significantly impact the value of securities and shape investors' decision-making processes.
Overview of Stock and Stock Price Theories
According to Article 4 of the Securities Law of Vietnam No 54/2019/QH14,
"Stocks are securities certifying the legitimate rights and interests of the owner over a portion of the capital of the issuing organization."
According to Article 121 of the Enterprise Law No 59/2020/ỌH14, stocks are defined as certificates issued by joint-stock companies that are documented in the company's records or electronic data, serving as proof of ownership rights to one or more shares of the company.
Stocks represent ownership in a company and do not have a maturity date, meaning there is no principal repayment Shareholders earn dividends based on the company's performance, but in the event of bankruptcy, they are last in line to receive any remaining assets after all debts and obligations are settled.
There are several types of stocks based on shareholder rights, which can be divided into two main types (Bach Duc Hien, 2009):
Common stocks represent the ownership rights of shareholders in a company, with dividends varying based on the company's performance and its dividend policy.
Shareholders of common stocks possess the right to participate in and vote on issues discussed at shareholders' meetings While common stocks carry a greater risk compared to preferred stocks, they also present greater potential for profit through capital gains and dividends.
Preferred stocks represent ownership in a company, similar to common stocks, but with limited rights and specific advantages Preferred shareholders receive dividends before common shareholders and have priority in payouts during liquidation or bankruptcy Unlike common shareholders, preferred shareholders lack voting rights and decision-making power While the growth potential of preferred stocks is lower than that of common stocks, they offer reduced risk due to their stable dividends and priority in liquidity.
Within the scope of the research, the study focuses on common stocks
The par value, also known as the nominal value, is the designated worth of a share of stock set by a corporation, as indicated on the stock certificate Under Article 2, Clause 13 of the Securities Law No 54/2019/QH14, the par value for a share is established at 10,000 Vietnamese dong.
Par value serves an accounting function for companies and typically does not represent the true value for investors Its importance is most notable during the initial share issuance, as it indicates the minimum amount a company can receive when offering shares.
Par value is essential for establishing a company's registered capital and is used to calculate dividends While it may not accurately represent the stock's market value, par value is a significant factor in financial reporting and business decision-making.
Book Value Per Share (BVPS) is an essential metric in stock financial analysis, indicating the net asset value of a company allocated per outstanding share Essentially, BVPS reflects the amount shareholders would receive for each share if the company were liquidated and all debts settled.
BVPS, or Book Value Per Share, is determined by dividing a company's net assets—calculated as total assets minus total liabilities—by the number of outstanding shares When a company issues preferred shares, it is essential to adjust the net asset value by subtracting the value of these preferred shares prior to dividing by the number of common shares outstanding.
BVPS, or Book Value Per Share, offers insights into a stock's accounting value and is commonly used to compare against its market price This comparison helps investors determine the reasonableness of the stock's current price, making BVPS an essential tool for evaluating a company's financial health and stock valuation.
The intrinsic value of a stock is a vital concept in securities investment, representing the true worth of a stock derived from fundamental business factors like assets, earnings, and financial health This estimated value, determined through fundamental analysis, remains unaffected by market price fluctuations Common methods for calculating intrinsic value include discounted cash flow analysis (DCF), residual income valuation models, and the comparison of financial ratios such as the Price-to-Earnings (P/E) Ratio and Price-to-Book Value (P/BV) Ratio.
Investors leverage intrinsic value to guide their buy or sell decisions in the stock market, seeking to capitalize on undervalued stocks and sell them when their prices exceed this intrinsic value As a key component of value investing, intrinsic value enables investors to assess the true potential and underlying worth of a business, facilitating informed investment choices.
The market price of a stock, also known as its market value, is the price at which it is traded on the stock market, typically shown in the last transaction This price is influenced by the supply and demand from investors, reflecting the consensus between what buyers are willing to pay and sellers are willing to accept Market prices are subject to frequent fluctuations, driven by various factors including a company's performance, industry developments, macroeconomic conditions, investor sentiment, and unforeseen events.
Market value is crucial for investors as it indicates the current price for purchasing or selling a stock and helps assess a company's total market capitalization Stock prices fluctuate throughout the trading day, reflecting the market's evaluation of a company's financial potential and future outlook Companies with higher market prices can more easily raise capital compared to those with lower prices.
Overview of Accounting Information on Financial Statements
2.3.1 Overview of Accounting Information on Financial Statements
Accounting information is data processed and provided by the accounting system
Accounting information is characterized by its factual, historical, and reliable nature, as all figures are supported by valid documentation Additionally, it holds legal value, ensuring its credibility and importance in financial reporting.
According to Vietnamese Accounting Standard No 21 - Presentation of Financial
Financial statements are structured documents that outline an entity's financial position and performance, serving to inform a diverse audience about its financial health They are essential for economic decision-making, as they provide crucial insights into an entity's assets, liabilities, equity, revenue, expenses, profits, losses, and cash flows.
According to Circular 200/2012/TT-BTC dated December 22, 2014, issued by the
Ministry of Finance, the financial reporting system of Vietnamese enterprises consists of 4 reports:
A balance sheet is a vital financial statement that illustrates an enterprise's financial position at a specific moment, typically at the end of an accounting period It systematically classifies and reports assets into two primary categories: the structure of assets, which includes current and long-term assets, and the sources of asset formation, encompassing debt and equity sources This comprehensive overview allows stakeholders to evaluate the enterprise's financial health and solvency effectively.
The Income Statement provides a comprehensive overview of a company's activities and financial results for a specific accounting period, highlighting both operational and other business activities This report is essential for managers and stakeholders, as it enhances their understanding of the enterprise's strategies and overall performance, thereby aiding in informed business and investment decisions.
The Cash Flow Statement is a crucial financial report that outlines the sources and uses of cash during a specific reporting period, typically quarterly or annually It is divided into three key sections: operating activities, investing activities, and financing activities By analyzing this statement, stakeholders can assess an enterprise's ability to repay debts, evaluate its investment potential, and forecast future profitability.
Financial statement notes are a crucial component of an enterprise's financial reporting system, offering detailed insights that enhance the summarized data presented in financial statements They ensure transparency and reliability, giving stakeholders a thorough understanding of the enterprise's financial position and performance.
2.3.2 Roles of Accounting Information on Financial Statements
Accounting information is essential for both internal and external users, such as management, owners, investors, and auditors, as it facilitates informed decision-making An effective accounting information system should deliver tailored data that meets the specific needs of these users To leverage this information effectively, users must possess a solid understanding of accounting principles and be able to organize the data meaningfully.
Accounting information serves to fulfill the varied requirements of its users, who depend on its reliability for informed decision-making The listing and disclosure of financial statements on stock exchanges enhance transparency and effectiveness in the financial market.
Specific roles of accounting information for various stakeholders are as follows:
• For business management: Managers use accounting information to manage and operate business activities Additionally, accounting information plays a role in linking management processes and connecting businesses with the external environment.
Investors prioritize maximizing returns on investment in the shortest timeframe, leading them to carefully analyze a company's accounting information to evaluate its operational performance and associated risks before making investment decisions.
Creditors base their lending decisions on a company's financial status and its current ability to repay loans Additionally, accounting information plays a crucial role in determining loan conditions, such as interest rates and repayment terms.
Government and regulatory bodies, including central and local tax authorities, depend on accounting data to accurately calculate corporate income taxes This accounting information is crucial for analyzing the economic landscape of a country or region, enabling management authorities to assess economic development, evaluate industry performance, and identify necessary resources Such insights are vital for formulating effective economic policies that foster sustainable business growth and enhance macroeconomic management.
Accounting information serves various stakeholders, each with unique interests tied to economic transactions within a business Suppliers utilize this information to evaluate a company's ability to pay before providing goods or services Additionally, independent auditors rely on financial statements as the basis for conducting their audits.
Although accounting information serves different purposes for each stakeholder, fundamentally it reflects issues related to the financial status of the business.
Accounting information is a vital tool that supports transparency and reliability in the market, helping businesses attract investment and create opportunities for sustainable development.
According to Nguyen Bich Lien (2012), accounting professional organizations such as the International Accounting Standards Board (IASB), the Financial
Accounting Standards Board (FASB), and the Vietnamese Accounting Standards
Value-Added Services (VAS) rely on the premise that the quality of accounting information is evaluated through the quality of financial statements (FS) To ensure effective financial reporting, the information presented in financial statements must fulfill specific accounting requirements, provide timely insights into the enterprise's financial status, and maintain comparability both among domestic companies and internationally This approach ultimately guides the selection of suitable accounting recording and reporting methods.
Article 101 of Circular No 200/2012/TT-BTC dated December 22, 2014, issued by the Ministry of Finance, stipulates the requirements for information presentation in financial statements:
Financial statements must accurately and reasonably represent an enterprise's financial position, performance, and operational results To achieve this truthfulness, the information presented must exhibit three essential characteristics: completeness, objectivity, and the absence of errors.
• Financial information must be appropriate to assist users of financial statements in predicting, analyzing, and making economic decisions.
• Financial information must be presented fully in all material aspects.
Material information is crucial as its absence or inaccuracies can significantly influence the decisions made by users of a reporting entity's financial information The concept of materiality is determined by both the nature and size of the items presented in the entity's financial statements.
• Information must be verifiable, timely, and understandable.
• Financial information must be presented consistently and comparably between accounting periods and between entities for comparison purposes.
According to the International Accounting Standards Board (IASB) and the
Financial Accounting Standards Board (FASB), the quality characteristics of useful financial information are categorized into fundamental quality characteristics and enhancing qualitative characteristics.
The fundamental quality characteristics are the most important attributes of financial information, ensuring its usefulness and reliability There are two primary fundamental quality characteristics:
Influence of Accounting Information on Financial Statements on Stock Prices
2.4.1 Influence of Accounting Information on Stock Prices
Several factors influence a company's stock price, including financial and monetary policies, industrial and trade policies, accounting information, investor expectations, and market surveillance (Junjie, Gang & Chao, 2013) According to Serife and Ugur (2012), accounting information is crucial for investors' decisions regarding stock investments, as it significantly impacts stock prices by providing insights into a company's financial position and performance Positive financial indicators, such as increased profits and improved liquidity, typically lead to rising stock prices Furthermore, transparent and reliable accounting practices enhance investor confidence The foundational work of Miller and Modigliani (1966) and Ball and Brown (1968) established the link between accounting information and stock prices, paving the way for further research in this area.
In 1995, a model was developed to analyze the value relevance of earnings and book value, which is determined by integrating statistical financial information with stock prices or earnings in the analysis.
2.4.2 Relationship between Accounting Information on Financial Statements and Stock Prices - Ohlson Model (1995))
2.4.2.1 Overview of the Ohlson Model (1995)
In 1995, Professor James Ohlson introduced the Ohlson Model (OM) in a scientific paper, establishing a clear linear relationship between a business's market value, earnings surplus, book value, and other market variables By integrating earnings surplus with Ohlson's proposed information chains and assuming an efficient market, the model has significantly shaped accounting research throughout the 1990s and is regarded as a classic contribution to the field.
A review of accounting literature identifies five key reasons for the widespread adoption of the OM model in global stock market research Firstly, there is a general agreement among accounting scholars that OM effectively connects pricing metrics with accounting practices Secondly, the model's inherent flexibility is highly valued by researchers Additionally, traditional accounting research has demonstrated a weak correlation between value changes and accounting data, whereas OM analyses indicate that surplus income pricing model estimates explain over 70% of price variation across different countries.
OM-based analyses indicate that shareholders' equity, net income, and dividends are the primary variables of value Researchers emphasize the high explanatory power of the Ohlson model, suggesting its utility for policy recommendations Consequently, the research group opts to utilize the Ohlson model for their study.
2.4.2.2 Pricing Models Used in the Ohlson Model
Valuing stocks can be effectively achieved by combining the dividends received during the holding period with the sale proceeds of the stock When the stock is sold, its price is determined by discounting the expected cash flows for the new owner Assuming efficient market operations and a company with an indefinite lifespan, the current stock price can be calculated by discounting all future dividends The Dividend Discount Model (DDM) simplifies this by stating that a stock's intrinsic value is the present value of its future dividend stream, represented by the formula: pt, the intrinsic value of the stock at time t.
^tt^t+iL Expected dividend to be received at time t+1 r: Discount rate (assumed to be constant)
The Dividend Discount Model (DDM) has notable limitations, including its complexity in application and the challenge of estimating dividends and discount rates over an indefinite timeframe Additionally, stock prices are influenced by anticipated dividend streams, yet the actual dividends distributed are often arbitrary and do not offer valuable insights.
Given these limitations of the DDM, many studies have been conducted to link stock prices with income and other variables more directly related to the value creation process.
The dividend discount model (DDM) can be adapted to assess the economic value of equity from an accounting viewpoint by emphasizing book value, market value, and abnormal income instead of dividends Transitioning to the Residual Income Model (RIM) from DDM necessitates assumptions regarding the interplay between dividends, earnings, and book value, leading to the introduction of two additional assumptions The first assumption pertains to a "clean surplus accounting system," which upholds the clean surplus relationship (CSR) This relationship illustrates the connection between Book Value per Share (BVPS) and Earnings per Share (EPS) after deducting dividends paid, represented by the formula: bt = Ồt-1 + xt-dt (Lo, K., & Lys, T., 2000).
Where: xt’ Earnings per share in period t bt: Book value per share in period t dt: Dividend paid on day t
Second, a regularity condition is imposed, where the book value per share
(BVPS) grows at a rate slower than the normal earnings rate (or risk-free interest rate)
Residual earnings, also known as abnormal income, represent the portion of earnings that surpasses the expected returns from initial investments This financial metric is calculated using a specific formula that assesses the difference between actual earnings and the estimated earnings based on initial costs.
Where x^: represents the residual earnings at time t xt : denotes the net income at time t r : is the risk-free interest rate b^j: stands for the book value at time l-l
These assumptions arc used to restate the DDM as a function of book value and the discounted expected abnormal earnings Using CSR to substitute the variable d
(dividend) with b (BVPS) and X (net income), we have: dt = bt-1 + Xt - bt
Replacing xt with the formula for abnormal earnings: x^ — xt — rbt^ we get: dt = X“ + (1 + r^b^ỵ - bt
Using this expression to replace d[+i in the DDM formula, we have the residual income valuation model as follows:
With Pt: Market price of the slock al time t bt: Book value of equity (theoretically) at time t x^+1\ Residual income per share at time t+1 r: Discount rate
The Residual Income Model (RIM) asserts that the current stock price is equal to the current book value of equity plus the present value of future residual incomes, or abnormal incomes Notably, RIM does not necessitate that the present value of accounting variables follow the clean surplus relationship; it solely requires that future estimated values are calculated based on this principle.
Like the Dividend Discount Model (DDM), the Residual Income Model (RIM) poses challenges in application due to the need for estimating future values over an indefinite timeframe Additionally, RIM is ineffective when the Clean Surplus Relationship (CSR) assumption is breached Violations of the CSR assumption can occur in situations such as significant market value increases of available-for-sale securities and excessive grants of employee stock options.
RIM is highly appealing to researchers as it establishes a robust theoretical connection between stock prices and the two most reliable accounting variables, aligning with the traditional dividend discount model.
From the RIM framework, Ohlson proposed the valuation model based on the
Information Chain - the dynamic Ohlson model, with the assumption that the time scries of residual income is expressed through 2 formulas as follows:
In which: x“: Current profit measured by residual income. vt: Non-accounting information (not affecting J^and xt)
St Jit- Residuals, with a mean of 0 cofy: respectively are the regression weights of X" and vt, ranging from
0 to 1 (lower bounds are given based on scientific explanation and empirical observation, upper bounds are provided to achieve stability).
Investors' expectations regarding a company's future profit potential are influenced by current financial statements and additional non-financial information that is not reflected in these statements.
Ohlson noted that, based on the stated assumptions, the Residual Income Model (RIM) can be simplified into a linear combination of the current book value, current abnormal income, and other pertinent valuable information.
R = (1+r), where r is the risk-free interest rate
The regression weights aA and a2 are crucial for understanding the economic significance of the model When O) is greater than 0, both aA and a2 are positive, indicating a relationship Conversely, if Ờ) equals 0, the expected abnormal income becomes independent of the variables XỊ1 and pt Furthermore, higher values of CO,Y indicate an increased sensitivity of Pt to the variables Xt and vt.
Related Theoretical Frameworks
In 1972, Alchian and Demsetz introduced agency theory, which was expanded upon by Jensen and Meckling in 1976 Jensen and Meckling characterized agency theory as examining a contractual-like relationship between a principal and an agent.
In the context of agency theory, an investor or shareholder hires an agent, typically a manager, to represent their interests by performing specific tasks and making related decisions This theory primarily focuses on the dynamics between the principal, such as shareholders or creditors, and the agent, which in this case refers to company managers.
The principal aims to serve shareholder interests, while the agent, typically the company's managers, pursues their own objectives, resulting in conflicting interests due to asymmetric information Jensen and Meckling (1976) highlighted that this divergence leads to agency costs, which arise as a necessity to motivate the agent to act in the principal's best interests.
The agency theory posits that audited financial statements should effectively account for stock price fluctuations in publicly listed companies This theory elucidates the rationale behind agents selecting accounting policies and disclosure strategies that serve their interests, enabling them to adapt to external changes while minimizing costs.
This study utilizes agency theory to analyze how audited accounting information in financial statements can effectively account for stock price fluctuations among listed mining companies on the Hanoi Stock Exchange (HNX) and the Ho Chi Minh City Stock Exchange (HOSE).
The signaling theory is highly useful in describing behavior when two parties (individuals or organizations) have access to different information (Connelly and
Signaling theory focuses on the dynamics between two parties, where one party possesses information and communicates signals to the market, while the other party interprets and utilizes that information This theory is essential for minimizing information asymmetry between the involved parties.
Kirmani and Rao (2000) illustrate a fundamental signaling model by differentiating between high-quality and low-quality firms In this scenario, while the companies are aware of their actual quality, external parties such as investors and customers face information asymmetry, lacking insight into the true nature of these firms.
This theory seeks to minimize information asymmetry between informed parties and those requiring information Companies communicate with the market by revealing details in their financial statements Consequently, this theory elucidates how investors react to the information provided by the company, particularly focusing on accounting information in this study.
According to Fama (1970), an efficient market is characterized by security prices that fully incorporate all available information This means that the market swiftly and comprehensively processes new information, ensuring that no securities are left undervalued.
A market achieves perfection by functioning as a perfectly competitive economy, effectively utilizing limited resources In economic research and financial analysis, a market is regarded as efficient when it excels in three key areas: distribution, organization of market operations, and information dissemination.
• Efficiency in distribution entails the market’s ability to allocate scarce resources to users in an optimal manner.
• Efficiency in organizing market operations extends to expanding the selection of goods, facilitating customer participation with low costs, and implementing measures against speculative activities.
• Efficiency in information means that the prices of traded goods on the market are fully and immediately reflected by the available information.
The available information includes macroeconomic data, business performance metrics, and insights on competitors and market trends, both historical and current Effectively leveraging this information can positively influence stock prices, signaling healthy market development Since all investors have equal access to information, opportunities for individual investors to outperform others are limited.
Eugene Fama (1970) synthesized and popularized the forms of market efficiency into three levels as follows:
The weak form of market efficiency posits that security prices incorporate all information from past records, suggesting that the current market price accurately reflects historical earnings and relevant market data Consequently, this implies that past earnings and other historical information do not influence future earnings, indicating that earnings rates are independent of one another.
The semi-strong form of market efficiency asserts that stock prices incorporate not only historical prices but also swiftly adjust to new information as it becomes available Consequently, investors who base their decisions on this disclosed information cannot expect to achieve returns that exceed the market average.
In strong form market efficiency, the prices of securities consistently represent their true value, incorporating all accessible information regarding the company and the broader economy This concept suggests that trading stocks may often resemble a game of chance rather than a skillful endeavor.
In Chapter 2, the authors established the theoretical foundations pertinent to the research topic, covering key concepts of accounting, its role, and the significance of financial information in financial statements, stocks, and stock prices They examined the characteristics of financial statements from multiple perspectives, highlighting their consistent importance The chapter also introduced the Ohlson model, which underpins the research project, alongside related theories that bolster the research topic These theoretical foundations form the basis for the proposed research model and associated hypotheses.
CHAPTERS: RESEARCH METHODS 3.1 Research Procedure
