Research on the relationship between dividend change and profitability of listed companies on Vietnam stock market - 1


MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF INTERNATIONAL ECONOMY


RESEARCH ON THE RELATIONSHIP BETWEEN DIVIDEND CHANGE AND FINANCIALITY OF LISTED COMPANIES ON THE STOCK MARKET IN VIETNAM


THESIS THESIS OF FINANCE - BANKING


HANOI - 2019

MINISTRY OF EDUCATION AND TRAINING


UNIVERSITY OF INTERNATIONAL ECONOMY


RESEARCH ON THE RELATIONSHIP BETWEEN DIVIDEND CHANGE AND FINANCIALITY OF LISTED COMPANIES ON THE STOCK MARKET IN VIETNAM


Major: FINANCE - BANKING Code: 9340201


DOCTORAL THESIS


HANOI - 2019


GUARANTEE


I have read and understand violations of academic honesty. I declare with personal honor that this research is my own work and does not violate the requirements of academic honesty.


Hanoi, date of 2019

Thesis author


THANK YOU


The author would like to thank the staff and lecturers of the Institute of Banking and Finance and the Graduate Institute, National Economics University for their enthusiastic support during the thesis implementation. In particular, the author would like to express deep gratitude to the two instructors who wholeheartedly guided, supported and encouraged the author during the thesis work. The author would also like to thank my friends, colleagues and family who have always been by my side during my study and research.

Despite many efforts, the thesis cannot avoid limitations and shortcomings. The author is looking forward to receiving the contributions of teachers, friends and colleagues for the author to continue to complete the thesis.

The author would like to thank you!


TABLE OF CONTENTS

GUARANTEE i

ACKNOWLEDGMENTS ii

TABLE OF CONTENTS iii

LIST OF Acronyms vi

LIST OF TABLES vii

LIST OF PICTURES viii

FOREWORD 1

CHAPTER 1: THEORETICAL BASIS AND RESEARCH OVERVIEW OF THE RELATIONSHIP BETWEEN DIVIDEND CHANGE AND COMPANY'S PROFIT 7

1.1. Theoretical basis of dividends and profitability of the company 7

1.1.1. Dividend basics 7

1.1.2. Concept and criteria for evaluating profitability 15

1.1.3. Theoretical basis for the relationship between dividend change and firm profitability 17

1.2. Research overview 22

1.2.1. Overview of foreign studies 22

1.2.2. Overview of domestic research 32

CONCLUSION CHAPTER 1 38

CHAPTER 2: SITUATION OF DIVIDENDS, DIVIDENDS CHANGE AND PROFITbility OF LISTED COMPANIES ON STOCK MARKET IN VIETNAM 39

2.1. Introduction of companies listed on Vietnam's stock market 39

2.1.1. Number of listed joint stock companies 39

2.1.2. Sub-sectors of listed joint stock companies 40

2.2. Dividend status of companies listed on Vietnam stock market 41

2.2.1. Form of dividend payment 41

2.2.2. Cash dividend 44

2.2.3. Comment on the situation of dividend payment of companies listed on Vietnam stock market in the period 2008-2016 48

2.3. Status of profits and profitability of companies listed on Vietnam's stock market in the period 2008-2017 49

2.3.1. Profits of companies listed on Vietnam stock market 49

2.3.2. ROA and ROE of companies listed on Vietnam stock market in the period 2008-2017 52

2.3.3. Comment on profit situation and profitability of companies listed on Vietnam stock market in the period 2008 - 2017 55

2.4. Changes in dividends and profitability of joint stock companies listed on Vietnam stock market 56

2.4.1. The changing situation of dividends of joint stock companies listed on Vietnam stock market 56

2.4.2. Profit fluctuations and profitability of companies listed on Vietnam stock market 57

CONCLUSION CHAPTER 2 60

CHAPTER 3: RESEARCH METHODS 61

3.1. Research gap 61

3.2. Empirical research models on the relationship between dividend change and firm profitability 64

3.2.1. Model of Benartzi et al. (1997) 64

3.2.2. Model of Nissim & Ziv (2001) 65

3.2.3. Model of Grullon et al. (2005) 67

3.3. Hypothesis and research model on the one-way relationship between dividend change and profitability of listed companies on Vietnam stock market .

3.3.1. Research hypothesis 69

3.3.2. Research Model 71

3.4. Research data 76

3.5. Research Methods 79

CONCLUSION CHAPTER 3 82

CHAPTER 4: VERIFICATION OF THE RELATIONSHIP BETWEEN DIVIDEND CHANGE AND PROFITbility OF LISTED COMPANY ON THE STOCK MARKET IN VIETNAM 83

4.1. Descriptive statistical analysis of the study sample 83

4.2. Results of regression models 85

4.2.1. Results of the relationship between dividend change and profitability 2 years later of companies listed on Vietnam stock market 85

4.2.2. Results of the relationship between dividend change and future profitability of state-controlled and privately-controlled firms 95

4.2.3. Results of the relationship between dividend change and future profitability: the case where the company repurchases shares and the case when the company does not repurchase shares in the market in the year of the dividend change 98

4.3. Robust analysis with dependent variable is the change in income over total assets 101

CONCLUSION CHAPTER 4 106

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 107

5.1. Conclusion 107

5.1.1. Summary of research results on the relationship between dividend change and future profitability 108

5.1.2. Summary of research results on the relationship between dividend change and profitability of companies by industry and by ownership factor 112

5.1.3. Summary of research results on the relationship between dividend change and profitability in 2 cases: Dividend change and share repurchase with dividend change and no share buyback at the year of change dividend 115

5.2. Recommendations 116

5.2.1. Recommendation for investors 116

5.2.2. Recommended for business 118

5.2.3. Recommendations for State management agencies 125

5.3. Limitations of the thesis and future research directions 128

CONCLUSION CHAPTER 5 129

CONCLUSION 130

LIST OF THE AUTHOR'S DISCLOSED WORKS RELATED TO THE THESIS 131

LIST OF REFERENCES 132

APPENDIX 144

LIST OF ACRONYMS



Acronyms

Explain

CP

Share

CSCT

Dividend Policy

JSC

Joint Stock Company

DN

Enterprise

SOEs

State-controlled enterprises

Private Enterprise

Privately controlled business

HNX

Hanoi Stock Exchange

HOSE

Ho Chi Minh City Stock Exchange

HQHĐ

Operational efficiency

KNSL

Profitability

NPAT

Profit after tax

MLCP

Stock buyback

Investors

Investors

ROA

The ratio of income to total assets

ROE

Return on equity ratio

SHNN

State ownership

SHTN

Private ownership

Stock market

Stock market

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Research on the relationship between dividend change and profitability of listed companies on Vietnam stock market - 1


LIST OF TABLES

Table 1.1: Summary of empirical research results between dividend changes and profitability in some countries around the world 31

Table 2.1: Number of joint stock companies listed on Vietnam stock market 39

Table 2.2: Sectors and proportions of listed joint stock companies at the end of 2017 40 Table 2.3: Number and proportion of listed companies paying dividends in the period 2008-2016 41

Table 2.4: Number and proportion of enterprises paying cash dividends by ownership structure 43

Table 2.5: Number of companies paying cash dividends by industry for the period 2008-2016 44

Table 2.6: Cash dividend for the period 2008-2016 45

Table 2.7: Average dividend rate for the period 2008-2016 46

Table 2.8: Average dividend by industry for the period 2008-2016 48

Table 2.9: Average profit of joint stock companies listed on Vietnam stock market in the period 2008-2017 50

Table 2.10: Number of firms changing dividends of listed joint stock companies on Vietnam stock market 56

Table 2.11: Return volatility of dividend change observations 57

Table 2.12: ROA volatility of dividend change observations 58

Table 2.13: ROE volatility of dividend change observations 59

Table 3.1: Summary of variables in the 77 . model

Table 3.2: Number of observations of dividend change by year 78

Table 3.3: Number of Dividend Change Observations by Sector 78

Table 3.4: Hausman test results of 80 . models

Table 4.1: Descriptive statistics of the study sample 83

Table 4.2: Regression results for MH1, MH2 and MH3 86

Table 4.3: Regression results of model 4 89

Table 4.4: Regression results of model 5 91

Table 4.5: Results of Model 5 of SOEs and Private Enterprises 94

Table 4.6: Number of observations and changes in dividends of SOEs and Private Enterprises 96

Table 4.7: Results of Model 5 of SOEs and Private Enterprises 96

Table 4.8: Regression results of model 5 with DN with MLCP and DN without MLCP . 99 Table 4.9: Regression results on the relationship between dividend change and ROA change 102 Table 4.10: Robust analysis results with MLCP and non-MLCP firms 104


LIST OF PICTURES


Figure 1.1: Dividend payment process of joint stock company 11

Figure 2.1: Number of joint stock companies listed on Vietnam stock market 40

Figure 2.2: Proportion of industries at the end of 2017 (%) 41

Figure 2.3: Proportion of companies paying cash and stock dividends

period 2008-2016 42

Figure 2.4: Cash dividend payout for the period 2008-2016 46

Figure 2.5: Average profit by ownership structure of Vietnamese enterprises in the period 2008-2017 51

Figure 2.6: Profitability of Vietnamese enterprises in the period 2008-2017 52

Figure 2.7: ROA by ownership structure of enterprises in the period 2008-2017 53

Figure 2.8: ROE by ownership structure of enterprises in the period 2008-2017 54


FOREWORD


1. Necessity of research

The dividend factor in common stock analysis is a much-discussed topic in corporate finance. Graham & Dodd's famous book "Security Analysis" (2017, 448-449) writes: "Dividend return is the overarching factor in common stock investing. A business is successful if it pays regular dividends and is expected to increase its dividend payout ratio over time. Because the concept of investing is inextricably linked with reliable earnings numbers. Accordingly, the price paid for ordinary shares will be determined primarily by the number of dividends.” According to Graham & Dodd (2017), dividend payout ratio and dividend payment history are among the factors involved in the common stock valuation process. Many domestic and foreign studies have analyzed the influence of dividends on enterprise value, as well as on stock prices in the market. These studies mainly evaluate the annual dividend payout ratio of enterprises. Another research direction on dividends that is also analyzed by many scholars is the change in corporate dividends, which is shown through the dividend signal theory. The content of dividend signal theory states that dividend changes contain information about the future profitability and profitability of the business, and managers use dividend changes to convey information about the future prospects. future for investors. Many authors around the world have researched and clarified this issue. However, up to now, the question of whether dividend changes are a good signal for the future profitability of companies is still controversial. Another research direction on dividends that is also analyzed by many scholars is the change in corporate dividends, which is shown through the dividend signal theory. The content of dividend signal theory states that dividend changes contain information about the future profitability and profitability of the business, and managers use dividend changes to convey information about the future prospects. future for investors. Many authors around the world have researched and clarified this issue. However, up to now, the question of whether dividend changes are a good signal for the future profitability of companies is still controversial. Another research direction on dividends that is also analyzed by many scholars is the change in corporate dividends, which is shown through the dividend signal theory. The content of dividend signal theory states that dividend changes contain information about the future profitability and profitability of the business, and managers use dividend changes to convey information about the future prospects. future for investors. Many authors around the world have researched and clarified this issue. However, up to now, the question of whether dividend changes are a good signal for the future profitability of companies is still controversial. Managers use dividend changes to convey information about future prospects to investors. Many authors around the world have researched and clarified this issue. However, up to now, the question of whether dividend changes are a good signal for the future profitability of companies is still controversial. Managers use dividend changes to convey information about future prospects to investors. Many authors around the world have researched and clarified this issue. However, up to now, the question of whether dividend changes are a good signal for the future profitability of companies is still controversial.

Lintner (1956) suggested that managers are willing to pay higher dividends when the firm's current profits are large enough to make cash dividends. In other words, managers tend to increase dividends when they believe that future cash flows will offset higher dividend payments, and vice versa. Bhattacharya (1979), Miller & Rock (1985), John & Williams (1985) have proposed theoretical models of dividend signals. These models show that when managers forecast better performance, they send this signal to the market by paying dividends.

In the world, there have been a number of studies analyzing the correlation between dividend changes and profitability of enterprises and have become a topic of interest to many scholars and investors. The experimental results give different conclusions, divided into two basic groups: The first group supports the view that changing dividends tells information about the future profitability of the enterprise; the second group, does not support the above view and thinks that dividend increase or decrease is not correlated with



future income changes. Supporting studies include: Healy & Palepu (1988), Nissim & Ziv (2001) performed on the US stock market, showing that dividend change is positively correlated with profitability change. next year, Kato et al (2002) studied the Japanese stock market, Choi et al (2011) conducted on the Korean stock market also found a positive relationship between dividend change and profit 1 year later. Chinpiao Liu & An-Sing Chen (2015) study the Chinese stock market and show that dividend changes are indicative of the prospects for return on equity.

In contrast, many studies find little or no correlation between dividend change and firm profitability. Studies including: DeAngelo (1996), Benartzi et al (1997), Grullon et al (2005), Lie (2005) did not find a significant relationship between dividend change and earnings change. Jensen et al. (2010) again show that corporate profits will bounce back after reducing dividends.

In summary, up to now, there are still many different conclusions when forecasting the profitability of enterprises based on information on dividend changes. Furthermore, these studies focus on cash dividend changes without taking into account the possibility of firms concurrently carrying out share buybacks (MLCPs) during the year in which cash dividends are paid, because repurchase activity Stock is also a form of distribution of profits to shareholders, so it will affect the level of cash dividends. On the other hand, many authors have demonstrated that ownership structure affects dividend payment of listed companies. Therefore, the correlation between dividend change and profitability may vary by ownership structure. However, to the knowledge of the author so far, there has been no research to clarify the dividend signal according to the ownership forms and in the case of enterprises that buy back shares in the market.

In Vietnam, many studies on dividends have been carried out, but these studies focus on the topic of improving dividend policy or the effect of dividend announcement on stock prices in the market. To date, there has been no research on the impact of dividend changes on the earnings forecast of companies listed on the stock market in the following years, thereby providing useful information for investors and managers. enterprise.

Stemming from the above theory and practice, the author has chosen the topic: "Research on the relationship between dividend change and profitability of listed companies on Vietnam's stock market" as the content. study.

2. Research objective

This study aims to test the one-way relationship between change



dividends and profitability in the next 2 years after changing dividends (years 1 and 2) of companies listed on the Vietnamese stock market, thereby finding empirical evidence of dividend signals on the Vietnamese stock market. Male. Specific goals include:

- Assess the current status of dividends, dividend changes and profitability of companies listed on Vietnam stock market in the period 2008-2017.

- Test the one-way relationship between dividend change and profitability in the next 2 years of companies listed on Vietnam stock market in general.

- Test the one-way relationship between dividend change and profitability in the next 2 years in the case of state-controlled companies and privately-controlled companies.

- Test the one-way relationship between dividend change and profitability in the next 2 years in 2 cases: the company repurchases shares and the company does not buy back shares in the market in the year of stock change. ie.

From the above objectives, the thesis develops the following research questions:

(1) What is the current situation of dividends, dividend changes and profitability of companies listed on the Vietnamese stock market in the period 2008-2017?

(2) Is the dividend change a signal to the profitability of the joint stock companies listed on the Vietnam stock market in the following years?

(3) How is the one-way relationship between dividend change and future profitability different if the state-controlled company and the privately-controlled firm are?

(4) How is the one-way relationship between dividend change and future profitability different if the firm has stock repurchases and the company does not repurchase shares in the market during the year of the change? dividend?

(5) What recommendations for investors, business managers and state agencies are made from the above research results?

3. Object and scope of research

3.1. Research subjects

The research object of the thesis is dividend change and the one-way relationship between dividend change and earnings performance in the next 2 years after the dividend change of companies listed on Vietnam stock market. According to the Enterprise Law (2014), dividends of listed companies can be paid in the form of cash, shares or other valuable assets. However, the study only focuses on companies that pay cash dividends, because the market

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