Page 1 of 10
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 10
November 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 58
A Two Factor Model Influences The Risk Level of Viet
Nam Commercial Electric Companies
Dinh Tran Ngoc Huy
1 MBA, PhD candidate, Banking University, HCMC – GSIM, International University of Japan, Japan,
dtnhuy2010@gmail.com
ABSTRACT
This research shows marketing factors such as
business competitors could affect business market
risk, from a quantitative point of view. Using a two
(2) factors model, this research paper estimates the
impacts of not only the size of firms’ competitors, but
also leverage in the commercial electric industry, on
the market risk of 99 listed companies in this
category.
This paper founds out that the risk dispersion level in
this sample study could be minimized in case the
competitor size doubles (measured by equity beta var
of 0,157) and leverage down to 20% or remaining as
current.
Beside, the emprical research findings show us that
when financial leverage increases up to 30%, max
asset beta value decreases from 0,240 to 0,229 in
case the size of competitor doubles.
Last but not least, this paper illustrates calculated
results that might give proper recommendations to
relevant governments and institutions in re- evaluating their policies during and after the
financial crisis 2007-2011.
KEYWORDS : risk management, competitive firm
size, market risk, asset and equity beta, commercial
electric industry
JEL CLASSIFICATION : M00, G3, M3
1. Introduction
In marketing and business, choosing
competitors might affect business strategies,
esp., during the crisis period 2007-2009 in
which commercial electric firms experience
many risks, although Viet Nam commercial
electric industry is considered as one of active
economic sectors, which has some positive
effects for the economy.
This paper is organized as follow. The research
issues and literature review will be covered in
next sessions 2 and 3, for a short summary.
Then, methodology and conceptual theories are
introduced in session 4 and 5. Session 6
describes the data in empirical analysis. Session
7 presents empirical results and findings. Next,
session 8 covers the analytical results. Then,
session 9 presents analysis of industry. Lastly,
session 10 will conclude with some policy
suggestions. This paper also supports readers
with references, exhibits and relevant web
sources.
2. Research Issues
For the estimating of impacts of the selection of
different industrial competitors on the risk
measured by beta for listed commercial electric
companies in Viet Nam stock exchange,
research issues will be mentioned as following:
Issue 1: Whether the selection of different
competitors makes the risk level of commercial
electric industry firms under the different
changing scenarios of leverage increase or
decrease so much.
Issue 2: Whether the selection of doubling size
competitor makes the dispersion of beta values
become large in the different changing scenarios
of leverage in this industry.
3. Literature review
Goldsmith (1969), Mc Kinnon (1973) and Shaw
(1973) pointed a large and active theoretical and
empirical literature has related dfinancial
development to the economic growth process.
......
Last but not least, Ana and John (2013)
Binomial Leverage – Volatility theorem
provides a precise link between leverage and
volatility. Chen et all (2013) supports suspicions
that over-reliance on short-term funding and
insufficient collateral compounded the effects of
dangerously high leverage and resulted in
undercapitalization and excessive risk exposure
for Lehman Brothers.
4. Conceptual theories
Industrial competitor theories
There are many competitive advantages which
are owned by industrial competitors. These
advantages can be attributes such as access to
natural resources or highly trained personel
human resources or capital or leverage. Using
leverage can help firms to obtain new
Page 2 of 10
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 10
November 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 59
technologies which are another competitive
advantage.
5. Methodology
In this research, analytical research method is
used, philosophical method is used and
specially, scenario analysis method is used.
Analytical data is from the situation of listed
commercial electric industry firms in VN stock
exchange and applied current tax rate is 25%.
The below table 1 shows us three cases of
choosing different competitors.
Finally, we use the results to suggest policy for
both these enterprises, relevant organizations
and government.
Table 1 – Analyzing market risk under three (3) scenarios of changing competitors (Made by Author)
Order
No.
Company
Stock code
Competitor
size as
current
Competitor size
slightly smaller Competitor size
double
1 TSB
2 BTH
3 DZM
4 DVH
TSB as
comparable
DZM as
comparable VHG as comparable
5 LGC
6 CJC
7 TYA
8 PPS
CMG as
comparable
CMG as
comparable HVG as comparable
9 GLT
10 NAG
11 NHW
12 FBA
BTH as
comparable
VBH as
comparable SRB as comparable
13 SMA
NHW as
comparable
NHW as
comparable CMG as comparable
14 TIE
15 TGP
16 VHG
17 VBH
18 CSG
6. General Data Analysis
The research sample has total 18 listed firms in
the commercial electric industry market with the
live data from the stock exchange.
Firstly, we estimate equity beta values of these
firms and use financial leverage to estimate
asset beta values of them. Secondly, we change
the competitors from what reported in F.S 2011
to those with size doubling and reducing
slightly to see the sensitivity of beta values. We
found out that in both cases of smaller
competitors and double size competitors, asset
beta mean values are reduced to 0,229 from
0,240 if the leverage up to 30%. Also in 3
scenarios of different competitors, we find out
equity beta mean values are moving in the
opposite direction with the leverage. Leverage
degree changes definitely has certain effects on
asset and equity beta values.
7. Empirical Research Findings and
Discussion
In the below section, data used are from total 18
listed commercial electric industry companies
on VN stock exchange (HOSE and HNX
Page 3 of 10
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 10
November 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 60
mainly). In the scenario 1, current financial
leverage degree is kept as in the 2011 financial
statements which is used to calculate market
risk (beta) whereas competitor size is kept as
current, then changed from double size to
slightly smaller size. Then, two (2) FL scenarios
are changed up to 30% and down to 20%,
compared to the current FL degree. In short, the
below table 1 shows three scenarios used for
analyzing the risk level of these listed firms.
Market risk (beta) under the impact of tax rate,
includes: 1) equity beta; and 2) asset beta.
Table 1 – Analyzing market risk under three (3) scenarios (Made by Author)
FL as current FL up 30% FL down 20%
Competitor size as
current
Scenario 1 Scenario 2 Scenario 3
Competitor size
slightly smaller
Competitor size
double
7.1 Scenario 1: current financial leverage (FL) as in financial reports 2011 and competitor size kept as
current, slightly smaller and double
In this case, all beta values of 18 listed firms on VN commercial electric industry market as following:
Table 2 – Market risk of listed companies on VN commercial electric industry market under a two
factors model (case 1) (source: VN stock exchange 2012)
Order
No.
Company
stock code
Competitor size as current
Competitor
size
slightly
smaller Competitor size double
Equity
beta
Asset beta (assume
debt beta = 0)
Equ
ity
bet
a
Asse
t
beta
(ass
ume
debt
beta
= 0)
Equ
ity
bet
a
Asset beta (assume
debt beta = 0)
1 TSB 0,376 0,102
0,3
76 0,102
0,3
76 0,102
2 BTH 0,701 0,465
0,7
01 0,465
0,7
01 0,465
3 DZM 1,372 0,551
1,3
72 0,551
1,3
72 0,551
4 DVH 0,136 0,041
0,5
11 0,153
0,4
49 0,135
5 LGC 0,890 0,361
0,8
90 0,361
0,8
90 0,361
6 CJC 0,587 0,091
0,5
87 0,091
0,5
87 0,091
7 TYA 1,145 0,359
1,1
45 0,359
1,1
45 0,359
8 PPS 0,092 0,007
0,0
95 0,007
0,0
63 0,005
9 GLT 0,687 0,482
0,6
87 0,482
0,6
87 0,482
10 NAG 1,220 0,472 1,2 0,472 1,2 0,472
