Tài liệu Phát hành cổ phiếu bổ sung (seos) – bằng chứng tại thị trường chứng khoán việt nam.

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MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY DINH THI THU HA SEASONED EQUITY OFFERINGS EVIDENCE IN VIETNAMESE STOCK MARKET DOCTORAL THESIS HoChiMinh City – 2016 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY DINH THI THU HA SEASONED EQUITY OFFERINGS EVIDENCE IN VIETNAMESE STOCK MARKET Specialization: Finance – Banking Specialization code: 62340201 DOCTORAL THESIS SUPERVISOR: Asso.Prof. HO VIET TIEN Asso.Prof. BUI KIM YEN HoChiMinh City – 2016 i TABLE OF CONTENTS List of Abbreviations List of Tables List of Figures Chapter 1: Introduction ............................................................................... 1 1.1 Research motivation ............................................................................ 1 1.2 Research objectives ............................................................................. 6 1.3 Research questions .............................................................................. 7 1.4 Research scope.................................................................................... 8 1.5 Research methods ............................................................................... 8 1.6 Research contributions ........................................................................ 10 1.7 Structure of the study .......................................................................... 11 1.8 A summarize of thesis findings ........................................................... 13 Chapter 2: Literature review and Hypotheses development....................... 16 2.1 Introduction .......................................................................................... 16 2.2 Theoretical literature on SEOs .............................................................. 16 2.2.1 Trade-off Theory ...................................................................... 16 2.2.2 Growth Opportunities Theory ................................................... 18 2.2.3 Market timing theory ................................................................ 20 2.2.4 Agency problem theory ............................................................ 23 2.2.5 Efficient Market Hypothesis ..................................................... 24 ................................................................................................. 2.3 Literature review on SEOs empirical studies ........................................ 27 2.3.1 Determinants of company’s SEOs motivation .......................... 27 2.3.1.1 Trade-off theory................................................................ 27 2.3.1.2 Growth Opportunities Theory ........................................... 28 2.3.1.3 Market timing theory ........................................................ 30 ii 2.3.1.4 Agency problem theory .................................................... 32 2.3.2 Market’s reactions to company’s SEOs .................................... 33 2.3.2.1 Growth Opportunities Theory ........................................... 33 2.3.2.2 Market timing theory ........................................................ 35 2.3.2.3 Efficiency market hypothesis ............................................ 37 2.4 Hypotheses building and variable measurements ................................. 40 2.4.1 Determinants of company’s SEOs motivation .......................... 40 2.4.2 Market’s reaction to company’s SEOs ...................................... 43 2.5 Conclusion .......................................................................................... 45 Chapter 3: Data and methodology ............................................................... 47 3.1 Data ................................................................................................... 47 3.2 Methodology ..................................................................................... 51 3.2.1 Determinants of company’s SEOs motivation .......................... 51 3.2.2 Market reaction to company’s SEOs......................................... 56 3.2.2.1 Event study .................................................................. 56 3.2.2.2 Determinants of market reaction to company’s SEOs ... 64 Chapter 4 Determinants of company’s SEOs motivation............................ 71 4.1 Statistics summary ............................................................................. 71 4.1.1 Distribution of SEOs over the sample period (2007-2013)........ 71 4.1.2 SEOs probability description .................................................... 73 4.2 Determinants of company’s SEOs motivation .................................... 79 4.3 Determinants of company’s SEOs motivation by issuance method .... 85 4.4 Conclusion ......................................................................................... 91 Chapter 5 Market’s reaction to company’s SEOs ....................................... 92 5.1 Data description ................................................................................... 92 5.2 Market reaction to company’s SEOs ..................................................... 93 5.2.1 Market reaction around announcement day ................................ 93 iii 5.2.2 Market reaction around ex-right day .......................................... 102 5.3 The relation between announcement day and ex-right day .................. 111 5.4 Determinants of market reaction to company’s SEOs .......................... 112 5.4.1 Determinants of market reaction around announcement day ...... 112 5.4.2 Determinants of market reaction around ex-right day .............. 117 5.5 Conclusion .......................................................................................... 122 Chapter 6 Conclusion and Suggestion......................................................... 124 6.1 Conclusion .......................................................................................... 124 6.2 Suggestion for stakeholders................................................................ 126 List of publications References Appendices iv LIST OF ABBREVIATIONS AAR: Average abnormal returns AD: Announcement day AR: Abnormal returns CAR: Cumulative average abnormal returns EMH: Efficient market hypothesis HOSE: Ho Chi Minh City Stock Exchange SEOs: Seasoned equity offerings XR: Ex-right day REC: Real estate and construction MAI: Manufacturing industry SER: Service FBI: Financial – Banking – Insurance services AFF: Agriculture, Fishery and Forestry LIST OF TABLES Table 1.1: Vietnamese lending interest rate ....................................................... 4 Table 3.1: VNIndex and Market capitalization of listed domestic companies (% of GDP) in 2006 -2013 ......................................................................................... 50 Table 3.2 Classification criteria: ........................................................................ 51 Table 3.3 SEOs-motivation independent variables description........................... 55 Table 3.4 SEOs-price reaction independent variables description ..................... 69 v Table 4.1 Distribution of SEOs over the sample period (2007-2013) ................. 71 Table 4.2 SEOs probability data description ...................................................... 73 Table 4.3 Characteristics between SEOs companies and non-SEOs companies . 75 Table 4.4 SEOs description by issuance method ................................................ 78 Table 4.5 SEOs conducting probability ............................................................. 83 Table 4.6 Average marginal effects on SEOs probability ................................... 84 Table 4.7 SEOs by equity right and by equity bonuses or dividends probability 88 Table 4.8 Average marginal effects on SEOs equity right and by equity bonuses or dividends probability ..................................................................................... 90 Table 5.1 Characteristics of SEOs companies around event day data description .......................................................................................................................... 92 Table 5.2 AAR and CAR around announcement day ......................................... 95 Table 5.3 AAR and CAR around announcement day in favorable and unfavorable market timing .................................................................................................... 97 Table 5.4 Market reaction around announcement day divided by criteria ......... 100 Table 5.5 AAR and CAR around ex-right day ................................................. 103 Table 5.6 AAR and CAR around XR day in favorable and unfavorable market timing .............................................................................................................. 106 Table 5.7 Market reaction around announcement day by criteria ..................... 109 Table 5.8 Determinants of market reaction around SEO announcement day .... 116 Table 5.9 Determinants of market reaction around SEOs ex-right day ............. 121 vi LIST OF FIGURES Figure 1.1: Listing value and Market capitalization ........................................... 4 Figure 1.2: Research methods ............................................................................ 9 Figure 2.1: Conceptual framework .................................................................... 39 Figure 5.1 Relation between AD and XR ......................................................... 111 1 CHAPTER 1 INTRODUCTION 1.1 Research motivation: Seasoned equity offerings (SEOs) draw enormous attention from researchers around the world. This method is an effective and popular way to expand company financial resources to maintain and develop its activities, to reconstruct capital and stakeholder structure of company. In order to finance companies’ activities, they can choose either internal sources or external sources of funding. While the former mainly refer to profit or retained earnings, the latter mention the concept of debt financing as well as equity financing. To estimate company’s financing decisions Modigliani and Miller (1958, 1963) suggest that capital structure is not consistent with firm value. Nevertheless, this observation is based on the important assumption that the market is perfect. The idea of perfect capital market consists of the following characteristics: (i) companies are classified based on their risk; additionally, companies having the same risk generate similar returns; (ii) perfect capital market which implies that there is no transaction cost, also no tax or bankruptcy cost; (iii) the interest rate for lending and borrowing activities are similar for private and investors as well as corporation. However, in the real market, tax is deducted from interest expenditure. Nevertheless, debt financing pressure may discourage firms to entirely use debt financing instead of equity financing (Huang, 2012). Besides the trade-off theory which mainly discuss tax shield as well as financial distress, there are also other factors affect the financing decision of company including information asymmetry costs, agency conflict costs and the availability of promising growth opportunities Besides, a trend of increasing international equity issuance has also been reported, especially after the financial crisis in 2010. To compensate for the losses 2 and larger writedowns suffering from the crisis as well as to raise capital in the prediction of more strict regulations will occur, global financial institutions have to raise equity issuance substantially. A report of Bloomberg in July 2010 shown that financial institutions, mainly from Europe and the United States, since mid2007 had raised US$1.5 trillion equity issue to offset their crisis losses (Witmer, 2010). The paucity of literature and case study in emerging market where results are inclusive also urge a solution. There have been many research to find out company and market behavior such as determinants of companies that lead them to conduct SEOs, impact of SEOs on company stock prices when information about SEOs are publicized. The number of research on this topic has been increasing with many aspects have been discovered and applied in practice. However, the majority of existing SEOs research are examined at developed market (Eckbo et. al., 2007) while only few research on cases of emerging market are conducted. The paucity of literature and case study in emerging market has drawn attentions from researchers to this market. Therefore, examining emerging economy case attracts the interest to fill the research gap and emphasize the own nature of this market. In additional, examining whether the results of developed markets can be carried over to emerging market also becomes appealing. In addition to examining determinants of company’s SEOs decision, researchers also show that stock prices on the market will be affected when information about the issuance is publicized. In contrast to negative reactions in developed markets, the results of emerging markets are inclusive. While there is a trend of positive reaction in the research of Kim and Lee (1990) for Korea; Salamudin et. al. (1999) for Malaysia; Tan et. al. (2002) for Singapore; Marisetty et. al. (2008) for Indian, the findings of Cahit (2006) for Turkey; Chen et. al. (2007) and Shahid (2010) for China; and Lerskullawat (2011) for Thailand, on the other 3 hand show negative reaction. The development and new trend in financing resources of Vietnamese Stock market also become a driving force. Since its first establishment with only two listed companies in 2000, Vietnamese stock market has witnessed remarkable development, the number of listed companies has strongly increased in both listed value and market capitalization (Figure 1.1). Besides, Vietnamese stock market gradually becomes more attractive to foreign investors. International integration helps raise the position, foster Vietnamese stock market to a higher level among international financial market (e.g. in 2013, the HOSE became official member of the World Federation of Exchanges), enhance the value of listed companies, attract more foreign investment, and achieve more opportunities so that it can access to international standards, exchange and absorb the experience of developed markets. With that impressive development, Vietnamese stock market, however, is still a very young market with the history of only over 15 years since its establishment. Vietnamese companies are still in favor of traditional finance such as loans borrow from banks. However, high lending interest rate (table 1.1) accompanied by the financial crisis in 2010 had strongly affect the banking system, firms were not confident in the possibility of providing loans from banks, and in return, bank themselves had no belief in firm’s ability to pay the loan since both sides were impacted due to the crisis. Consequently, when bank financing can not play its traditional roles, companies turn their attentions to equity financing. 4 Figure 1.1: Listing value and Market capitalization (Source: hsx.vn) Table 1.1: Vietnamese lending interest rate Year Lending interest rate (%) 2006 11.18 2007 11.18 2008 15.78 2009 10.07 2010 13.14 2011 16.95 2012 13.47 2013 10.37 (Source: theglobaleconomy.com) 5 In addition, SEOs gradually become more appealing to Vietnamese companies. From 2007 to 2013, there were 482 cases that companies use SEOs to pay bonuses or dividends, or to increase their financial resources by issuing equity rights offerings. This fact has shown that SEOs is a popular method for companies to manage their financial and investment activities, gradually become more widespread and of interest in Vietnam. Furthermore, SEOs on Vietnamese stock market also draw attention from researchers e.g. Nguyen Quang Diep (2011) examines capability of Vietnamese investors in evaluating long-run operating performance of the issuers. Vo Xuan Vinh and Doan Minh Thai (2015) investigate market reaction to company stock price and trading volume when information about cash dividend is publicized. Vo Xuan Vinh and Phan Thi Anh Thu (2015) examine market reaction to information about companies’ stock split. Vo Xuan Vinh and Dang Buu Kiem (2015) investigate trading of foreign investors when information about cash dividend is announced. Recently, Vo Xuan Vinh and Dang Buu Kiem (2016) examine the stock market reaction measured by abnormal trading volume around ex-dividend day using data set of listed firms on HOSE. However, there is lack of study investigating thoroughly behavior of listed companies in regarding of why Vietnamese companies conduct SEOs and market reaction around event day when information about SEOs by dividend or rights are publicized. Therefore, limited number of SEOs literature in the context of Vietnam should be increased to fill this empirical gap. The important function of SEOs in the Vietnamese capital market and in case of SEOs companies, accompanied by the role of enhancing knowledge of investors about behavior of SEOs companies and behavior of the market have led us to this comprehensive research. Base on the findings, we then point out relevant suggestions for related stakeholders such as SEOs companies and investors. 6 In case of investors: should investors join or leave companies that intend to issue SEOs. Are there any signs to recognize the issuance in order to prepare necessary financial resources in case investors want to join the issuance? What are relevant investment strategies toward equity of company conducting SEOs in order to earn money? In case of SEOs companies: what methods could be applied to increase the effectiveness of the issuance in terms of maximizing proceeds collected from the issuance and increasing company value by conducting SEOs. 1.2 Research objectives Vietnam is in the CIVETS group include Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa which can be represented for new stardom candidates among emerging markets. Although these six CIVETS countries still suffer from some disparities during their development, they do have common element for emerging market such as young populations, stable politics, domestic economic structure diversification, less commodity exports reliance, relatively developed financial markets, outperforming returns potential (Korkmaz et. al., 2012). The main objectives of this thesis are to investigate thoroughly SEOs in the context of emerging market with Vietnamese stock market case. This objective serves to fill the gap of literature lacking in this region. Besides, it is among the first study in Vietnam to focus on many aspects of SEOs in terms of determinants of company’s SEOs motivation, market reaction and determinants of market reaction to company’s SEOs. 7 We examine SEOs in Vietnam on two aspects: Company’s SEOs motivation by examining why do Vietnamese companies conduct SEOs. Market reaction to company’s SEOs by examining how does market react to company’s SEOs, which express through the fluctuations of stock prices. Subsequently, we develop the estimation model to measure to what extend the theories mentioned in previous SEO studies can be applied to explain market reaction to companies SEOs in case of Vietnam stock market. Furthermore, we then compare our findings with existing literatures. 1.3 Research questions Objective 1: Examining company’s SEOs motivation Why do Vietnamese companies conduct SEOs? Objective 2: Examining market reaction to company’s SEOs How does market react to company’s SEOs? Does classifying companies into three criteria: Market capitalization, Industry and Issuance method make any differences in terms of market reaction? To what extend the theories mentioned in previous SEO studies can be applied to explain market reaction to companies SEOs in case of Vietnam stock market? 8 1.4 Research scope This research covers only companies listed on the HOSE during 2007 – 2013. Stock prices are collected from HOSE website. The data is collected from financial statements of HOSE listed companies which are extracted from the database of Orbis. Research sample comprises companies conducting their SEOs as right distributions; or rights accompanied with dividends; or rights accompanied with bonuses; and companies issued their SEOs as bonus or dividend payments. The event days include announcement day and ex-right day which are widely publicized on the media. SEOs companies are classified according to three criteria (market capitalization, issuance method and industry). 1.5 Research methods: To examine the company’s SEOs motivation, we apply logit/probit model to find the determinants of company motivation to issue SEOs. Based on the interpreted results, we will suggest relevant recommendation for investors and SEOs companies. To examine the market reaction to company’s SEOs, we first apply the Event study method developed by Campbell, Lo and MacKinlay (1997) to study the market reaction around event day, then using random effects and fixed effects model on panel data to investigate determinants of market reaction around event day. Based on Hausman test, we select the appropriate model and interpret results in according to relevant financial theories then point out relevant suggestions for stakeholders. 9 RESEARCH METHODS Company’s SEOs motivation Why do Vietnamese companies conduct SEOs? Quantitative method Market reaction to company’s SEOs How does market react to company’s SEOs. The extent of SEO theories application into Vietnamese stock market Quantitative method Logit/probit model on STATA Event study method. Random effects/Fixed effects models for panel data on STATA. Results interpretations. Results interpretations. Conclusion and relevant policy suggestions. Figure 1.2: Research methods 10 1.6 Research contributions: Contribution to SEOs literature: Our research covers different aspects from previous research regarding SEOs area. Firstly, we investigate SEOs using data from Vietnamese market which has not been examined yet. We refer to SEOs literature in both developed and other emerging markets to form the research hypotheses then examine whether the results of those markets can be carried over to Vietnam. Conducting research on SEOs is mainly based on Event study; its objective is to measure the financial assets value fluctuation, which is resulted from particular event. The number of research applying this method is approximate 565 topics from 1974 to 2000 in top five journals of business and finance (Khotari and Warner, 2006), however the number of studies on SEOs in developing countries is relatively limited. In addition to the out-of-sample tests, this research also fills the gap and enriches the literature on cases of emerging market where the results are inclusive and very limited, from then to draw an overall picture in comparison to developed markets, which have been wildly discovered; therefore the research findings enrich existing literature related to SEOs in Vietnamese market, especially to discover how much Vietnamese stock market can catch up with mature market. This research also examines Vietnamese stock market characteristics, Vietnamese investors and SEOs companies on many aspects: SEOs motivations and market reaction. Contribution to empirical study: Raising capital through conducting SEOs brings certain benefits to issuing companies in comparison to debt borrowing or cash dividends. However, there are very few research about this topic be conducted at Vietnamese stock exchange, Vietnamese listed companies, therefore lack of necessary references. 11 With this research, we fill the gap about SEOs research and contribute an empirical study since it enrich existing literature of SEOs in Vietnam. Investors, SEOs companies can use this research as a reference material in their trading, investment and management activities toward information management, making trading decisions. Investors could consider trading stocks of SEOs companies to earn profits, reserve money in advance to “catch the issuance”, or to have relevant actions toward these kind of SEOs. SEOs is also considered a way to test the efficiency level of the market. Furthermore, the level of efficiency of market can be reflected through the transparency of information, which is one of the most crucial elements that market legislators should ensure to the investors, especially the minor ones. Market legislators can consider using this research as a way to test the level of information transparency in the market to take relevant actions toward the current market situation. Applying a well-known Event study method to investigate how does market react to different issuing method such as to increase company capital by equity rights or to pay bonuses/dividends, we compare stock price reaction to those two methods to provide more evidence in the field of SEOs in Vietnam, which can be used as reference or studying material for students. 1.7 Structure of the study: The remaining of the research is organized as follows: Chapter 2 presents the literature concerned SEOs in most relevant study. We review thoroughly how SEOs research have been examined in both developed as well as emerging market. For an easily approach we then build a conceptual framework to summarize financial theories that have been previously applied. At the end of 12 this chapter, based on the existing SEOs literature in both developed and other emerging markets we develop hypotheses for our study. We also include in this chapter three appendices to summarize tables of our literature surveys. In Chapter 3: Data and Methodology, we present the way our data is collected, along with the criteria to classify them. Besides, we describe methodology is applied in our study with proxies for the relevant theories, estimation regression models, along with the detail description of Event study method, which help in our empirical estimation in chapter 4 and chapter 5. Chapter 4: Determinants of company’s SEOs motivation is the first empirical result chapter regarding to companies motivations that lead them to conduct SEOs. We examine the determinants in four areas: trade-off, growth opportunities, market timing and agency problem theory, those theories have strong impact on company’s SEOs decisions. In this chapter, the logit/probit model is applied to identify determinants of company’s SEOs motivation. We then compare our results to existing previous study to draw a comprehensive picture on Vietnamese case. Chapter 5 examines market reaction to SEOs in two categories: (1) how the stock prices fluctuate around announcement day and the ex-right day; (2) the determinants of stock price reactions. We apply the standard Event study method to measure the stock price reaction while regression models on panel data (Fixed effect and Random effect models) are chosen to examine determinants of market reaction to company’s SEOs. In this chapter, we focus on the differences of stock price reactions after classifying the data into three criteria: market capitalization, industry and issuance method, we especially focus on the type of issuance method on whether companies issue SEOs to raise capital by equity
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