Tài liệu Value relevance of accounting information for investors by large listed company in vietnamese stock market

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VALUE RELEVANCE OF ACCOUNTING INFORMATION FOR INVESTORS BY LARGE LISTED COMPANY IN VIETNAMESE STOCK MARKET BY LAM THI BICH NGOC E0600096 Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business (Accounting) Hons JUNE 2010 1 DECLARATION I hereby declare that this graduation project is based on my original work except for quotations and citation which have been duly acknowledged. I also declare that it has not been previously or concurrently submitted for any other courses/degrees at HELP University College or other institutions. The word count is: 10125 words Lam Thi Bich Ngoc Date: 2 VALUE RELEVANCE OF ACCOUNTING INFORMATION FOR INVESTORS BY LARGE LISTED COMPANY IN VIETNAMESE STOCK MARKET BY LAM THI BICH NGOC June 2010 Supervisor: Dr. Dang Duc Son Abstract Value relevance of accounting information is not a new concept. There are many researchers who have been trying to build up different aspect of value of accounting information for investors by providing surveys and assumptions. These theories have similar basic knowledge. But there are still a gap of investors usage of accounting information between Vietnam and other countries. By taking applicable theories and practicing from previous studies, the researcher does a research by dividing 100 questionnaires to investors in Hanoi Securities Trading Center (HASTC). The aim of the research is to determine whether accounting information affects the investor‟s decision and the frequency of the use of information by investors. The result of this research show that Accounting information is an important reference source when investors make investment decisions. This also shows that investors did not completely rely on accounting information for their investment investors because they worried about information disclosed. 3 TABLE OF CONTENTS Page Declaration of Originality and Word Count ii Abstract iii Table of Content iv List of Figures viii List of Abbreviations ix CHAPTER 1 INTRODUCTION 1 1.1 Research background 2 1.2 Problem Statement 3 1.3 Objective and Scope of Research 5 1.3.1 Objectives of Research 5 1.3.2 Scope of Research 5 1.4 Research Methods 5 1.5 Structure of Research 6 4 CHAPTER 2 LITERATURE REVIEW 2.1 Financial Statements – The Important Source of Accounting 7 8 Information for Investors in Vietnamese Stock Market 2.1.1 Balance Sheet 8 2.1.2 Income Statement 9 2.1.3 Cash flow Statement 9 2.1.4 Note to the Financial Statements 10 2.1.5 Disclosure of Information of Public Companies under 11 Vietnamese Accounting Standards 2.1.6 2.1.5.1 Periodical Disclosures of Information 11 2.1.5.2 Extraordinary Disclosures of Information 14 Financial Ratios 16 2.1.6.1 Liquidity Ratios 16 2.1.6.2 Profitability Ratios 18 2.1.6.3 Financial Leverage Ratios 21 2.1.6.4 Dividend Policy Ratios 22 2.1.6.5 Asset Turnover Ratios 22 5 2.2 Value-relevance Literature 24 2.3 Requirements of Investors about the Quality of Accounting Information 26 Disclosure 2.3.1 Truthfulness 27 2.3.2 Objectivity 27 2.3.3 Materiality 28 2.3.4 Relevance 28 2.3.5 Timelines 28 2.3.6 Understandability 29 2.3.7 Comparability 29 CHAPTER 3 RESEARCH METHODOLOGY 30 3.1 Research Objectives 31 3.2 Research Strategy 31 3.3 Data Source 31 3.3.1 Secondary data 31 3.3.2 Primary data 32 6 3.4 Research Methodology 32 3.5 Research Tool 33 3.6 Data Collection 34 3.7 Sampling 34 3.7.1 Sample Population 34 3.7.2 Sample Frame 35 3.7.3 Sample size 35 CHAPTER 4 RESULTS AND DISCUSSION 36 4.1 Introduction 37 4.2 Results and Discussion 35 4.2.1 Part A 35 4.2.2 Conclusion of Part A 40 4.2.3 Part B 42 4.2.4 Conclusion of Part B 44 4.2.5 Part C 45 4.2.6 Conclusion of Part C 50 4.3 Conclusion of the Survey 56 7 CHAPTER 5 CONCLUSION AND RECOMMEDATION 58 5.1 Conclusion 59 5.2 Recommendation 61 5.3 Limitation of Study 63 5.4 Suggestion for Future Research 64 REFERENCES & BIBLIOGRAPHY 65 APPENDICES 68 8 LIST OF FIGURES Figure Title Page Chapter 1 N/A N/A Chapter 2 N/A N/A Chapter 3 Figure 3.1 Data collection 34 Figure 4.1 Age 38 Figure 4.2 Gender 38 Figure 4.3 Occupation 39 Figure 4.4 Annual Income 39 Figure 4.5 Time 42 Figure 4.6 Type of Market 43 Figure 4.7 Investment Form 43 Figure 4.8 Usage of accounting information 45 Figure 4.9 Interest Level 46 Chapter 4 9 Figure 4.10 Effect of Accounting Information 46 Figure 4.11 Investment Channels 47 Figure 4.12 Financial Statements 47 Figure 4.13 Analysis Types 48 Figure 4.14 Financial Ratios 49 Figure 4.15 Satisfaction Levels 50 10 LIST OF ABBREVIATIONS Abbreviations Full Name CAPM Capital Asset Pricing Model DCF Discounted Cash Flow FS Financial Statement HASTC Hanoi Securities Trading Center HSC HoChiMinh Securities Corporation SSC State Securities Commission SE Security Exchange VAS Vietnamese Accounting Standard WTO World Trade Organization 11 CHAPTER 1: INTRODUCTION 1.1 Research Background 1.2 Problem Statement 1.3 Objectives and Scope of Research 1.4 Research Methods 1.5 Structure of Research 12 1.1 Research background Vietnam has increasingly opened the economy and trade, remarkably after joining the World Trade Organization (WTO) in 2007. As a result, it attracts more investments from foreign companies and institutions. Vietnam‟s economy becomes emerging market economy. On July 10th 1998, two securities trading centers at Hanoi (HASTC) and Ho Chi Minh City (HSC) were set up and marked the formation of Vietnam‟s stock market. The first trading session took place on July 28th 2000 with two types of listing stocks. After ten years of operation, from only a few companies listed, so far on both HASTC and HSC have nearly 500 listed companies. In 2000, share transaction reached only 1.37 billion VND per session, 0.03 billion of bond transactions per session; to February 2010, share transactions to 1520 billion VND per session and bond transactions to 216 billion per session. From a capitalization of only 0.28% of GDP in 2000, to the end of 13 February, 2010 has reached 38.57% of GDP. Vietnam‟s stock market has an important contribution to assist governments and enterprises to mobilize longterm investment capital market development, business expansion, making the economy less dependent on bank credit.( hsx.vn) There are many types of economic decisions, so there are also many types of accounting information. Financial accounting information is the major type that investors need in the stock market. It illustrates the financial resources, financial situation and activities of an organization ( or an individual). The role of accountants is to summarize and analyze the financial accounting information of the economic entity. Then, the users can have an overview about financial resources at a time period and operations of that economic entity. The purpose of financial accounting information is to support investors and creditors in deciding where to put their scarce investment resources. (blogspot.com) The goal of financial statements is to provide useful accounting information to investors in making economic decisions. However, when the principles, requirements and instructions for compiling and presenting the financial statements are not clear and complete lack of uniformity, or difficult to apply, will not guarantee the properties (reliability, understandability, comparability), so that financial statements become less useful. Thus, accounting information from those financial statements may cause bad impacts to the decisions of investors. Useful accounting information is subject with special attention of many 14 professional organizations, researchers, practicing accountants on the world for years with many different angles approach. (atc.edu.vn ) 1.2 Problem statements The purposes of accounting information are to provide information of a business about its: assets, liabilities, equity, revenues, income, expenses, profits and losses, cash flows. It assists users predict future cash flows, especially the timing and the degree of certainty of making cash flow and cash equivalents. Accounting information helps managers to consider the situation of enterprises: whether good operation or not; which field brings success for enterprise; the strengths and weaknesses of the financial situation of enterprises; which needs to change to improve and increase business value. Financial accounting field provides effective information to investors, so as to aid potential investors or funds evaluate and making investment decisions. Accounting information is seen as a kind of basic information provided to investors on the stock market. Through the analysis of accounting information, investors will find out: how business activities of enterprise are? How much expected income is? Where competitive position is? It has capability of improving the competitive position or not? And the final decision is about whether invests in such enterprise or not? 15 Accounting field gives information for financial decision making. For example, application of DCF model to analyze whether to invest in a government bond or not; or CAPM model to examine and determine the cost of using capital in order to decide whether to mobilize capital by issuing shares or not. (Peter Jennergren, 2008) Accounting information is reliable when users can put their faith in it to make decisions. Base on two important features: honest presentation and check ability. In addition, the truthfulness of the information also has interaction relationship with two above features to affect the usefulness of information. 1.3 Objectives and Scope of the Research 1.3.1 Objectives  Determine whether accounting information affects the investor‟s decision  The frequency of the use of information by investors  Suggest some solutions to improve accounting information which investors use 1.3.2 Scope  Place of conducting research: Ha Noi stock exchange  Object of research: Investors  Period of conducting research: From 17th May 2010 to 7 June 2010 16 1.4 Research method This project is based on the practical research and investigation. The researcher operates the survey among investors in Ha Noi stock exchange. The previous surveys and researches from different areas in Vietnam contain the information which could help the researcher to design the questionnaire and measurement. This research follows quantitative method with a sample of n = 100. By distributing questionnaire to investors, the researcher could collect and analyze data and know the frequency of the use of accounting information in Vietnam stock market. 1.5 Structure of the research This project included five chapters: Chapter 1: Introduction Chapter 2: Literature Review Chapter 3: Research Methodology Chapter 4: Results and Discussion Chapter 5: Conclusion and Recommendation. 17 CHAPTER 2: LITERATURE REVIEW 2.1 Financial Statements –The Important Source of Accounting Information for Investors in Vietnamese Stock Market 2.2 Value – Relevance Literature 2.4 Requirements of Investors about the Quality of Accounting Information Disclosure 18 2.1 Financial statements – the important source of accounting information for investors in Vietnamese stock market Financial statements, are always created in compliance with accounting standards, must be studied and interpreted if they are to be used as a basis of comparisons. Given the varied legal, economic and political backgrounds in countries around the world, it is not surprising that the national accounting standards vary among countries. Decision No. 15/2006 20th March 2006 of the Minister of Finance of Vietnam prescribed financial reporting system of enterprises including annual financial statements and interim financial statements. The followings are the main financial statements under Vietnam Accounting Standards. 19 2.1.1 The balance sheet The balance sheet is one of the extremely important financial statements to enterprise; reflect the general case of the entire value of existing assets and assets that form part of the enterprise at a certain time. Through balance sheet, user analyzes and evaluates the prospects and future prediction. Balance sheet also provides information to users about enterprise liability for tax authorities, employees, investors, bank and suppliers, etc. 2.1.2 Income statement Income statement reflects the business situation and results of operations of the enterprise including business results and other results. Investors are always interested in income statement most in the investment decision. Through the income statement data, investors have the financial information (revenue, cost of good sold, interest, profit, etc) is used to calculate the financial ratios as a basis for reflecting the financial situation of enterprise. 2.1.3 Cash flow statement 20
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