In this research paper, employing a two factor model, an endeavour is made to analyse the impact of financial leverage as well as the size of the firm’s competitors on the market risk level of 57 listed companies in the construction material industry of Vietnam. This paper manifests commendable research results. Most notably, the risk dispersion level could be minimised by maintaining competitor’s size approximate as current (quantified by equity beta value of 0,284) as well as decreasing down the financial leverage to 20%. In addition, the risk level could be diminished, if the size of competitor is slightly smaller (quantified by equity beta value of 0,933) and financial leverage increases by 30%. Moreover, inferred results has also been evinced in this paper, which might bestow appropriate recommendations to apropos government as well as private institutions for re-appraising their approaches and policies during and after the global financial crisis 2007-2011.
Risk management, Competitive firm size, Market risk, Asset and equity beta, Construction material industry, Vietnam.
Ang, A. and Chen, J. (2007), “CAPM Over the Long Run: 1926-2001”, Journal of Empirical Finance, Vol. 14, Issue 1, pp. 1-40.
Baker, K. H.; Singleton, C. J. and Veit, T. E. (2011), “Survey Research in Corporate Finance: Bridging The Gap Between Theory and Practice”, Oxford University Press
Chen, R. R.; Chidambaran, N. K; Imerman, M. B. and Sopranzetti, B. J. (2013a), “Liquidity, Leverage, and Lehman: A Structural Analysis of Financial Institutions in Crisis”, Working Paper No. 2279686, Fordham School of Business Research.
Chen, Z.; Huang Y. and Wei, John K. C. (2013b), “Executive Pay Disparity and The Cost of Equity Capital”, Journal of Financial and Quantitative Analysis, forthcoming.
Dexheimer, J. and Haugen, C. (2003), “Sarbanes-Oxley: Its Impact on the Venture Capital Community”, Minnesota Journal of Business Law and Entrepreneurship, Vol. 2, No. 1.
Eugene, F. F. and French, K. R. (2004), “The Capital Asset Pricing Model: Theory and Evidence”, Journal of Economic Perspectives, Vol. 18, No. 3, pp. 25-46.
Flifel, K. (2012), “Financial Markets between Efficiency and Persistence : Empirical Evidence on Daily Data”, Asian Journal of Finance and Accounting, Vol. 4, No. 2, pp. 379-400.
Gabrijelcic M.; Herman U. and Lenarcic A. (2013), “Debt Financing and Firm Performance Before and During the Crisis: Micro-Financial Evidence from Slovenia”, SSRN Working Paper.
Huy, D. T. N. (2012), “Estimating Beta of Viet Nam listed construction companies groups during the crisis”, Journal of Integration and Development.
Marren, P. (2013), “Strategy’s Main Failures: The Extermination of Livelihood”, Journal of Business Strategy, Vol. 34, Iss: 1, pp. 47-49.
Minnis, M. (2011), “The Value of Verification in Debt Financing: Evidence from Private U.S. Firms”, SSRN Working Paper.
Needham, A. W.; Farr, W. and Gallagher (2002), “Special Problems with Debt Financing by Private Equity Funds”, Tax Notes, Vol. 97, No. 11, available at SSRN: http://ssrn.com/abstract=362760.
Scott, C. J. (2013), “Corporate Marketing Leaders: The Key Attributes”, Journal of Business Strategy.
Umar (2011), “Profits, Financial Leverage and Corporate Governance”, SSRN Working Paper.
Impacts of Changing Corporate Tax Policy on the Risk Level of Firms
MERC Global's International Journal of Management July (2014) 2 (3): 97-108