The Suitability of Proxy Levered Beta in Business Valuation: Evidence from Vietnam

Kim-Duc Nguyen (), Sinh Hay (), Ngoc-Thuy-Duong Huynh () and Cong-Nguyen-Bao To ()

Asian Economic and Financial Review, 2018, vol. 8, issue 2, 248-268

Abstract: This study aims to test the suitability of Proxy Levered Beta (PLB) in the context of corporate valuation in Vietnam. In particular, there are two main issues clarified in this paper: (i) whether there is a significant relationship between financial leverage, operating leverage, and systematic risk; and (ii) whether PLB can be an alternative of Market-Based Beta (MBB). By estimating with the panel data collected from non-financial firms listed on Ho Chi Minh Stock Exchange (HoSE) during the period 2010–2015, the empirical findings show that: (i) the operating leverage and financial leverage have a significant impact on systematic risk; (ii) PLB with adjusted financial leverage will be the most effective measure of MBB; and (iii) the new standard of industry classification on HoSE will not suitable to represent the systematic risk when measuring PLB in Vietnam.

Keywords: Proxy levered beta (PLB); Bottom-up beta; Market-based beta (MBB); Systematic risk; Financial leverage; Operating leverage. (search for similar items in EconPapers)
Date: 2018
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