Using External Financing in a One Factor Model Measuring the Volatility of Market Risk of Vietnam`s Banking Industry During and After the Global Crisis

Huy Dinh

Journal of Central Banking Theory and Practice, 2019, vol. 8, issue 2, 173-187

Abstract: This paper evaluates the impact of external financing on market risk for the listed firms in Vietnam`s banking industry, especially during and after the financial crisis 2009-2011. First of all, by using quantitative and analytical methods to estimate asset and equity beta of total 9 listed companies in Vietnam banking industry with a proper traditional model, we found out that the beta values, in general, for many institutions are acceptable. Second, under 3 different scenarios of changing leverage (in 2011 financial reports, 30% up and 20% down), we recognized that the risk level, measured by equity and asset beta mean, decreases when leverage increases to 30% and increases more if leverage decreases down to 20%. Third, by changing leverage in 3 scenarios, we recognized the dispersion of risk level, measured by equity beta var, increases from 0,108 to 0,181 if the leverage increases to 30% whereas decreases to 0,073 if leverage decreases to 20%. But the dispersion measured by asset beta var decreases to 0,007 (leverage up 30%), showing leverage impact. Finally, this paper provides some outcomes that could provide companies and the government with more evidence in establishing their policies in governance.

Keywords: equity beta; financial structure; financial crisis; risk; external financing; banking industry (search for similar items in EconPapers)
JEL-codes: G01 G10 G39 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:8:y:2019:i:2:p:173-187

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