Vo Thi Quy | 605 Export performance and stock return: A case of fisheries firms listing in Vietnam stock markets VO THI QUY International University, Vietnam National University HCMC – vtquy@hcmiu.edu.vn Abstract This research aims to study the relationship between export performance and stock return of Vietnamese fishery companies To conduct this study, quarterly data was collected for period from 2010-2015 of 13 fishery companies listing in Ho Chi Minh Stock Exchange (HOSE) and Ha Noi Stock Exchange (HNX) The export performance was measured by export intensity, export growth and export market coverage In addition, interest rate, exchange rate, GDP, firm size, profitability and financial leverage were considered as the control variables in the research model Panel data analysis with Pooled OLS model was employed to estimate the predictive regression The findings indicated that export intensity has a significant and positive relationship with stock returns However, export growth and export market coverage have no a significant relationship with stock return at the 0.05 level The findings also showed the profitability and exchange rate has a positive relationship, while interest rate and financial leverage has a negative relationship with stock return GDP has no relation to stock return at the 0.05 significance level Keywords: export performance; stock returns; fishery industry; HOSE and HNX Introduction Many studies have been conducted on the determinants of stock return Researchers have found that economic factors (e.g., GDP, interest rate, and inflation rate) and company factors (e.g., profitability, financial leverage, and dividend policy) have a significant impact on stock returns However, a few studies on the influence of export performance of exporters on their stock return VN-index increased sharply and reached 1170 points as Vietnam became the member of WTO in 2007, and responded positively as Vietnamese government signed the Trans-Pacific Partnership (TPP) Agreement on 5, October 2015 In the week from 30 September 2015 to October 2015, VN-Index rose 24.5 606 | ICJED2017 points; the average trading volume of the market reached 208 million shares per day, a double increase of the average trading volume of previous weeks Average trading value also increased twice, reaching 3,700 billion VND per day The price of exporters’ stocks increased dramatically such as TCM increasing 12.68%, TNC increasing 17.15%, HCV increasing 14.4%, etc In general, Vietnamese stock markets seem to respond positively as Vietnamese economy integrated with global economy Therefore, this research attempted to study the relationship between export performance and exporters’ stock returns in Vietnamese stock markets from 2010 to 2015 with case of fishery industry Literature review Export performance and stock return Export oriented strategy also called “export led growth” was suggested by Ricardo and Smith in the 19th century based on the theory of comparative advantage of country The theory supports the exchange of products/services between countries in international trade Exporters gain competitive advantages through economic of scale, according to Giles and William (2000) Singapore, Hong Kong, Taiwan, and South Korea have achieved the fast growth by applied successfully export oriented strategy, and become the Asian Tigers (Todaro & Smith, 2006) The followers are Malaysia, Thailand, Philippines, and Indonesia Vietnam, Cambodia, and Myanmar are also trying to repeat the success of East and Southeast Asian countries Lal and Rajapatirana (1987) argued that exporting boosts company’s sales and expand its markets to regional and worldwide beside the local markets leading to the improvement of company’s performance The reaching the economics of scale increases the company’s profitability, in turns impacts positively on the company’s stock price Export performance is the outcome of a firm’s activities in export market (Zou et al, 1998) It is categorized in two broad groups of measures: Financial/ economic and nonfinancial/non-economic measures presented in Table below Even though many variables used as measures of export performance, some of them seem to be used considerably more than others, this study used export intensity, export sales growth and export market coverage to measure export performance Vo Thi Quy | 607 Table Measurements of export performance Category Authors (year) Measures - Export profitability Bilkey, W.J (1982) - Export profitability growth - Export profit margin - Export profit ratio - Export market share Economic measures - Sales- related indicators - Profit-related indicators - Market-share related indicators Archarungroj & Hoshino (1998) - Export market coverage - Export market share growth - Profitability rate of export - Market share Haghighi et al., (2008) - Sales volume - Profitability Hosseini & Mirijahanmard (2011) Sousa, Bradley (2004) - Export sales growth - Export profitability - Export intensity - Profitability of export - Growth in export sales - Perceived export success Ibeh and Wheeler, 2005 Non-economic measures - Achievement of export objectives - Satisfaction with export performance - Strategic export performance - Meeting expectation Sousa, Bradley (2004) - How competitors rate firm’s export performance Source: Developed by author Carde Maurel (2008) showed that companies with higher export performance have higher profitability Bernard and Jensen (1999) found that exporters have a better financial wealth than non-exporters However, the findings of studies on relationship between export performances and stock return did not bring about the same results Bakhtiari (2001) did not find a significant relationship between export earnings and stock price in food firms listed in Tehran Stock Exchange However, Yodollah, et al (2013) 608 | ICJED2017 indicated a significant relationship between export revenues and stock return on chemical firms in the same stock market Vietnam fishery industry overview With a coastline of 3.260 km and favorable natural condition for the development of aquaculture and fishing industry, the fishery has been contributed an important part in the development of Vietnamese economy Vietnam has been the five largest seafood exporters in the world together with Indonesia and Thailand, and the third in fishery aquaculture and production, after India and China The export turnover of Vietnamese seafood products has increased steadily from 2000-2015 However, from 2012 to 2015, the export value reduced significant because of the reducing demand of some major markets such as Japan and EU The selected firms as the sample of this study includes 13 fishery firms listed in HOSE and HNX before 2010 They are the leading exporters of Vietnam fishery industry Their products are exporting to the United States, European countries, Japan, and South Korea And now they have expanded their foreign markets to Middle East countries, African countries The overview of their export performance from 2010 to 2015 was summarized in Table below Table Export performance of selected firms from 2010 to 2015 Year Average Export Intensity Average Export Growth Average Export Market Coverage 2010 0.756 0.21 18.15 2011 0.736 0.07 16.35 2012 0.738 0.06 16.58 2013 0.738 0.09 17.27 2014 0.756 0.14 19.10 2015 0.699 (0.07) 19.12 Source: Ministry of Industry and Trade (2016) In order to test the relationship between export performance and stock return, the conceptual framework below was proposed Vo Thi Quy | 609 Figure Conceptual Framework Variables and measurement Dependent variable In this study, stock return (St) is dependent variable and calculated quarterly by the formula: St = (P1 – P0)/P0, where: P1: average adjusted closing stock price of quarter t; and P0: average adjusted closing stock price of quarter t-1 Independent and control variables: • Export intensity (Ei) = Total export revenue/ total sales • Export growth (Eg) = (Total export revenue quarter t – Total export revenue quarter (t-1))/Total export revenue quarter (t-1) 610 | ICJED2017 • Export market coverage (Em) is measured by the number of countries which the firms is exporting their product to or export market coverage = total number of company’s foreign markets • Control variables: • Profitability (Pr) = Earnings after tax/ total asset • Firm size (Size) = Ln (Total asset) • Leverage (De) = Total debt/ Total asset • Interest rate (Ir) was collected from the website of Vietnam Commercial Bank (VCB) • Exchange rate (Ex) used is direct exchange rate (USD/VND), and collected from the website of Vietnam Commercial Bank (VCB) • Gross domestic product (GDP) growth rate is nominal GDP collected from Thomson Reuters page, GDP = Ln (GPD) Model specification St= β1 + β2Ei + β3Eg + β4Em+ β5Pr+ β6Size + β7De + β8GDP +β9Ex + β10Ir+ ɛ Where: • St: Stock returns • Ei: Export intensity • Eg: Export growth • Em: Export market coverage • Pr: Profitability • Size: Firm size • De: Financial leverage • GDP: Ln (GDP) • Ex: Exchange rate • Ir: Interest rate Vo Thi Quy | 611 Hypotheses in research H1: Export intensity has a significant positive relationship with stock returns H2: Export growth has a significant positive relationship with stock returns H3: Export market coverage has a significant positive relationship with stock returns H4: Profitability has a significant positive relationship with stock returns H5: Firm size has a significant negative relationship with stock returns H6: Financial leverage has a significant negative relationship with stock returns H7: GDP has a significant positive relationship with stock returns H8: Exchange rate has a significant positive relationship with stock returns H9: Interest rate has a significant negative relationship with stock returns Data collection There are 13 fishery firms listed in HOSE or HNX from 2010 Financial data was collected from these firms’ financial reports from 2010 to 2015 with total observation of 312 quarterly data points; GDP collected from Thomson Reuters; Interest rate and exchange rate collected from Vietcombank website Stock price was collected from http://finance.vietstock.vn Export revenue and export market of selected firms were collected from the report of Ministry of Industry and Trade Statistical description and results Descriptive statistics (Table 3) indicate that the average stock returns (St) of fishery firms are in the range from -74.68% to 74.60% with standard deviation (Std.Dev) of 17.79% The average export intensity (Ei) of selected fishery firms is 73.71% in the period from 2010 to 2015 The highest export intensity is 99.03%, the lowest is 0% (Q4/2015, ATA) and standard deviation is 20.43% It showed that export revenues contributed the large portion of the companies’ revenues The average export growth (eg) is 8.35%, the highest export growth rate is 474%, the lowest is -100%, and standard deviation is 47.60% With market coverage (Em), the average number of foreign markets that selected fishery firms exported to is 18, the highest number is 55, the lowest is zero due to ATA had no export revenues in fourth quarter of 2015 612 | ICJED2017 Table Descriptive statistics, 312 observations Variable St Ei Eg Em Pr De Size Ir lnGDP Ex Mean -0.0013 0.7371 0.0835 17.759 0.0122 0.4332 11.9208 0.0914 14.2134 20791.63 Median -0.0203 0.8028 0.0351 17.000 0.0060 0.4473 11.8586 0.08 14.3396 20919.50 Std Dev 0.1779 0.2043 0.4760 11.0827 0.0164 0.2429 0.4732 0.0286 0.6822 853.98 Min -0.7468 -1 -0.0405 10.8349 0.06 12.8018 18813.00 Max 0.7460 0.9903 4.7457 55 0.1199 2.6667 13.1974 0.14 15.2489 22371.00 Skewness 0.5256 -1.0678 0.9192 0.7645 1.8346 1.1004 0.2274 0.6075 -0.3971 -0.7771 Kurtosis 5.2812 3.4209 4.9204 3.3632 8.9567 4.0464 3.0150 1.9728 2.1862 3.4142 Unit root test results In order to obtain the effective estimators for regression analysis with times series data the test for stationarity should be conducted to avoid spurious regression problem To test the stationarity for panel data, we used Levin-Lin-Chu (LLC Test, 2002) and ImPesaran-Shin (IPS Test, 2003) techniques Both techniques test the null hypotheses of a unit root, and the results shown in Table below Table Unit root testing results Variables St Ei Eg Em Pr De Size Ir Ln(GDP) Ex LLC Stat -4.7193 -3.9661 -10.8504 -2.4763 -6.1132 -34.4734 -1.6885 -6.9341 -9.0442 -2.1076 IPS Prob 0.0000 0.0000 0.0000 0.0066 0.0000 0.0000 0.0457 0.0000 0.0000 0.0175 Stat -7.5380 -7.0201 -10.6641 -4.0545 -6.4944 -3.9997 -1.9659 -7.1903 -8.6688 -5.8633 Prob 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0247 0000 0.0000 0.0000 Vo Thi Quy | 613 Table shows that there is no evidence of presence of a unit root for all of the variables; therefore, all variables are stationary at a significance level of 5% Multicollinearity test As two or more independent variables in multiple regression models are highly correlated, it would cause multicollinearity problem that generates ineffective regressors The matrix of correlation analysis between individual variables is the easiest way to figure out the multicollinearity problem The matrix of the correlation coefficient (Table 5) shows that the magnitude correlation between these variables less than 0.7; therefore it is unlikely to occur multicollinearity in the model Conducted with VIF test also resulted in the same conclusion (Table 6) The coefficient VIF of all variables are less than 10 and the average of VIF is equal 1.53 or there is no multicollinearity phenomenon existing in regression model Table Correlation Matrix St Ei Eg Em Pr De Size Ir Ln(GDP) Ex St 0.1451 0.0063 0.0466 0.0885 -0.0534 0.0447 -0.119 0.0341 0.1374 Ei Eg Em 0.1396 0.0378 0.2073 -0.157 -0.251 0.0285 -0.067 -0.08 -0.037 0.0051 0.0552 -0.034 0.0019 0.1474 -0.108 0.1077 -0.216 0.671 -0.086 0.0603 0.031 Pr De -0.091 -0.013 -0.046 0.2496 0.0289 -0.073 0.0541 -0.216 0.0996 Size Ir lngdp Ex -0.107 0.0916 0.1433 -0.313 -0.29 0.5186 Table VIF Testing results Variable Size Em Er Lngdp Pr VIF 2.23 2.12 1.71 1.54 1.35 1/VIF 0.447736 0.470963 0.586179 0.648167 0.73824 614 | ICJED2017 Variable Ei Ir Eg De Mean VIF VIF 1.34 1.3 1.12 1.1 1.53 1/VIF 0.745477 0.768769 0.891729 0.908015 Regression results To test the research hypotheses we run regression with the three models, Pooled OLS, FEM and REM To test assumptions of Pooled OLS model, we performed heteroskedasticity testing through White’s test and autocorrelation by Wooldridge test White’s test showed result that Prob > chi = 0.1163 > 0.05, we accept H0 or there is no the existence of the heteroskedasticity phenomenon in the model The autocorrelation testing resulted in Prob> F =0.3283 > 0.05, or H0 was accepted, i.e there is no autocorrelation problem in the model However, Pooled OLS method may be suspected because of not considering unobserved heterogeneity or characteristics of each enterprise; therefore the FEM and REM was used Finally, choosing model was done through the Hausman and BreuschPagan tests, and the results showed in Table and Table below: Table Summary of regression models and testing results Variables Ei (Export intensity) Eg (Export growth) Em (Export market coverage) Pr (Profitability) De (Financial leverage) Size (Firm size) Pooled OLS FEM REM 0.13836** (0.011) 0.00442 (0.839) -0.00019 (0.880) 1.37951** (0.034) -0.05967** (0.021) 0.02569 (0.403) -0.80323** 0.12408 (0.113) 0.00139 (0.951) 0.00034 (0.890) 1.39432 (0.102) 0.04428 (0.518) 0.0731 (0.554) -0.72497* 0.13836** (0.01) 0.00442 (0.839) -0.00019 (0.88) 1.37951** (0.033) -0.05967 (0.160) 0.02569 (0.403) -0.80323** Vo Thi Quy | 615 Ir (Interest rate) (0.034) -0.0223 (0.076) -0.02243 (0.033) -0.0223 (0.214) (0.219) (0.213) LnGDP 0.0000350** (0.016) -0.78738* (0.08) Ex (Exchange rate) _Cons White’s test Wooldridge test Hausman test Time fixed effects test Breusch – Pagan test 0.0000319* 0.0000350** (0.065) (0.015) -1.285 -0.78738* (0.336) (0.078) Prob> chi2=0.1163 Prob> F = 0.3283 Prob> chi2 = 0.9956 Prob>F = 0.9842 Prob> chi2 = 1.00 Significant: * p Chi2 =1.00 As a result, the most appropriate regression result is Pooled OLS model Pooled OLS was chosen to explain the relationship between export performance and stock returns as the objective of this study It was used as the final results for analysis The findings showed five variables being exports intensity, profitability, financial leverage, interest rate and exchange rate have a significant impact on stock return at 0.05 levels Especially, export intensity, profitability and exchange rate have a positive relationship with stock returns; while the financial leverage and interest rate have a negative relationship with stock returns Four other variables being export growth, export market coverage, GDP and firms size have a statistically insignificant relationship with stock returns at the 5% level 616 | ICJED2017 Table Pooled OLS regression model Variables Pooled OLS Ei (Export intensity) 0.13836** (0.011) Eg 0.00442 (Export growth) (0.839) Em -0.00019 (Export market coverage) (0.880) Pr 1.37951** (Profitability) (0.034) De -0.05967** (Financial leverage) (0.021) Size (Firm size) 0.02569 (0.403) Ir -0.80323** (Interest rate) (0.034) LnGDP -0.0223 (0.214) Ex 0.0000350** (Exchange rate) (0.016) _Cons -0.78738 (0.08) Significant: ** p