A 3 Variables Model Impact on Beta CAPM of Vietnam IT Software Industry

Abstract

In recent years, many milestones have been achieved in the technology industry in Vietnam. In Viet Nam, a well-established software industry has been struggling to rebound from the 2008 crisis under the uncertainty of commodity prices and change in macro-factors like CPI and market rate. This paper analyzes the effect on the market risk of listed companies in the software industry of the competitor size, tax rate policy and leverage, as applicable.
First of all, we found that the beta values for many companies in general are appropriate by using quantitative and analytical methods for the estimation of asset and equity beta of 6 listed Vietnamese software companies with a better traditional model.
Next, we have noted that under three different scenarios of adjustments in tax rates (25%, 25% and 28%), the equity beta values will not spread significantly, even if the risk distribution will increase to 0.216 if the tax rate is down to 20% and the risk dispersion will increase to 30%.
Third, this analysis found that the risk-variation in this sample analysis could be held to a minimum, if the financial leverage is reduced to 20%, and a tax rate is raised to 28% or to 25% (measured by equity beta var from 0,214) by adjusting the tax levels in 3 scenarios (25%, 20% and 28%).
Four, we find that there is no significant volatility in equity beta and var values in the same financial leverage situation with different competitor sizes. Yet if financial debt shifts without 3 examples, there are significant variations.
This paper, hopefully, presents some findings that may provide further proof for businesses and the government to determine its governance policies. When adjustments to tax rates and strategic strategy or leverage could affect risk levels, corporate management and policy makers should consider making appropriate decisions using the findings.