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Profitability and the Distance to Default: Evidence from Vietnam Securities Market

The Journal of Asian Finance, 2019, Economics and Business , 6(4), , pp.53-63 [Peer Reviewed Journal]

ISSN: 2288-4637 ;EISSN: 2288-4645 ;DOI: 10.13106/jafeb.2019.vol6.no4.53

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  • Title:
    Profitability and the Distance to Default: Evidence from Vietnam Securities Market
  • Author: VU, Van Thuy Thi ; DO, Nhung Hong ; DANG, Hung Ngoc ; NGUYEN, Tram Ngoc
  • Subjects: 경제학
  • Is Part Of: The Journal of Asian Finance, 2019, Economics and Business , 6(4), , pp.53-63
  • Description: The paper examines the influence of profitability on distance to default (DD) in Vietnam securities market. The investigated sampl e consists of 211 companies listed on HOSE during 18 years from 2010 to 2017. We apply KMV model to calculate distance to d efault and use both macroeconomics factors and firm specific factors as independent variables. Using General Least Squared (GL S) method, we find evidence to confirm the positive relationship between profitability and distance to default. This result showed t hat, although profitability did not directly reflect the cash flow generated, a good profitable enterprise would be an important facto r to help facilitate and generate cash flow and at the same time debt was guaranteed when it was due. Besides, the test results rev ealed that the financial structure and sales on assets have the inverse effect on the distance to default at the significance level o f 5%. The results also revealed that a group of macro factors had an influence on the distance to default of businesses, including spre ad, GDP and trade balance (via exchange rates). Gross domestic income had certain impacts on the distance to default of businesse s. This was also a basic indicator measuring the national economic cycle.
  • Publisher: 한국유통과학회
  • Language: English
  • Identifier: ISSN: 2288-4637
    EISSN: 2288-4645
    DOI: 10.13106/jafeb.2019.vol6.no4.53
  • Source: Alma/SFX Local Collection
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