THE IMPACT OF THE SOLVENCY TO THE FINANCIAL INDEPENDENCE LEVEL IN LISTED COMPANIES: EVIDENCE FROM VIETNAM

Abstract

The research focuses on the relationship between solvency and financial independence level of 3261 listed companies in Vietnam. To prove and analyse the influence among 5 independent variables that measure the solvency level, both EVIEW 10.0 and SPSS version 22.0.0.0 were used. The 5 independent variables mentioned above are the general payment ability ratio, long-term payment ability, short-term payment ability, quick ratio, and financial leverage. The two dependent variables including financial autonomy and financial security represent the financial independence level of Vietnamese listed firms. The results show that financial autonomy is influenced by 89.5% of the general payment ability ratio. While general payment ability ratio is a variable that has the greatest positive influence on financial independence, neither quick ratio nor financial leverage has any impact or if there is, very little to other remaining dependent variables. From the collected results, the listed firms need to prioritize using permanent capital to invest their long-term assets instead of using short-term debts with high interest. Doing so could result in losing financial security and put the firms at risk of bankruptcy. The conclusion is that for Vietnamese firms to want to perform effectively, financial independence must be ensured first.