The Risk Level of Viet Nam Tourism Industry Under Financial Leverage During and after the Global Crisis 2007-2011

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ABSTRACTThis paper evaluates the impacts of external financing on market risk for the listed firms in the Viet nam tourism industry, esp. during and after the financial crisis 2007-2009. First of al, by using quantitative and analytical methods to estimate asset and equity beta of total 10 listed companies in Viet Nam tourism 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 decreases much 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 of 0,767, increases if the leverage increases to 30% whereas decreases to 0,038 if leverage decreases to 20%. But the dispersion measured by asste beta var decreases to 0,473 (leverage up 30%), showing leverage eficiency. Finaly, this paper provides some outcomes that could provide companies and government more evidence in establishing their policies in governance.Keywords: Equity Beta, Financial Structure, Financial Crisis, Risk, External Financing, Tourism IndustryINTRODUCTIONFinancial leverage has certain effects on the risk level of listed companies on stock exchange. Flifel (2012) stated today, the assumption of efficient capital markets is very controversial, especially in these times of crisis, and is challenged by research showing that the pricing was distorted by detection of long memory. Gabrijelcic et all (2013) find a significant negative effect of leverage on firm performance. And firms that had some foreign debt financing performed better than their counterparts.Measuring beta is a popular method used in many models such as the famous CAPM model. The Viet Nam tourism industry is selected for the research because until now there is no research published with the same scope and because Viet Nam tourism industry is considered as one of active economic sectors in local financial markets, which has some positive effects for the economy. The purpose of this study, therefore, to find out how much market risk for this industry in changing contexts of financial leverage.We mention some issues on the estimating of impacts of external financing on beta for listed tourism industry companies in Viet Nam stock exchange as following:Issue 1: Whether the risk level of tourism industry firms under the different changing scenarios of leverage increase or decrease so much.Issue 2: Whether the disperse distribution of beta values become large in the different changing scenarios of leverage estimated in the tourism industry.This paper is organized as follow. The research issues and literature review will be covered in next sessions 2 and 3, for a short summary. Then, methodology and conceptual theories are introduced in session 4 and 5. Session 6 describes the data in empirical analysis. Session 7 presents empirical results and findings. Next, session 8 covers the analytical results. Then, session 9 presents empirical results and session 10 presents analysis of risk. Lastly, session 11 shows discussion and session 12 will conclude with some policy suggestions. This paper also supports readers with references, exhibits and relevant web sources.THEORETICAL BACKGROUNDA. Conceptual theoriesThe impact of financial leverage on the economyFinancial development and economic growth are positively interrelated. The interaction between these two (2) fields can be considered as a circle, in which good financial development causes economic growth and vice versa. A sound and effective financial system has positive effect on the development and growth of the economy. Financial institutions and markets can enable corporations to solve liquidity needs and enhance long-term investments. …