Article History JEL Classification: E44This study aims to test the suitability of Proxy Levered Beta (PLB) in the context of corporate valuation in Vietnam. In particular, there are two main issues clarified in this paper: (i) whether there is a significant relationship between financial leverage, operating leverage, and systematic risk; and (ii) whether PLB can be an alternative of Market-Based Beta (MBB). By estimating with the panel data collected from nonfinancial firms listed on Ho Chi Minh Stock Exchange (HoSE) during the period 2010-2015, the empirical findings show that: (i) the operating leverage and financial leverage have a significant impact on systematic risk; (ii) PLB with adjusted financial leverage will be the most effective measure of MBB; and (iii) the new standard of industry classification on HoSE will not suitable to represent the systematic risk when measuring PLB in Vietnam.Contribution/ Originality: This study contributes in the existing literature in two ways: (i) concurrently considering both financial and operating leverage when adjusted beta coefficient instead of just financial leverage as previous studies; and (ii) providing the empirical evidence so that appraisers may not only apply them in Vietnam but also explain the valuation result to consumer convincingly.
This study aims to develop systematic models for the selection of comparable firms for firm valuation. The conventional approach argues that indicators such as firm size, growth rate, and industry should be considered for the selection of peer firms. However, this is sometimes very difficult for appraisers because it is almost impossible to find firms that capture all these criteria, especially in developing countries. Guided by business valuation theory, three indicators-profitability, earnings growth rate, and systematic risk-are applied by this study to build systematic models that simultaneously consider the many criteria affecting firm value. Using firm-level data from nonfinancial enterprises with 18,418 firm-year observations collected from the six ASEAN nations' stock exchange markets from 2010 to 2020, this study contributes to business valuation literature by developing systematic models for the selection of comparable firms. The results of this study are also practically significant for valuers because our models can be applied to peer group selection as well. Additional analysis shows that our models are more appropriate or suitable than models from previous conventional approaches that use the same industry or same firm financial characteristics.
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