Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Does Accepting Risk Increase Profitability? Evidence across Industries in Vietnam

Author(s): Hang Thi Thuy Dinh, Kim Thi Nguyen, Vi Thi Hoang Tran, Hien Thi Ho

Any analysis of the associations between risk and profitability would not be comprehensive if ignoring various assays across the sectors. The paper examines the effect of risk on the profitability of 711 firms from 8 different industries in Vietnam between 2014 and 2019. We applied a panel regression model with an estimation of Pooled Ordinary Least Square (OLS), Fixed Effects Model (FEM) and Random Effects Model (REM). Numerous technical tests among the Hausman, Chow, and Breusch & Pagan tests were utilized to determine which model is most suitable. The test results suggested that pooled OLS outperformed estimating the impact of risk on profitability. Empirical findings found that taking financial risks such as credit risk led to a decrease in profitability in most sectors such as Energy, Materials, Technology, Consumer discretionary, Utility and Health. Additionally, accepting business risk could be detrimental to Industrials, Consumer discretionary, and Utility profitability. However, accepting business risk did not affect technology, materials, energy, consumer staples, and health profitability.

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