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International Finance and
d Banking
ISSN 2374-2089
2
2017, Vol. 4, No. 2

Impaact of Cost
C Co
ontrol oon Busiiness Efficienc
E
cy of Small
S
andd Mediuum Sized Enteerprises in Thai Binhh, Vietn
nam
Nggoc Hung Dang
Haanoi Univerrsity of Indu
ustry, Vietnaam
E-m
mail: hungdaangngockt@
@yahoo.com
m.vn


Thi Viet Ha Ho
oang
Haanoi Univerrsity of Indu
ustry, Vietnaam
E-mail:
E
hoanngthivietha@gmail.com
m

Maanh Dung Tran
T
Nattional Econoomics Univ
versity, Vietn
nam
E-mail:
E
tmddungktoan@
@yahoo.com
m

Receiveed: Sept. 200, 2017
doi:10.55296/ifb.v4i2.12030

Accepted:: Sept. 28, 2017
2

Published:
P
O
Oct. 22, 201
17

URL: hhttp://dx.doii.org/10.529
96/ifb.v4i2.112030

Abstract
This stuudy is condducted for in
nvestigatingg the impactt of cost con
ntrol on bus


usiness efficiency of
small annd medium
m-sized enterrprises (SM
MEs) in the area
a of Thai Binh, Viettnam for th
he period
from 20012 to 20144. Impacting
g factors weere built and
d verified on business eefficiency of
o SMEs
includinng (i) Costt of goods sold ratio,, (ii) Finan
ncial expen
nse ratio, ((iii) Adminiistration
expensee ratio, (iv)) Firm size,, (v) Finanncial leverag
ge, (vi) Asssets structuure, and on Pre-tax
return oon sales raatio and Prre-tax returrn on assetts ratio. Th
he study em
mployed regression
models of OLS, FE
EM, REM and
a GLS wiith multi-yeear dataset of
o SMEs in T
Thai Binh province.
p
The ressults show that
t
the ratio
os of cost of goods solld, financial leverage, and adminiistration
expensees have negative relatio
on with bussiness efficieency, but afffecting Retturn on sales (ROS)
and Retturn on asssets (ROA).. In additionn, financiall leverage, assets struccture and firm
f
size
have sm
mall impactts on ROS and
a ROA. A
Also, basing
g on the fin
ndings, SME
MEs operatin
ng in the
form off joint stockk company have
h
higherr business efficiency th
han those opperating in the
t form
of limitted liability company.
112


International Finance and
d Banking
ISSN 2374-2089
2
2017, Vol. 4, No. 2

Keywords: Small & medium--sized enterp
rprise, Busin
ness efficien
ncy, GLS m
model, Thai Binh
B

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International Finance and
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ISSN 2374-2089
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2017, Vol. 4, No. 2

1. Introoduction
SMEs aalways playy an important part in national ecconomy with consideraable contrib
bution to
econom
mic growth, job creatio
on, incomee increase, and social stability. T
They help to fill in
market gaps unocccupied by large enteerprises an
nd contributte to the eeconomy’s smooth
operatioon (Marcheesnay e t a l . , 1998). E
Especially, SMEs
S
have an
a importannt role in shaarpening
businesss managem
ment skills and
a promotiing innovatiion. Moreov
ver, SMEs help to buiild close
links to explore and bring into
o play potenntials of pro
ovinces. Theerefore, steppping up sup
pport for
the devvelopment of
o SMEs iss consideredd an effecttive tool in
n mobilizingg capital an
nd other
resourcees for busineess operatio
on, which coontributes to economic growth
g
and ssocial stabillity.
According to criterria for classsifying enteerprises, alm
most all enteerprises in V
Vietnam aree SMEs.
In term
ms of labor scale,
s
324,3
377 SMEs oout of 348,342 operatiing enterpriises, accoun
nting for
97.7%, of which 68.7% are micro
m
enterpprises, 27.1%
% are small--sized enterrprises and only 1.9%
e
are meddium-sized enterprises.
Reportss of the Minnistry of Pllanning & IInvestment in 2016 sho
ow that bussiness efficiency of
SMEs w
was much lower
l
than that
t
of the overall leveel of enterp
prises. For innstance, ou
ut of one
Vietnam
m dong (VN
ND) spent for
f businesss operation, SMEs onlly gained 00.38 VND in
i return
comparred to 2 VN
ND of the general
g
leveel. This resu
ult reflected
d SMEs’s m
more limited
d capital
scale, ccapability of
o managem
ment, technnology and market access compaared to large-sized
enterpriises.
Thai Biinh provincce is the cen
nter of the Red River Delta; its infrastructur
i
re system has
h been
built, uupgraded, and
a expandeed to becom
me a natio
onal and reg
gional econnomic link,, thus it
creates more favoorable conditions for iinvestment and socio-economic ddevelopmen
nt. Even
though SMEs in Thai
T
Binh have
h
gained important achievemen
nts and playyed an increasingly
importaant role inn the prov
vince’s ecoonomic dev
velopment, they still experience many
difficultties such ass outdated technology
t
levels, weaak business managemeent skills, reestricted
access tto credit reesources and
d business premises. According
A
to
t General Statistics Office
O
of
Vietnam
m (2015), enterprises
e
in
i Thai Binnh have verry low business efficieency in com
mparison
with thee general leevel of the whole counntry and off other prov
vinces in thhe Red Riveer Delta.
Data off return ratioos and profiit before taxx of SMEs are
a shown in
n Table 1 annd Table 2.

Table 1. Return rattios of enterrprises by Pllaces (Unit in %)
Place

2009
9

20110

2011
1

2012
2

2013

2014
4

The whoole country

5.39

4.533

3.16
6

3.13

3.91

4.04
4

The Redd River Delta

5.55

3.866

2.92

2.80

4.53

4.04
4

Thai Binnh

1.94

0.599

-0.19
9

-0.54
4

-1.07

-1.09

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International Finance and
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ISSN 2374-2089
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2017, Vol. 4, No. 2

Table 2. Profit befoore tax of en
nterprises bby areas (Un
nit in billion
n dong)
Arrea

20
009

20 10

2011

2012
2

2013

2014

Thhe whole counntry

32
27,207

3500,301

334
4,407

358,9
937

488,2273

556,69
95

Thhe Red River Delta
D

95
5,222

96,,261

100
0,199

104,8
838

196,6685

184,18
86

Thhai Binh Proviince

50
01

2155

-97

-288

-625

-724

On 18tth October,, 2013 thee People’s Committeee of Thai Binh issuued Planniing No.
59/KH--UBND on developing SMEs in thhe provinciial area for the period ffrom 2013 to
t 2015,
which pprovides guuidelines an
nd policies , encouragees the deveelopment oof SMEs an
nd helps
SMEs bbring into play
p
their po
otential in innvestment and
a businesss developm
ment. However, it is
the mattter of whetther these guidelines
g
aand policiess follow thee practical ssituation an
nd really
help SM
MEs developp or improv
ve their busiiness efficieency.
Cost coontrol is the analysis an
nd assessmennt of the practical situaation of usinng capital reesources
and cosst; from thaat decisionss are given about shorrt-term and long-term ccost of enteerprises.
Cost coontrol is an important activity of cost manag
gement. In order to coontrol cost incurred
daily, itt is importaant for managers to ideentify typess of cost. Especially, thhey should identify
controlllable cost so that theey can havve appropriate plans for
f controllling cost and
a
skip
uncontrrollable cossts. There are
a always certain flu
uctuations in
i businesss operation cost of
enterpriises for eacch period. Therefore, one of im
mportant tasks in cost managemeent is to
consideer and selecct the mosst cost-savinng and efffective costt structure. Cost manaagement
includes analyzingg and provid
ding an optiimal cost strructure and mobilized capital reso
ources in
each peeriod; havinng an appro
opriate policcy for cost distribution
n and profiit level; con
ntrolling
asset ussage to avoiid waste and
d inaccuratee usage purp
pose.
This stuudy aims to analyze thee business eefficiency of SMEs in Thai
T Binh dduring 2012 to 2014
and verrify factors regarding
r
th
he capabilitty of cost co
ontrol on bu
usiness efficciency based on the
accountting principples in deterrmining perrformance effectivenesss. In addittion, we con
nsidered
how thhe differencce in busineess form oof SMEs afffects the capability
c
oof cost control and
businesss efficiencyy.
2. Theooretical Fraamework
2.1 Bussiness Efficiency
The effficiency of any econom
mic activityy is reflected
d through the relation between in
nput and
output. An efficiennt economicc activity m
means less amount
a
of input
i
is reqquired for th
he same
amountt of output or, to put it
i differentlyy, more am
mount of output is prodduced for th
he same
amountt of input. According to Guerrieen (2007), efficiency is the techn
hnical term used to
indicatee the distribution of ressources in thhe best way
y. Depending
g on the meeasurement method,
efficienncy can bee called tecchnical effficiency or economic efficiency.
y. From theeoretical
perspecctive, there are
a two app
proaches reggarding the concept of efficiency:
e
The firrst approacch states th
hat efficienncy is the concept thaat represennts the relaationship
betweenn the achievved result when
w
carryinng out goalls and cost spent to achhieve that result
r
by
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International Finance and
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ISSN 2374-2089
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2017, Vol. 4, No. 2

an entitty in certaiin condition
ns. Under tthis approacch, efficiency can be shown in terms
t
of
numberr and quotient and thee bigger thhe outcome compared to cost speent, the hig
gher the
efficienncy.
The seccond method admits th
hat efficienccy is an ind
dicator that reflects thee level of return
r
in
order too reach a sppecific goaal by an enttity in relattion with a unit of ressource spen
nt during
operatioon. Regardiing this app
proach, efficciency is allways assocciated with a certain go
oal - the
obtained result. If an activity
y does not hhave a goall, it is not possible
p
to identify eff
fficiency.
Therefoore, efficienncy is the concept thaat reflects the relation
nship betweeen cost sp
pent and
obtained result afteer the process as well aas the level of
o using ressources whille obtained result is
the speccific goal thhat enterpriises wish too achieve and
a is considered the nnecessary faactor for
identifyying and evaluating efficiency
e
((Do, 2012)). Howeverr, in realityy, there arre many
differennt aspects of
o activities such as ecconomic, political and
d social actiivities; thatt is why
when m
mentioning the
t efficien
ncy of a fielld of activitty, the namee of the fielld of activitty is put
togetherr with efficciency, such
h as econom
mic efficien
ncy, social efficiency,
e
ppolitical eff
fficiency.
Econom
mic efficienccy is of utm
most importaance becausse it decides and affectts all other fields of
activitiees in normaal life; it refflects the levvel of using
g resources to achieve eeconomic taargets in
a specific period. From a naarrower vieew for each
h firm, eco
onomic effiiciency is business
b
efficienncy.
Smith (1997) statted that bu
usiness effiiciency is meant
m
the obtained rresult in ecconomic
wo differen
nt amounts oof cost to ob
btain the
activitiees. Accordinng to this viiewpoint, iff there are tw
same bbusiness ressults, they both have the same efficiency. So, this vi
viewpoint considers
businesss efficiencyy the same as
a business result. Sam
muelson & Nordhaus
N
(22001, p. 125
5) wrote
in the bbook Econom
mist that: “efficiency iis the most effective usse of resourc
rces in the economy
e
to satisfy human needs”.
n
So efficiency is evaluateed through the usage oof resourcees in the
my; howeverr no specificc indicator iis given to evaluate
e
effficiency.
econom
Businesss efficiencyy is the top concern forr any enterp
prise and co
overs all actiivities, show
wing the
quality of the overrall enterpriise managem
ment. Realiity of operaation in ente
terprises sho
ows that
ontents, meethods and measures
m
on
nly truly coount when th
hey lead
all channges in mannagement co
to improove businesss efficiency
y.
In the ccontext of competition
c
n in the mar
arket econom
my and inteegration, too survive an
nd grow,
businesss activitiess must be efficient.
e
T
The higher the business efficienccy, more faavorable
conditioons enterpriises have to
o expand annd develop production
n, create jobbs, improvee the life
standardd of employyees, and co
ontribute moore to state budget. As a result, buusiness efficciency of
enterpriises must bee considered compreheensively in relation witth the overaall efficienccy of the
whole eeconomy (ecconomic an
nd social effficiency).
2.2 Indiicators of Business
B
Effi
ficiency
There aare many inddicators to measure
m
buusiness efficiency basin
ng on book vvalue, mark
ket value
and soccial efficienccy. For meaasuring busiiness efficieency basing
g on markett value, proffitability
is frequuently used. It reflects the amountt of profit generated
g
by
y a unit of iinput of (the higher
the num
meric value of this indiccator is, the higher the business eff
fficiency is aand vice verrsa).
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Of varioous indicatoors for meassuring businness efficien
ncy, the mo
ost frequentlly used onees can be
dividedd into (i) book value co
oefficients ((also called
d profit coeffficients) annd (ii) mark
ket value
coefficiients (also called
c
as assset growth coefficientss). Accordin
ng to Murphhy and Hilll (1996),
businesss efficiencyy needs measuring thhrough criteeria in both
h aspects oof book vaalue and
market value. Whaatever aspeect it is, bussiness efficiency is refflected by tthe followin
ng basic
indicatoors, as below
w:
+ Returrn on sales (ROS): thiss indicator sshows how much profiit is generatted for a un
nit of net
revenuee; the higherr the numerric value off this indicattor is, the hiigher the buusiness efficciency is
and vicee versa.
+ Returrn on assetss (ROA): du
uring its buusiness operration, all enterprises w
wish to hav
ve profit;
by comp
mparing reveenue with in
nvestment asssets, we caan see the prrofitability oon assets.
In adddition, therre are oth
her indicattors to measure
m
business effiiciency, in
ncluding:
Price-too-Book Rattio (P/B), Tobin's
T
Q Ratio (marrket value), Dividendd yield ratio
o (DY).
Howeveer, regardinng the study’s approachh in this stud
dy about bu
usiness efficciency of SM
MEs, we
used RO
OA and RO
OS as representative inddicators for measuring business effficiency because of
the folloowing reasoons.
(i) in tthe approacch of Shah & Jan (20014), Shah
hid (2003), and Le & Buck (2011), the
indicatoors used forr measuring
g business eefficiency is
i Return on Equity (R
ROE) or Reeturn on
Investm
ment (ROI). The usagee of ROI orr ROE is quite similarr to that off ROA and ROS so
ROA aand ROS arre appropriiate determ
minants for determining
g how the capability of cost
control affects busiiness efficieency.
(ii) acccording to Behn (200
03), busineess efficien
ncy of a measuremen
m
nt variable can be
influencced by business targett, developm
ment of stocck market and capitall market. Itt is very
difficultt to evaluate SMEs’ bu
usiness efficciency using
g market vaalue, busineess target, Tobin's
T
Q
Ratio oor Price-to--Earnings Ratio
R
(P/E)) because most
m
SMEss are not llisted in th
he stock
exchangge; thereforre there is no basis tto identify these indicators and calculation
n is too
difficultt.
3. Reseearch Methodology
3.1 Research Modeels
In analyyzing businness efficien
ncy, we colllected finaancial statem
ments of SM
MEs. An im
mportant
indicatoor for meaasuring business efficiiency is prrofit. Under the accoounting fram
mework,
businesss result is the
t differen
nce among rrevenue, income and expenses
e
off enterprises after a
period of businesss operation of an entitty. Businesss result is measured
m
uusing the fo
ollowing
formulaa:
Net
Business result

=

reven
nue

from sales and
a
services

Costt
- goodds

of
+

sold

ncome
In

Expenses

frrom

for

financial
acctivities

117

-

financial
activities

Selling
g

and

+ admin
nistrative
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International Finance and
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ISSN 2374-2089
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2017, Vol. 4, No. 2

Based oon the form
mula above, we give hhypotheses with the fo
ollowing im
mpacting faactors of
businesss result, naamely costt of goods sold ratio,, financial expense raatio, admin
nistration
expensee ratio, firm
m size (reevenue as a proxy), financial leeverage annd assets sttructure.
Variablees in the model
m
for an
nalyzing faactors affectting business efficienccy are presented in
Table 3.

Table 3. Variables in the reseaarch model
Name

Ty
ype

Code

Meeasurement

Pre-tax return on asseets
Pre-tax return on salees ratio
Cost of goods sold raatio
Financiaal expenses raatio

Deependent
Deependent
Ind
dependent
Ind
dependent

R
ROA
R
ROS
COGS
EFFA

Administration expennse ratio

Ind
dependent

GAAE

Financiaal leverage
Assets sstructure
Revenue

Co
ontrolling
Co
ontrolling
Co
ontrolling

CAP
LAR
SIZE

Earrnings before tax/ Total asseets
Earrnings before tax/ Sales
Co
ost of goods so
old / Sales
Fin
nancial expensse/Total revennue
Ad
dministration
expense
/Total
rev
venue
Deebt/Total assets
Long-term assets/Total assets
Revenue

Ex
xpected
dirrection
of impact
+
+

In this research, we
w use dataa in the ballance sheetts and income statemeents for ideentifying
factors affecting buusiness efficciency of SM
MEs as follows:
c
is the deciding factor
f
of efficiency foor each acttivity at
- Cost factors: Prroduction cost
enterpriises during each produ
uction cyclee. It also deecides comp
petitivenesss and sustaiinability.
The effi
ficiency of each
e
activity
y is associatted with thee ability to control
c
costt. On the oth
her hand,
expensees are freqquently inccurred in the producction proceess and chhanged durring the
re-produuction proccess. Thereffore, enterpprises alway
ys aim at ho
ow to contrrol cost in the
t most
effectivve way. Bieerstaker et al. (2006) pointed ou
ut that regu
ular inspectition of the internal
control system, esppecially the accountingg system, is the one pop
pular methood to preven
nt issues
ver, it is only
o
appliedd by a verry small
during operation. Despite itss effectivenness, howev
Es due to th
he investmeent cost. Thhe lack of applying
a
numberr of enterpriises, especiially at SME
such as highly effeective metho
ods leads too losses in reesources/asssets of enterrprises. Thaat is why
S
shoulld consider the long-teerm benefitts and invesst in the
this ressearch propoosed that SMEs
m to control material miisstatements. It also sh
hows the quuality of acccounting
accountting system
informaation has im
mpact on caapital expennses of enteerprises, botth directly and indirecctly. The
disclosuure of correect informaation affectss the evaluaation of relative impacct of differeent cash
flows iin enterprisses, causing
g direct im
mpacts, and affects decisions aboout producttion and
businesss as well as
a estimated
d rate of retturn and tottal absolutee value of ccash flows, causing
indirectt impacts. Impact
I
can
n happen inn one of tw
wo direction
ns; howeveer, they all lead to
situationns where thhe higher the quality of accountiing is, the higher posssibility of reducing
r
capital cost is (Lam
mbert et al.., 2007). Thhe issue to be considerred is how the organizzation of
accountting activitties affects internal c ost controll and how internal c ost controll affects
bookkeeping. Cosst for prod
duction andd business include cost of gooods sold, business
b
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adminisstration exppenses and financial eexpenses. According
A
to the form
mula for callculating
businesss efficiencyy, when exp
penses increease, efficien
ncy decreasses due to thhe negative relation
betweenn them.
- Busineess size: Baaard & Van (2004), Arri & Fredriik (2004), Hansen
H
(20002) found that
t
firm
size, am
mong other factors,
f
affeects an enterrprise's busiiness efficieency.
- Finanncial leveragge: Study of
o Zeitun & Tian (200
07) showed that financcial leveragee affects
efficienncy of enterrprises wheen efficienccy is measu
ured basing
g on book and markeet value.
Margariitis & Psilllaki (2007) found thee relation between
b
fin
nancial leveerage and business
b
efficienncy.
- Assetss structure:: For enterp
prises that hhave assets structure with
w higherr ratio of lo
ong-term
assets ccompared too other enteerprises in thhe same fieeld, it is norrmal becausse they inveest more
in fixedd assets; as a result th
hey have beetter capabiility to prod
duce produc
ucts and serrvices of
higher qquality and cheaper priice, hence thhe higher bu
usiness efficciency.
3.2 Research Data
Researcch data are collected from
f
financcial statemeents includiing balancee sheet and income
statemeent of SMEss in Thai Binh
B
for the period from
m 2012 to 2014.
2
Accoording to En
nterprise
Law Noo. 60/2005/Q
QH11, enterprises are rrequired to provide ann
nual reportss to Tax Staation and
Statisticcal Departm
ment. There is also an oofficial dataabase of thee statistical departmentt in Thai
Binh prrovince. Thhe scope of this paper iincludes SM
MEs in various fields aand industriies from
2012 too 2014. To match with
h internationnal studies,, this articlee does not include entterprises
operatinng in the fieelds of bank
king, financce and insurrance. Theree are 1,009 SMEs with
h dataset
of operrations for 3 consecutive years. T
The final selected samp
ple includess 661 SME
Es; those
withoutt adequate information
i
or have ouutlier in variiables are excluded
e
froom the samp
ple. The
total nuumber of obbservations is
i 1,983 (6661 enterprises x 3 yearss). Of 661 SSMEs, 228 operates
in the foorm of jointt stock com
mpany and 4443 operatess in the form
m of limited company.
In this study, indiccators emplloyed to m
measure busiiness efficieency are R
ROA and RO
OS with
multi-year dataset for the periiod from 20012 to 2014. During thiis operationn period, theere were
changedd in the corrporate inco
ome tax ratte and of 66
61 SMEs in
n the study,, many SM
MEs have
negative earnings before tax. Thereforee, to ensuree compariso
on among tthe years, we
w used
profits bbefore tax to measure business
b
effficiency of SMEs.
S
3.3 Datta Analysis
Regresssion techniqques are ap
pplied on paanel data, including
i
Pooled
P
OLSS regression
n model,
Fixed E
Effect Modeel (FEM) an
nd Random Effect Mod
del (REM). After
A
choossing the app
propriate
regressiion techniquues for the research m
model, we veerified the chosen
c
moddel and evaaluate its
defects.. In case off having deefects that violate regrression hyp
potheses, w
we would ov
vercome
them byy using Genneralized Leeast Squaress (GLS) mo
odel.
4. Resu
ults and Disscussion
Descripptive Statistiics
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According to statiistical data in Table 44, the averaage ROS raatio is low at 0.236% and the
averagee ROA ratioo is - 0.997%. COGS, financial ex
xpense ratio
o and admiinistration expenses
e
ratio coompared too revenue are 85.62%
%; 2.01% and 12.78%
%, respectiively. The average
financiaal leverage of SMEs (d
debt/total asssets) is 54.55% while the averagee assets stru
ucture is
30.94%
%.

Table 4. Descriptivve Analysis of Average Variables in
n 3 Years Frrom 2012 too 2014
Indicattors
Pre-taxx Return onn Sales ratio
o
(ROS)
Pre-taxx Return on Assets ratio
o
(ROA))
Cost O
Of Goods Soldd ratio (COGS)
Financcial Expenses ratio
Adminnistration exxpense ratio
o
(GAAE
E)
Financcial leverage (C
CAP)
Assets structure (LA
AR)
Revenuue (SIZE)

Number of
observatioon

Mean vaalue

Standarrd
deviatio
on

mum
Minim
value

Max
ximum
value

1,983

0.00236

0.04296
67

-0.51

0.53

1,983
1,983
1,983

-0.00997
7
0.856273
3
0.020096
6

0.08234
42
0.14462
29
0.04849
98

-1.03
0.01
0

0.63
0.99
0.89

1,983
1,983
1,983
1,983

0.127761
1
0.545522
2
0.309435
5
15.96471
1

0.14372
23
0.26285
56
0.25334
42
1.704818

0.01
0.01
0.01
9.66

0.97
0.99
0.99
21.21

Impact of differencce in busineess form on cost contro
ol
Data inn Table 5 shhow that SM
MEs operatiing in the form
fo of join
nt stock havve higher effficiency
measureed by bookk value (RO
OS, ROA) tthan those operating in
n the form of limited liability
companny. Howeveer, there is only
o
considderable diffeerence regaarding ROA
A ratio with 99% of
reliabiliity.

Table 5. Business efficiency
e
according too business fo
orm of SME
Es
Number

of

Indiicator

Businesss form

Pre--tax Return on

ock company
Joint sto

684

-0.0074
44

Salees ratio (ROS))

Limited
d company

1,299

-0.01131

Pre--tax Return on

ock company
Joint sto

684

0.00643
33

Asseets ratio (ROA
A)

Limited
d company

1,299

0.00021
16

observations

Mean

Bartleett's test

Prr

0.008

0.3
3334

0.000

0.0
0044

As menntioned abovve, another goal of thiss research iss to check th
he capabilitty of cost co
ontrol of
enterpriises in the sample.
s
Evaaluation resuults about th
he capability of cost coontrol in entterprises
and descriptive sttatistics forr all samplles are preesented in Table 6. W
We found out that
enterpriises operatting in thee form of joint stock
k firms haave lower ratio of financial
f
expensees/revenue than
t
those operating
o
inn the form of
o limited liability firm
m while the ratio of
adminisstration exppenses/reven
nue is highher with thee level of significance of 5%. Th
here is a
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differennce in the raatio of finan
ncial expensses/revenuee between th
he two busiiness forms,, but not
remarkaable.

Table 6. Business efficiency
e
under
u
busineess forms off SMEs
In
ndicators

Business
B
form
m

Numberr of
observa
ations

Bartllett's

n
Mean

test

Joint
J
stock firrm

684

0.843202

Limited
L
firm

1299

0.863156

F
Financial Expeenses ratio

Joint
J
stock firrm

684

0.018714

(E
EFFA)

Limited
L
firm

1299

0.020824

A
Administrationn expense

Joint
J
stock firrm

684

0.137573

raatio (GAAE)

Limited
L
firm

1299

0.122594

C
Cost Of Goodss Sold ratio

Pr

0.5899

0.0035

0.0000

0.3045

0.0122

0.0158

Factors affecting business
b
effiiciency of S
SMEs
Table 7 shows ressults of corrrelation coeefficient am
mong variab
bles. The puurpose of checking
c
close coorrelation between dependent and independen
nt variables is to eliminnate factors that can
lead to multicollinnearity befo
ore applyinng the regreession mod
del. Regardding the corrrelation
coefficiients of inddependent variables,
v
noo pair has the
t value ov
ver 0.8, exccept for thee pair of
COGS and GAA
AE variables with thee coefficien
nt of .8073
3. Howeveer, to test whether
multicoollinearity occurs
o
when
n using thee regression
n model, wee employedd variance inflation
i
factor (V
VIF) for tessting.

Table 7. Correlatioon matrix
R
ROS
R
ROA
COGS
EF
FFA
G
GAAE
CAP
LA
AR
SIIZE

RO
OS
1
0.55616
-0..079
-0..2631
-0..3178
0.00357
-0..033
0.22188

RO
OA

COG
GS

EFFA
A

GAAE

CAP

L
LAR

SIZ
ZE

1
-0.0
0925
-0.1
1113
-0.1
134
-0.0
021
-0.0
029
0.1624

1
-0.22211
-0.80073
0.16659
-0.1882
0.39986

1
0.031
15
0.164
42
0.170
02
-0.035

1
-0.226
0.131
-0.506

1
-0.1417
0.4424

1
--0.0841

1

(i) Regrression withh dependentt variable off ROS
For the dependent variable off ROS (Tabble 8), we compare
c
and
d select thee appropriatte model
M, and REM
M. To do so,, we employ
yed F test and
a Hausma
man test. By using F
among OLS, FEM
test, it ccan be seen that Prob > F = 0.000 < α =5%, therefore,
t
with
w the leveel of significcance of
5%, H0 is eliminaated. This means
m
that, for the dattaset, the FE
EM is apprropriate wh
hile OLS
model iis not due too the existence of fixedd effects off each enterp
prise overtim
ime. After choosing
c
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the FEM
M model innstead of thee OLS moddel, we begu
un to proceess data usinng FEM an
nd REM.
From thhe result off using FEM
M and REM
M, we appllied Hausman test to ccompare an
nd select
betweenn FEM andd REM. Reesults of Haausman test are presen
nted in Tabble 8. Prob>chi2 =
0.000 soo P_value = 0.000 < α = 5%; it m
means there is sufficien
nt basis to elliminate hy
ypothesis
H0 and FEM is moore suitable than
t
REM. Through teesting, FEM
M is chosen aas the best one.
o

Table 8. Result of multivariate
m
e regressionn with the deependent vaariable of R
ROS
COGS
S
EFFA
A
GAAE
E
CAP
LAR
SIZE
_cons
N
R-sq
F test

OLS
S
-0.7007***
[-51.38]
-0.8446***
[-33.86]
-0.7333***
[-51.28]
0.004491
[1.011]
-0.0000233
[-0.05]
0.002202**
[2.466]
0.6711***
[35.226]
1983
0.6455
F(6, 1976) = 599.4
48
Prob > F = 0.0000

FEM
-0.726****
[-34.12]]
-0.876****
[-20.45]]
-0.739****
[-35.60]]
-0.0005
[-0.05]
0.0247**
[1.75]
0.0101****
[3.62]
0.555****
[11.18]
1983
0.6236
F(6,131 6) = 343.85
Prob > F = 0.0000

REM
-0.709***
[-50.37]
-0.852***
[-32.87]
-0.736***
[-50.52]
0.00467
[0.91]
0.00045
[0.09]
0.00216**
[2.46]
0.671***
[33.87]
1983
0.6454

Wald chi2(6
6) = 3509.79
LM teest
Prob > chi2 = 0.0000

GLS
-0.767***
[-86.18]
-0.859***
[-71.27]
-0.773***
[-86.43]
0.00291***
[5.19]
0.000809
[1.18]
0.00172***
[16.91]
0.737***
[82.36]
1983

Wald chi2(6) =
8316.08
Prob > ch
hi2 =
0.0000

chi2(6) = 16.43
Hausm
man
test
Prob>chhi2 = 0.0116
chi2 (6661) = 1.7e+10
Modiffied
Wald test
Prob>chhi2 = 0.0000
F(1, 6600) = 1.391
Woolddridge
test
Prob > F = 0.2387
Note. t sttatistics in brackets * p<0.1, ** p<0.05, **** p<0.01.

Howeveer, before analyzing
g factors affecting ROS, wee applied heterosced
dasticity,
multicoollinearity, and
a autocorrrelation testts as well ass made neceessary adjusstment to ov
vercome
the moddel’s shortcoomings.
Heterosscedasticity test: to testt if there is changing variance, wee used Modiified Wald test
t with
hypotheeses that H0: there is no
o change inn variance, H1: changes in variancee occur. Tesst results
show thhat P-value is small (ssmaller thann the 0.05 default value), hypothhesis H0 is rejected
while hhypothesis H1 is accepted. In Tablee 8, P_valu
ue < α = 0.0
05. Accordinng to test reesults of
models,, obtained P-values
P
are all as folllows: 0.000
0 < α (5%) which impplies hypoth
hesis H0
(that theere is no chhange in variance) is rejjected with the level off significancce of 5%. Therefore,
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we elim
minate the deefects of reg
gression moodel by usin
ng the GLS regression m
method.
Autocorrrelation teest: The Wo
ooldridge teest is used to test wheether autocoorrelation occurs in
regressiion modells with th
he hypotheeses that: H0= no autocorrelaation occu
urs; H1:
autocorrrelation occcurs. If the test produc es results of
o P_value =0.2387
=
> α = 0.05, hy
ypothesis
H0 ia acccepted, meeaning no au
utocorrelatioon occurs.
Multicoollinearity test:
t
to disccover multiicollinearity
y in the mo
odels, we eemployed Variance
V
Inflationn Factor (V
VIF). There are differennt proposed
d value of VIF
V but the m
most popullar value
of 10; iif the valuee of VIF is higher thann that limit, multicollinearity cann occur (Haair et al.,
1995). R
Results of VIF
V value for
fo all variabbles are low
wer than 10,, proving thhat multicollinearity
does noot occur.
Using G
GLS methodd: after app
plying regreession, testin
ng and choosing FEM
M as the app
propriate
model, we dealt with defeccts discoverred in the model by using GLSS method. Results
presenteed in Table 8 are those in which thhe model’s defects
d
are handled.
h
According to Tabble 8, variaables of CO
OGS ratio, financial expense raatio, admin
nistration
expensee ratio, finanncial leveraage, and firm
m size by reevenue havee statistical significancce with 1%
level of significannce 1% wh
hile the varriable of assets
a
structture does nnot affect business
b
efficienncy.
(ii) Reggression withh dependent variable of ROA
Regardiing dependdent variable of ROA, results of Hausman test
t are preesented in Table
T
9.
P_valuee 0.4378 > α = 5% so there
t
is a suufficient bassis to use RE
EM. Througgh test resullts, FEM
is choseen as the best model.
To test if there is change
c
in vaariance, we implement Breusch an
nd Pagan tesst. Test resu
ults show
that obttained P-vaalue are all as follows : 0.000 < α (5%). Thiis implies hhypothesis H0 (that
there is no change in variancee) is rejectedd with the level of sign
nificance off 5%. Therefore, we
eliminaate the defeccts of regresssion modell by using th
he GLS regrression meth
thod.
In Tablle 9, variabbles of COG
GS ratio, finnancial exp
pense ratio, administraation expense ratio,
financiaal leverage, and size acccording to revenue arre statisticallly importannt with 1% level of
significcance.
From sttudy results in Table 8 and
a Table 99, a numberr of discussions can be ggiven as:
First, faactors of CO
OGS ratio, financial eexpense rattio, adminisstration exppense ratio all have
negative relationshhip and stattistical signnificance; th
hey match with
w the inititial hypothesis that
when coost increasees, profit decreases, leaading to low
wer businesss efficiency.. So cost facctors are
importaant factors with
w major impact
i
on bbusiness effiiciency, ROS, ROA of SMEs.
Second, the financcial leveragee factor hass a positive relation witth ROS butt a negative relation
with RO
OA and has 1% level of statisticcal significaance. So th
here is a diffference in relation
betweenn financial leverage
l
and ROS, RO
OA; however, the level of impact oof financial leverage
l
is very small. Connsidering th
he impact oof financiall leverage on
o ROA, itt matches with
w the
hypotheesis of the study;
s
to putt it differenttly, the high
her the debt ratio is, thee lower the business
b
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efficienncy of enterpprises is. Result of thiss study are similar to th
hose of Zeiitun & Tian
n (2007)
and Maargaritis & Psillaki
P
(200
07).
Third, tthe factor of
o assets sttructure hass a positivee impact on
n ROS but with no sttatistical
significcance. Meannwhile, it haas a negativee relation wiith ROA butt with 1% leevel of signiificance.
This result contraddicts with th
he initial hyypothesis but
b the level of impactt is insignifficant. A
more fixed assets
a
but do
d not utilizze them effe
fectively,
possiblee reason is that SMEs invest in m
leading to low busiiness efficieency.

Table 9. Result of multivariate
m
e regressionn with the deependent vaariable of R
ROA
COGS
EFFA
GAAE
CAP
LAR
SIZE
_cons
N
R-sq
F test

OLS
-0.211***
[-19.557]
-0.1998***
[-10.13]
-0.1991***
[-17.007]
-0.0132***
[-3.500]
-0.000601*
[-1.700]
0.003370***
[5.777]
0.1611***
[10.882]
1983
0.20002
F(6600, 1316) = 1.3
32
Prob > F = 0.0000

FEM
-0.206** *
[-13.02]
-0.153** *
[-4.80]
-0.174** *
[-11.28]
-0.0102
[-1.24]
-0.005699
[-0.54]
0.00342**
[1.65]
0.156****
[4.25]
1983
0.1982
F(660, 13316) = 1.69
Prob > F = 0.0000

LM test
Hausmann test

REM
-0.709***
[-50.37]
-0.852***
[-32.87]
-0.736***
[-50.52]
0.00467
[0.9]
0.00045
[0.09]
0.00216**
[2.46]
0.671***
[33.87]
1983
0.2025

G
GLS
--0.184***
[[-35.60]
--0.173***
[[-31.20]
--0.173***
[[-33.27]
--0.00761***
[[-13.10]
--0.00216***
[[-4.23]
00.00216***
[[17.83]
00.155***
[[29.06]
1983

Wald chi2(6) = 455.63
Prob > chi2 = 0.0000

W
Wald chi2(6) = 1550.91
PProb > chi2 = 0.0000

chi2(6) = 5.87
Prob>chii2 = 0.4378
chibar2(001) = 68.25

Breusch and
Pagan
Prob > chhibar2 = 0.000
00
Lagrangiaan
F(1, 660)) = 0.070
Wooldriddge
test
Prob > F = 0.7916
Note. t sttatistics in brackets * p<0.1, ** p<0.05, **** p<0.01.

Fourth, the factor of size by revenue prroduces possitive regresssion resultts with 1% level of
statisticcal significaance; it affeects businesss efficienccy with RO
OS and ROA
A as measu
urement.
This ressult matchess with thosee of Baard & Van (200
04), Kokko & S jöholm
m (2004), Hansen
H
et
al. (20002).
The coeefficient of R2 accordin
ng to ROS is 0.6234 and
a accordin
ng to ROA is 0.2025. It
I means
that facctors in thee research model
m
only explain 62
2.34% the impact
i
on bbusiness effficiency
when m
measured byy ROS and 22.25% whhen measurred by ROA
A; the remaaining perceentage is
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due to tthe fact thaat there are factors nott included in the research model such as: caapability,
skill off director, prrovincial su
upport policcies. This iss the shortcoming of thhis research
h, which
will be further studdied.
5. Concclusion and
d Recommeendations
During the studiedd period, business
b
effficiency of SMEs in Thai
T
Binh was low and
a their
averagee profits beffore tax werre negative;; there was no improveement in buusiness efficiency of
2014 coompared too 2013 and 2012. Throough regresssion resultss, 6 factorss affecting business
b
efficienncy of SME
Es are identtified. Impaacting facto
ors of cost control abiility includee COGS
ratio, fiinancial exppense ratio,, and adminnistration expense
e
ratiio; they havve negativee impact
businesss efficiencyy (ROS, RO
OA). In adddition, the factors of financial lleverage facctor and
assets sstructure alsso have neg
gative impaact businesss efficiency
y while reveenue has a positive
impact.
Based oon study ressults, we pro
opose a num
mber of reco
ommendatio
ons, as below
w:
First, thhere shouldd be solution
ns to reducee cost such as having a rationalizzed and streeamlined
producttion process, improvin
ng labor prroductivity, cutting neecessary coost in busin
ness and
producttion. Enterpprises need
d to considder building
g the effecctive internnal control system,
enhanciing technoloogy applicaation in accoounting for improving transparenccy and efficciency in
providinng reliable accounting
a
informationn and data.
Second,, SMEs shoould enhan
nce competiitiveness off products or servicess, have app
propriate
measurees to increaase revenuee, and carryy out reseaarches on new
n
productts and serv
vices for
meetingg the markket demand
d. Also, thhey should build and complete their manaagement
apparatuus so increease cost co
ontrol capabbility. Wheen having sufficient coonditions an
nd goal,
SMEs ccan considerr switching to the form
m of joint sto
ock firm.
Third, S
SMEs shouuld choose capital
c
resoources with state and provincial
p
aassistance to
o reduce
interest cost and inncrease the equity
e
ratio during the business an
nd productioon process.
Fourth, SMEs shhould utilize invested assets efffectively, esspecially fi
fixed assetss. When
implem
menting inveestment projjects, they nneed to hav
ve feasible report
r
abouut efficiency
y, capital
mobilizzation and also should
d research areas that are prioritized for deevelopmentt by the
governm
ment and prrovince.
Last, sttate agenciees in Thai Binh
B
need too actively and
a effectiv
vely implem
ment guideliines and
policiess issued in planning No.
N 59/KH-U
UBND in order
o
to app
ply solutionns into pracctice for
SMEs in the provinncial area.
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n Accountinng Business & Finance Journal, 1((4), 40-61.

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