Impact of financial capability on the sustainable growth of securities companies: A case study

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Abstract

Growth not compatible with the financial capacity of the business, uncontrolled growth, imbalance of resources, dependence on external funding, and financial risks may occur. That is the current situation of some securities companies, in the context of a volatile world economic context. Meanwhile, theoretical and empirical research on this special type of enterprise on the relationship between financial capacity and sustainable development is still limited, especially in countries with marginal stock markets, which are making emerging transformation efforts. The goal of the article is to clarify whether or not financial capacity has an impact on the sustainable development of securities companies. Data was collected by the authors from 78 securities companies, with 591 observations in the period from 2013 to 2022 operating on the Vietnam Stock Exchange. By using linear regression methods (OLS, FEM, REM, GLS regression models), the article has identified seven factors affecting the sustainable development of securities companies, those factors are 1) scale of total assets of securities companies; 2) self-financing coefficient; 3) financial leverage (debt ratio); 4) profitability of equity; 5) profitability of assets; 6) retained profits, and 7) financial safety ratio. With the experimental results obtained, the authors propose a number of solutions aimed at sustainable development for securities companies such as increasing equity capital, promoting debt capital mobilization, restructuring capital sources, and providing strengthened risk management capacity.

Keywords: Sustainable Growth, Capital Mobilization, Operational Efficiency, Financial Safety, Risk Management

Authors’ individual contribution: Conceptualization — T.C.M. and M.N.T.; Methodology — T.C.M., M.N.T., and H.T.V.; Validation — L.V.T. and A.T.L.T.; Formal Analysis — T.C.M. and H.P.H.; Resources — L.V.T., H.H.V., and N.L.T.; Writing — Review & Editing — M.N.T. and H.T.V.; Supervision — T.C.M. and H.T.V.; Project Administration — T.C.M. and M.N.T.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G31, G32, G34

Received: 22.08.2023
Accepted: 15.03.2024
Published online: 19.03.2024

How to cite this paper: Cao Minh, T., Nguyen Thi, M., Vu Thuy, L., Hoang Van, H., Pham Huy, H., Tran, A.T. L., Le Thi, N., & Tran Van, H. (2024). Impact of financial capability on the sustainable growth of securities companies: A case study. Risk Governance and Control: Financial Markets & Institutions, 14(1), 53–62. https://doi.org/10.22495/rgcv14i1p4