Volume 13 No 2 (2021): International Journal of Early Childhood Special Education

Balancing Risk and Profitability of Securities Companies – A Case Study in Vietnam


Tran Van Hai, Pham Huy Hung, Vu Thuy Ha

DOI: 10.9756/INT-JECSE/V13I2.211120

Keywords: Z-score, Securities Companies, Vietnam.


Abstract

The goal of creating, forming, and developing businesses in general and securities companies in particular, whose ultimate goal is profit, high and stable profitability is the goal of any company. However, due to their specific business lines, securities companies are affected by risks such as market risk (which is the value corresponding to the level of loss that may occur when the market price of assets currently owned and expected to be owned under the underwriting commitment fluctuates in an adverse direction); Payment risk (is the value corresponding to the level of loss that may occur when the counterparty is unable to make payment on time or deliver assets on time as committed; operational risk (is the value corresponding to the level of losses that may occur due to technical errors, system and business process errors, human errors in the operation process, due to lack of business capital arising from expenses and losses from investment activities, due to other objective reasons). The problem is how the securities company can balance the safety goal, limit the possible risks and at the same time still increase the ability of the enterprise profitability. In practice, there are many methods to measure risk, but one of the most widely accepted methods of predicting risk and bankruptcy today is Z-score of the US economist's - Edward I. Altman – a lecturer of New York University faculty member set. In the US, about 95% of bankruptcies are forecast from the Z-score one year before the closing date, but this rate drops to just 74% for 2-year forecasts. From the initial Z-index forecast, Professor Edward I. Altman has developed it into Z' and Z'' to be applicable to each type and industry of the business. The Z'' coefficient is similar to the S&P credit rating.

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Volume 13 No 2 (2021): International Journal of Early Childhood Special Education

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Research Articles

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