A Two Factor Model Influences the Risk Level of Viet Nam Manufacturing Material Companies

Abstract

This research shows marketing factors such as business competitors could affect business market risk,
from a quantitative point of view. Using a two (2) factors model, this research paper estimates the impacts
of not only the size of firms’ competitors, but also leverage in the manufacturing material industry, on the
market risk of 99 listed companies in this category. This paper founds out that the risk dispersion level in
this sample study could be minimized in case the competitor size is approximately the same (measured by
equity beta var of 0,09) and leverage up to 30%. Beside, the emprical research findings show us that when
financial leverage increases up to 30%, max asset beta value increases from 1,162 to 1,419 in case the
size of competitor doubles. Last but not least, this paper illustrates calculated results that might give
proper recommendations to relevant governments and institutions in re-evaluating their policies during
and after the financial crisis 2007-2011.