TAILIEUCHUNG - Incentives for financial risk management in Vietnamese enterprises: A study on their determinants

This study aims to assess the factors affecting the incentives for financial risk management in Vietnamese enterprises. By employing multivariable binary logistic regression, the author examines the relationship between hedging decisions for firms’ financial risks and their determinants. | Nguyen Khac Quoc Bao / Journal of Economic Development 22 (2) 85-101 85 Incentives for Financial Risk Management in Vietnamese Enterprises: A Study on Their Determinants NGUYEN KHAC QUOC BAO University of Economics HCMC - nguyenbao@ ARTICLE INFO ABSTRACT Article history: This study aims to assess the factors affecting the incentives for financial risk management in Vietnamese enterprises. By employing multivariable binary logistic regression, the author examines the relationship between hedging decisions for firms’ financial risks and their determinants, namely financial distress costs, tax, agency cost of debt, capital-market imperfections and growth opportunity, hedge substitutes, level of managerial utility, level of government influence, and size of firms. The results demonstrate that hedging decisions for financial risks have a positive correlation with costs of financial distress and managerial utility, and a negative correlation with government influence. These findings are agreeable to empirical results of previous researches that work out on the same case. Received: Aug. 04 2014 Received in revised form: Oct. 30 2014 Accepted: Mar. 26 2015 Keywords: risk management, financial risk, derivatives. 86 Nguyen Khac Quoc Bao / Journal of Economic Development 22 (2) 85-101 1. Introduction Against all expectations, risks transpire in any investment decisions or corporate trade/business activities and are likely to turn the managers’ “sweet dreams” to “bitterness”. Depending on the level of risk, it may bring about firm’s financial damage, being its source of distress or even bankruptcy. Thus, risk management is a crucial point to be taken into consideration by all corporations in their own business. The increasingly complicated fluctuations in prices of materials, interest rate, and exchange rate have caused corporate financial risk to become more unpredictable. Particularly in the current stages of global instability, it is yet more difficult

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• Logistic regression
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