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How Vietnamese Export Firms Faced Financial Distress during COVID-19? A Bayesian Small Sample Analysis

Author

Listed:
  • Thanh Dan Bui

    (Finance Faculty, Ho Chi Minh University of Banking, Ho Chi Minh City 70000, Vietnam)

  • Nguyen Ngoc Thach

    (Asian Journal of Economics and Banking, Ho Chi Minh University of Banking, Ho Chi Minh City 70000, Vietnam)

Abstract

A crucial role belongs to export firms in the export-led growth model of Vietnam. The COVID-19 disease has posed a serious challenge to the Vietnamese economy, having negatively impacted its influential export sector. However, investigating this export sector encounters small sample issues within the frequentist framework. So, by adopting a Bayesian approach, this study intends to explore the impact of COVID-19-specific factors on the financial distress of the export companies listed on the Vietnam stock exchange. In case frequentist and Bayesian estimation with non-informative priors cannot acquire statistical efficiency due to problems with insufficient data, thoughtful Bayesian analysis can yield meaningful outcomes. A Bayesian logistic regression model was employed to analyze the scarce data, and the posterior estimates of all the model parameters achieved significantly show that the main operating cash flow ratio to total debt, company size, and retained return on total assets are all negatively related to financial distress. Interestingly, financial leverage positively affects financial distress because a benefit from a tax shield could not compensate for the adverse impact of a debt burden, as suggested in the trade-off theory, which demonstrates the specific financial situation of the companies when the COVID-19 pandemic was in full swing.

Suggested Citation

  • Thanh Dan Bui & Nguyen Ngoc Thach, 2023. "How Vietnamese Export Firms Faced Financial Distress during COVID-19? A Bayesian Small Sample Analysis," Economies, MDPI, vol. 11(2), pages 1-12, January.
    • Handle: RePEc:gam:jecomi:v:11:y:2023:i:2:p:41-:d:1052326
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    References listed on IDEAS

    as
    1. John R. Graham & Sonali Hazarika & Krishnamoorthy Narasimhan, 2011. "Financial Distress in the Great Depression," Financial Management, Financial Management Association International, vol. 40(4), pages 821-844, December.
    2. repec:bla:jfinan:v:53:y:1998:i:5:p:1443-1493 is not listed on IDEAS
    3. Khiem Dieu Truong, 2022. "Corporate governance and financial distress: An endogenous switching regression model approach in vietnam," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2111812-211, December.
    4. John R. Graham & Sonali Hazarika & Krishnamoorthy Narasimhan, 2011. "Financial Distress in the Great Depression," NBER Working Papers 17388, National Bureau of Economic Research, Inc.
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