Study on the Financial Capacity of Securities Companies Listed on the Hanoi Stock Exchange

: Research solutions to improve the financial capacity of securities companies listed on the Hanoi Stock Exchange. The data are audit reports of stock companies listed on the Hanoi Stock Exchange in the period 2020 - 2022. Using a combination of quantitative and qualitative methods. Based on the research results, the author proposes (i) The author has systematized the basic theory of quality management of listed securities companies. (ii) Based on the theoretical basis of financial capacity developed by the author, it is used to evaluate the current situation of financial capacity of stock companies listed on the Hanoi Stock Exchange. (iii) From there, the author proposes some solutions to improve the financial capacity of securities companies listed on the Hanoi Stock Exchange.


Introduction
The stock market is an important part of the market economy, acting as a medium and longterm capital channel for the economy, and for the market to operate effectively, an indispensable factor is The participation of market intermediaries, in which Securities Company is a special intermediary financial institution, carrying out securities trading activities as the main business line.
In Vietnam, the formation and development process of securities companies is closely associated with the formation and development process of the stock market.In the first years of the stock market's operation, the number of securities companies was small.In the following years, securities companies developed rapidly in both quantity and quality.From 7 newly established companies in 2000 to 78 companies in 2007, this number continued to increase to 105 companies in 2009, 25 times higher than in 2000.The rapid increase of securities companies has partly responded to the met the needs of the market, but also revealed many limitations leading to unsustainable growth, the number of securities companies gradually decreased to 78 operating companies, including 25 securities companies listed on the Hanoi Stock Exchange.Securities companies' business activities are concentrated mainly in big cities such as Ho Chi Minh City and Hanoi city, not widely distributed, a few securities companies are in Da Nang, Binh Duong, Vung Tau, and Nghe An cities. An...but small scale.
Securities companies with charter capital of less than VND 250 billion are restricted from participating in some securities business operations without being able to fully participate.Low financial capacity has hindered securities companies in improving service Suggested Citation Hai, T.V. (2023).Study on the Financial Capacity of Securities Companies Listed on the Hanoi Stock Exchange.European Journal of Theoretical and Applied Sciences, 1(5), 942-950.DOI: 10.59324/ejtas.2023.1(5).81quality, deploying new products, opening more branches, investing in technology and expanding markets.The risk of insecurity for the system still exists, affecting affect the interests of investors, partners and customers.1998) .The methodology to determine minimum capital standards for internationally operating securities companies allows the use of models based on conditions according to standards 21 and 22.In addition, IOSCO promulgates the objectives and principles of the regulations.Securities Regulation in May 2003, investor protection and financial system stability were increased through full oversight of capital standards.Capital standards allow securities companies to absorb some losses, especially in the event of large adverse market movements, and achieve an environment where securities companies go out of business for a short period of time.without affecting or causing losses to customers, without disrupting the orderly operation of the financial market.From IOSCO's point of view, a securities company with sufficient capital will not affect customers, investors, or partners.This means that a securities company with sufficient capital will have the capacity to achieve other goals of the investor.securities company management.Principles for market intermediaries, mainly securities companies, include 4 principles: Principle 21.Regulations should set out minimum input standards for market intermediaries.

Literature Review and Previous Research Studies
Principle 22.There should be initial capital and ongoing other prudential requirements for market intermediaries that reflect the risks taken by the intermediaries.
Principle 23.Market intermediaries should comply with standards of internal organization and conduct that protect the interests of their customers, ensure appropriate risk management and, accordingly, initially manage accepting intermediaries.accept responsibility for these problems.
Principle 24.A market intermediary's incident handling procedures should be in place to minimize damage and losses to investors and limit systemic risk.
Thus, the IOSCO principles set out the first and most important standards being the standards of capital capacity, capital adequacy and, as a result, ensuring the payment requirements of securities companies.
Theory of diseconomies of scale (Transaction cost economics or theory): The concept of transaction costs was first introduced by Ronald Cose in 1937, published in the study The study titled "The Nature of the Firm" laid the foundation for the transaction cost theory, later completed and developed by Williamson (1987), and the theory also clarified the forms of transaction management.and different forms of transaction organization affect company size.
According to Cose (1937), the size of a company is limited by the number of transactions that can be carried out efficiently."the firm becoming larger means that additional transactions are undertaken by the firm's owners and becoming smaller means that some transactions will be abandoned" (Coase, 1995), and those is most optimally implemented by the market mechanism.Cose (1937) gives an explanation: (1) When the size of the company is larger, the profits of the company owner may decrease and additional transaction costs within the company may increase.And of course, at some point the additional transaction costs within the company will be equal to the costs of carrying out this transaction on the market or organized by another company owner.(2) Maybe when transactions increase, company owners do not know how to use operations effectively.(3) The price of supplying one or another input factor may increase because other benefits of a small company are greater than those of a large company.
Cose (1937) concluded that if all factors are equal, a company will tend to increase in size when: (1) Organizational costs tend to decrease and these costs increase more slowly with the increase in transactions are organized; (2) Company managers make fewer mistakes and the smaller the increase in mistakes with the increase in transactions held; (3) The greater the supply price of input factors, the greater the supply price of factors for larger-sized companies.The limit on enterprise size is determined when the scope of its operations expands to the threshold at which the costs of organizing additional transactions into the company exceed the costs of implementing these same transactions through market or at another company (Hoang Van Hai & Dinh Van Toan, 2020).If the company's size reaches its maximum, if the scale continues to increase, transaction costs continue to increase and are higher than the costs of exchanging or buying from the market to perform additional transactions, then the company The company will operate inefficiently or at a loss.Implications from the Theory of diseconomies of scale, the financial capacity of securities companies depends on the size of the company, the capacity of managers and operators of securities companies, and operational efficiency.

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Pecking Order Theory: Also known as capital increase order theory, the theory was initially researched by Myers and Majluf (1984).The theory begins with asymmetric information indicating that company directors know more about their company's potential and risks than outside investors (Myers & Majluf, 1984).Asymmetric information affects the choice between internal and external financing, and between new issuance of debt securities and equity securities.This results in a pecking order whereby a company's investment projects will be funded first with internal capital, mainly retained profits for reinvestment, and then by issuing new debt.and finally by issuing new share capital.Issuing new shares is often the last resort when the company has used up all its debt capacity, meaning there is a threat to the company's financial resources, forcing existing creditors as well as the company's financial director to worry.
The pecking order theory explains why companies with low profitability often borrow more.Not because they have higher target debt ratios but because they need more external financing.Firms, which are less profitable, issue debt because they do not have internal resources for capital investment and because debt financing is at the top of a pecking order of external financing.Highly profitable companies with limited investment opportunities will strive for low debt ratios.Companies with greater investment opportunities than internally generated capital are forced to borrow more debt.In other words, profitability and the ability to supplement capital from retained profits for reinvestment have an impact on the financial resources of a securities company.

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Basel Agreement.Before 1987, capital standards that banks had to comply with varied from country to country, which gave some banks a global competitive advantage over others (Bell & Carcello, 2000).For example, suppose a bank in the US must comply with a 6% capital requirement, which is twice as high as a foreign bank.The reason is because the country's government can support their banks every day, so a low capital ratio does not necessarily mean much risk, with US banks not having this advantage.In December 1987, 12 developed countries attempted to resolve this difference by introducing uniform standards for banks.In July 1988, the central bank governors of 12 countries accepted the standards in the Basel agreement.For the capital adequacy ratio, according to the recommendations of the Basel Committee of the Bank for International Settlements (BIS), it has issued a set of standards, including Basel I ( 1988), which provides credit risk measurement with capital standards.at least equal to 8% of total riskweighted assets.Basel II ( 2004) requires banks to maintain a minimum capital ratio of 4% for tier 1 capital and 8% for tier 2 capital, and monitors the operations of financial institutions based on three pillars., pillar 1 is CAR (quotient of equity capital and total risk-weighted assets), pillar 2 is Strengthening assessment of the quality of risk management of banks, pillar 3 is Supervising disciplinary compliance market.Basel III (2010) sets higher minimum standards than Basel I and Basel II, the CAR coefficient remains unchanged but requires banks' equity capital to be raised from 4% to 6%, of which 4.5 % must be the capital of common shareholders.Especially in Basel III standards (2010), securities companies are added as subjects.

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Xiuping Wang and Tuoyu Wang (2017).Empirical research on financial capability evaluation of A-share listed companies in the securities industry based on principal component analysis.The team of researchers based on the relevant financial data indexes of the A-share market of Shanghai and Shenzhen in 2009, with all 29 listed companies in the stock industry, selected 10 variables with can fully reflect the NLTC indicators.The results show that the comprehensive financial capabilities of listed companies in securities industry A must focus on four groups of capabilities: Investment and income, profitability, capital structure and solvency, and indicators.about cash flow.The disadvantage of the study is that it has not considered the ability to mobilize and use capital, operational efficiency, financial safety, as well as macro factors affecting the financial capacity of securities companies (Tran Van Hai, 2023).

The Current Financial Capacity of Securities Companies Listed on the Hanoi Stock Exchange Some Main Business Results of Listed securities Companies
In the period 2020 -2022, the Vietnamese economy in general is affected by the Covid -19 pandemic, in addition to the complicated political situation in the world, the stock market has many unpredictable fluctuations, but economic activities The business of listed securities companies has also achieved positive results.This is shown in the following table.Source: From financial statements of listed securities companies calculated by the author Table 1 shows that revenue from business activities of securities companies in 2020 reached 14,300 billion VND, the average company reached 572.0 billion VND.From 2021 onwards, revenue from business activities will increase significantly each year higher than the previous year and reach the highest in 2022 of VND 40,430 billion, on average a securities company reaches VND 1,617.2 billion, equivalent to VND 1,617.2 billion.The rate increases by 108.58% compared to 2021, more than 3 times higher than in 2020.
To clearly see the fluctuations in business revenue of listed securities companies in recent years, we look at the revenue of each activity through the following data table: Source: From financial statements of listed securities companies calculated by the author From Table 2, it shows that in the period 2020-2022, the listed economy has gradually stabilized, the stock market has had many improvements, and the business activities of securities companies have been more favorable than before.Therefore, except for other business activities that have many fluctuations, the revenue of all remaining activities in general has quite high growth, so the total revenue in the years 2020-2022 increased times.compared to the previous year was 5,084 billion VND; 21,046 billion VND, corresponding to an increase rate of 35.55%; 108.58%In particular, the spectacular growth of securities proprietary trading activities from VND 10,012 billion in 2020 has increased to VND 26,334 billion in 2022, corresponding to an increase rate of 87.62%.Next is the stability in scale and growth rate of stock brokerage activities, from VND 2,931 billion in 2020 to VND 11,082 billion in 2022, an increase of nearly 4 times.
To fully and more specifically evaluate the fluctuations in revenue of business activities of securities companies, we need to consider the proportion of revenue of each activity in the total revenue of securities companies.The revenue structure of listed securities companies' activities in the period 2020-2022 is shown in Figure 1 below.
From chart 1 on the revenue structure of business activities over the years of listed securities companies, it can be affirmed that proprietary trading activities and brokerage activities are the two activities that bring the highest source of revenue for the listed securities companies.Listed Securities Company.Especially, self-trading activities in recent years have accounted for a very high proportion of the total operating revenue of securities companies (accounting for 65.13 -70.01%).The proportion of revenue from consulting activities tends to decrease while revenue from guarantee activities tends to increase in recent years, however, the growth rate is quite slow, the reason for this activity is only securities companies with good reputation.Only strong financial capacity can participate in this field of operations.The proportion of revenue from brokerage activities is relatively stable, fluctuating from 20.11 to 27.41%.Other operating revenue has a large fluctuation in 2021, the proportion is only 0.84%.Contributing to total revenue is a small proportion (less than 1.22%) of revenue from securities depository activities, which often ranks last with underwriting activities.Based on the analysis of business results of listed securities companies in the period 2020 -2022, it can be seen: The scale of business activities tends to increase and expand.Companies have tried very hard to manage operating costs, but the results have not been economical or effective.However, profits have grown dramatically due to the sharp increase in revenue from self-trading activities.Besides, it also shows that the development of business activities is not really stable and diverse; The development of securities companies is uneven, the development 948 gap between companies is still large; There are still a number of securities companies with losses in business, many companies have sustained losses, leading to weak financial resources for the company; The business results of securities companies also depend heavily on typical objective factors such as the development of the stock market.

Current Status of Financial Capacity of Listed Securities Companies in the Period 2020-2022
Although, in the recent period, the economy in general and the stock market in particular have had many fluctuations, the ability to mobilize capital of listed securities companies has also achieved positive results: The capital scale of companies increased steadily over the years with the trend of each year being higher than the previous year.This is shown in the following table:

Conclusions Some Suggested Solutions to Improve the Financial Capacity of Securities Companies Listed at the Hanoi Stock Exchange
The results of research on the current situation show that the size of equity capital of listed securities companies is still limited and unreasonable, significantly affecting the financial capacity of the company.To improve the financial capacity of listed securities companies, it is necessary to follow the following directions: First, increase retained profits for reinvestment.
In recent years, the retained profits of listed securities companies have been low.To increase this source, securities companies need to consider and decide on a reasonable dividend policy between distributing profits to shareholders in cash or Retain profits to reinvest.
Second, increase equity capital by issuing new shares.With this option, securities companies need to consider the benefits between improving business results and increasing profits when expanding scale from increased equity with sharing voting rights and public control rights.company as well as the right to distribute high income to new shareholders.To increase equity for securities companies, options can be used including: Third, merger and consolidation of securities companies (collectively referred to as M&A transactions).The current market situation shows that the number of securities companies is greater than the demand and size of the market, while the majority of securities companies have limited financial potential.Consolidation and merger activities of securities companies have gradually reduced the number of securities companies in the market while minimizing negative fluctuations for the securities company system such as problems related to handling customer trading accounts and related financial obligations; Consulting and underwriting contracts for securities issuers, handling technical infrastructure systems, and the workforce doing business at merged and consolidated securities companies.most...Consolidation and merger activities of securities companies also contribute to minimizing the decline in trust of the investing public and customers in the activities of securities companies compared to dissolution or bankruptcy activities and at the same time help After the merger and consolidation, the securities company concentrates resources, including human resources and finance, to carry out securities business activities.
Fourth, promote the search for strategic investors.Securities companies can seek strategic partners such as domestic and foreign investment organizations and large financial institutions through selling shares and joint venture activities to strategic investors to increase capital scale.Owner.
Fifth, change the type of business operation.Another option to increase equity capital is for securities companies that are organized under the limited liability company model to convert into joint stock companies, and non-public securities companies to transform into public companies through operations.IPO shares to the public to increase equity capital, contributing to increasing the company's financial capacity.During this process, it is necessary to reserve a significant proportion of shares to offer to strategic investors who are strong domestic and foreign financial institutions.The ratio of shares for organizations and strategic investors must be in accordance with the provisions of law on the participation of foreign organizations and investors doing business on the listed stock market and has just been encouraged.Encourage strategic investors, especially foreign strategic investors, to increase financial capacity for securities companies.

Figure 1 .
Figure 1.Revenue Structure of Activities of Listed Securities Companies 2020-2022 Source: From financial statements of securities companies calculated by the author

Table 3 . Number of Listed Securities Companies with Loss-Making Business Results in 2020 -2022
Source: From financial statements of listed securities companies calculated by the author Thus, besides securities companies that are making great efforts to improve business results, there still exist some securities companies that have persistent losses, typically in 2020, Asia Pacific Securities Company had 34.38 billion VND; Vietnam Trade and Industry Securities Company lost 23.95 billion VND; Wall Street Securities Company lost 79.90 billion VND; Guotai Junan Vietnam Securities Company lost 58.15 billion VND; and at the same time, many securities companies have large accumulated losses.

Table 4 . Capital Scale of Listed Securities Companies in the Period 2020 -2022
From financial statements of listed securities companies calculated by the author) With the necessity of strengthening financial potential to bring clear advantages to securities companies, the capital scale of listed securities companies is constantly growing: as of December 31, 2021, the total capital of securities companies reached 118,519 billion VND, an increase rate of 131.06% compared to December 31, 2020 and reaching the highest rate of VND 215,356 billion with an increase rate of 181.71% in 2022 compared to the end of 2021.Average capital of A listed securities company has a steady growth rate over the period with a growth rate of 34.11% respectively; 84.69%.Spectacular growth in capital is the basis for financing business activities and providing quality services, with the growth rate of average revenue per company being higher than the growth rate of average capital per company.The company partly shows the effectiveness of capital increase.The driving force behind the strong growth in capital scale in recent years is mainly due to the fact that many securities companies have Source: