i UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS • VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS BANK CREDIT APPRAISAL CRITERIA FOR BORROWING FIRMS IN VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of t MASTER OF ARTS IN DEVELOPMENT ECONOMICS By LE DiNH THUY NGAN Academic Supervisor: Asso.Prof.TRUONG QUANG THONG HO CHI MINH CITY, DECEMBER 2010 - -~ CERTIFICATION i • I hereby certify that the substance of this thesis has not been submitted for any degrees and is not being currently submitted for any other degrees I also certify that, to the best of my knowledge, and any help received in preparing the thesis and all sources used have been acknowledged in the thesis Signature ' LeDinh Thuy Ngan Date: December, 2010 • · ~ _- ACKNOWLEDGEMENT • This research 1s impossibly completed without the valuable guidance, encouragement and advice from numerous individuals including VietnamNetherlands program lecturers, friends and my family members I am really indebted and grateful to what they have done for my thesis completion First of all, I would like to send my deepest gratitude to my supervisor, Professor Truang Quang Thong who always gives advice and comments during my completion of the thesis I am grateful for Professor Nguy~n TrQng Hoai and Professor Peter Calkins for their precious advice and comments from the initial ideas of the theme for my thesis • Many especially respectful thanks are sent to my family for encouraging and providing me with an opportunity to pursue my desires in higher learning and for their love, affection and sympathy that have helped me to gain more strength and motive to complete this thesis LIST OFT ABLES Table 2.1: Rating symbols long-term and short-term debt II Table 2.2: Weighted points of non-financial criteria 14 Table 2.3: Weighted points of financial ratios and non-financial criteria 15 Table 2.4: Weighted points of financial ratios and non-financial criteria 15 Table 2.5: Rating symbols ofVCB 16 Table 2.6: Profit and tax with two different capital structure 18 Table 3.1: Sort credit rating business 25 Table 3.2: Business structure has ability to repay 26 Table 4.1: Following explain the meaning of variables (see appendix 1) 31 Table 4.2: Points of cash flow factor 37 Table 4.3: Points of management quality factor 38 Table 4.4: Points of relations with banks factor (see appendix 3) 39 Table 4.5: Points of business environment factor 40 Table 4.6: Points of other activities factor 41 Table 5.1: Descriptive Statistics 44 Table 5.2: Correlations (see appendix 4) 45 Table 5.3: Model summary (see appendix 5) 46 Table 5.4: Anova 46 Table 5.5: Coefficients of models (see appendix 6) 46 Table 5.6: Distribution graph 48 Table 5.7: Spearman rank correlation 48 Table 5.8: Standardized residual graph 49 ABBREVIATIONS BIDV: Bank for Investment and Development of Vietnam CIC: Credit information center EBIT: Earning before tax and interest rate EU: Europe FDI: Foreign Direct Investment GDP: Gross Domestic Products GSO: General Statistics Office ofVietnam MM: Modiglian Miller SBV: State Bank of Vietnam SMEs: Small Medium Enterprises U.S.: United States VCB (Vietcombank): Bank for Foreign Trade of Vietnam WACC: Weighted average cost of capital ABSTRACT Capital credit is very important in business activities of enterprises The ability to repay loans model in this thesis shows an important role when the bank make a lending decision This study examines and analyses credit rating criteria affecting borrowing firms on bank credit appraisal in Vietnam through applying cross-section data from Credit Information Center which concentrate on forty firms including the medium-sized enterprises that has equity capital more than five billions Vietnam dong or number labor more than two hundred people in leather-footwear industry The regression model is estimated based on the multiple linear regression function The ability to repay loans is dependent variable in the thesis model, and independent variables are current ratio, quick ratio, inventory turnover, receivable turnover, total asset turnover, debt to equity ratio, debt to total asset ratio, return on asset, return on common equity ratio, net profit margin ratio, delinquency ratio, cash flow, management quality, the relations with banks, business environment, other activities and corporate income tax (new added) As results, corporate income tax factor affecting Vietnam Moreover, the results seem to be appropriate to answer questions of the research, borrowing firms are perceived to be information on the lending decision at banks in TABLE OF CONTENTS LIST OF TABLES ABBREVIATIONS ABSTRACT CHAPTER 1: INTRODUCTION 1.1 Problem statement 1.2 Research objective 1.3 Research questions 1.4 Methodology 1.5 The structure ofthesis CHAPTER 2: LITERATURE REVIEW 2.1 Theory background ; 7 2.1.1 Credit appraisal 2.1.2 The definition of credit rating 2.1.3 Objective of credit rating 2.1.4 Role of credit rating 2.1.5 Principle credit rating 2.1.6 Credit rating model 2.1 The basic elements of credit rating 2.1 7.1 The number ranks of credit rating 2.1 7.2 Scale of criteria 10 2.2 Some model of credit rating 10 2.2.1 Moody's rating analysis 10 2.2.2 Z-score model of Altman 12 2.2.3 Credit rating of credit information center 13 2.2.4 Credit rating VCB 13 2.3 Corporate income tax 17 2.3.1 Assumptions and proposition ofM&M theory 17 2.3.2 MM proposition I (corporate taxes)- The value of levered firm 17 2.3.3 Optimal capital structure theory 20 2.4 Summary 21 CHAPTER 3: OVERVIEW OF LEATHER - FOOTWEAR INDUSTRY IN VIETNAM Reasons of using data in Vietnam's leather - footwear industry 23 3.2 Overview ofleather- footwear industry in Vietnam 23 3.3 Credit ratings data ofthe leather-footwear industry in year 2008 24 3.4 Summary 27 CHAPTER 4: METHODOLOGY 28 4.1 The econometric design 28 4.2 Suggested research model 29 4.3 The conceptual design 32 4.3.1 Criteria that banks use to appraise ' 23 32 4.3.1.1 Current ratio- CR 32 4.3.1.2 Quick ratio- QR 33 4.3.1.3 Inventory turnover- IA 4.3.1.4 Receivable turnover- RT 34 4.3.1.5 Total asset turnover- TAT 34 4.3.1.6 Debt to total asset ratio - DA 35 4.3.1.7 Debt to equity ratio- DE 35 4.3.1.8 Net Profit margin- NPM 36 4.3.1.9 Return on assets - ROA 36 4.3.1.10 Return on Equity- ROE 36 4.3.1.11 Cash flow- CF 37 4.3.1.12 Management quality- MQ ) 4.3.1.13 Relations with banks- RB 39 4.3.1.14 Business environment- BE 39 4.3.1.15 Other activities- OA 41 4.3.1.16 Delinquency ratio- DR 42 4.3.2 Corporate income tax (new factor)- CIT , g1-'l J 42 4.4 Data collection method 43 4.5 Summary 43 CHAPTER 5: DATA PROCESSING AND EMPIRICAL RESULTS 5.1 Descriptive statistics 5.2 Regression and hypothesis testing 44 44 45 5.2.1 Correlation analysis 45 5.2.2 Evaluating the reliability of multiple linear regression model 45 5.2.3 Test the relevance of the overall regression model 46 5.2.4 Test the significance of partial regression coefficients 46 5.2.5 Assumption of multiple linear regression model 47 5.2.5.1 Linearity Assumption 47 5.2.5.2 Homoscedasticity 48 5.2.5.3 Distribution standard of residual 49 5.2.5.4 No-serial correlation 49 5.2.5.5 Collinearity diagnostic 50 5.3 Summary CHAPTER 6: CONCLUSION 50 51 REFERENCE APPENDIX iv APPENDIX2 v APPENDIX3 V111 APPENDIX4 APPENDIX APPENDIX6 ix X Xl CHAPTER 1: INTRODUCTION This chapter starts with introduction to problem statement It then presents research objectives, questions and methodology in sections: 1.2, 1.3 and 1.4, respectively Finally, this chapter show thesis structure in section 1.5 1.1 Problem statement The world economy is currently undergoing a severe crisis The cause of the crisis is following: - Objectively, on the theory, growth and development economic generally follows cycle After a period of extreme development, it will reach the top, followed by a recession cycle With this perspective, the world economy developed rapidly in last years of previous century and peaked during the period 2001-2007 - Subjectively, these are the errors in the management economy of economic times "digital" - "virtual economy", particularly in management of financial system, money and banks, namely approximately six percents of all mortgage loans in United States were in default in 2008 Historically, defaults were less than one-third of that, i.e., from 0.25% to 2% The crisis began with the collapse of Bank Lehman Brother Investment, one ofthe largest banks in the United States, on June 2008 (BBC News, 2008) As year progressed, the United States banking and financial system, followed by the EU and Japan, were all shaken by the crash of multiple banking, corporate finance-insurance institutions In the first three months of 2009, the situation continued to deteriorate, with GDP growth in most of developed countries dropped to around negative 2.2 percent Trade turnover reduced strong (export of Eastern Asia reduced 30%, CHAPTER6: CONCLUSION According to government's orientations, banks must achieve credit growth but ensure credit quality Hence, this thesis studies the affect of corporate income tax factor to ability to repay loans of enterprises If new factors that affect ability to repay loans, banks can be credit appraisal to increase lending in but still safe credit Present, factors are used to evaluate credit rating in credit appraisal of banks in Vietnam not include corporate income tax factor in credit rating results Data is chosen in this thesis is credit rating criteria data of enterprises in Vietnam leather - footwear industry is being used at banks, including new added corporate income tax factor Multiple linear regression model is used in the thesis is to determine: Does enterprise income tax factor affect ability to repay loans of borrowers? And the results study has proved that new factor is corporate income tax factor affect ability to repay loans of borrowers after running SPSS software Corporate income tax will affect the evaluation of increasing ability to repay loans This thing will lead to bank's credibility with the borrowers will increase Thus, banks may increase limit loans for enterprises to increase outstanding loans but ensuring credit quality Therefore, banks will improve business performance, credit growth, but ensuring credit quality With banks: According to the thesis, corporate income tax of enterprises affects the decision lending by banks in credit appraisal It increases limit loans at banks, but ensuring credit quality 51 However, limited data of thesis only study the impact of corporate income tax factor in credit rating for medium size enterprises in leather and footwear industry of Vietnam In order to apply new corporate income tax factor conjunction with factors are used at banks to evaluate repayment ability of borrowers in credit appraisal, author recommends banks as follow: • Make research in the broad about influence of corporate income tax factor to access credit for enterprises in many sectors with different scale enterprises • Must build experimental model have corporate income tax factor for enterprises to consider ability to repay loans of borrowers before and after application corporate income tax factor Thus, banks in credit rating will test the model by adding points for enterprise and its number depends on total corporate income tax of each enterprises Banks can increase the limit loan for enterprises following the number of adding points After some time monitoring the repayment of the enterprises, if enterprises have ability to repay loan well by increasing limit loan following level of corporate income tax, prove that the real impact of corporate income tax factor in credit rating relevant with the content of the thesis • Study to build credit point table which has new factor is corporate income tax for using in banks Thus, the bank established credit rating system for borrowers, in which corporate income tax factor will be established by a weight that follow the affecting level of corporate income tax is calculated by further research With enterprises In case, if enterprises have capital structure to save corporate income tax, they will use a part of contributed capital to other investment and the other investment will bring profit for enterprises When enterprises use contributed 52 capital for other investment, they need to add bank loans to produce business Consequently, need for bank loans of enterprises increase and it made an increase interest loans expenses, they will be reduced corporate income tax, leading saving corporate income tax Thus, when enterprises represent the optimal capital structure to saving the corporate income tax, means that enterprises have to pay much corporate income tax Therefore, enterprises increase using debt to saving the corporate income tax And banks base on the corporate income tax before businesses have optimal capital structure, to increase reliability in the credit appraisal by banks with enterprises have to pay much corporate income tax Since then, banks can increase limit loan for enterprises The limitations ofthe research: Although there have been attempts, but the author acknowledges that the thesis remains limitation in the processing thesis, such as: • Sampling method has only been a sector and a group enterprise Therefore, it can affect the research results • The specific direction: because of limit time, enterprises not be directly interviewed by author Consequently, data is used to processing and calculating in this thesis is data which is collected by Credit Information Center about credit rating of enterprises 53 REFERENCE 1) Altman, E.l., (1993), "Corporate Financial Distress and Bankruptcy", New York: John Wiley & Sons, Chapter 2) Andre, P.H., (2009), "Advanced risk management for financials", JFPS Group, Singapore 3) Bhattacharya, H., (1998), "Banking strategy, Credit appraisal and lending decisions", Oxford University Press 4) Cortes, C., and Berggren, A., (2001), "Financing growth of Vietnamese firms", Discussion papers, Central institute for economic management of Vietnam 5) Credit information center - The state bank of Vietnam (2008), "Credit rating enterprises", Labor publisher 6) Dan Meng, Xu Yang, (2007), "SMEs Credit Rating Method with Heterogeneous Information: a Chinese Case", Research paper 7) Decision No 57/2000/QD-NHNN, dated on 24 Jan 2002, issued by State Bank, "Guide and implement credit rating for enterprises" 8) Frank, M.Z., and Goyal, V.K., (2003), "Capital structure decisions", Working paper, University of British Columbia & Hong Kong University of Science & Technology 9) Fitchrating, (2006), "International Issuer and Credit Rating Scales" http://www.fitchratings.com/creditdesk/public/ratings defintions/index.cf m?rd file=ltr, accessed on September, 2009 lO)Hoang Trong, Chu Nguyen Mong Ngoc (2008), "Analysis research data with SPSS ",The statistic publisher 11)Jonathan Golin, (2001), "The bank credit analysis handbook: A guide for analysts, bankers and investors", Singapore: John Wiley & Sons, 2001, Chapter 12)J.P Morgan, (2004), "Determining optimal capital structure", Research paper 13)Karel Jansen, (2008), "Money & Banking" Course 14)Le Thi Thanh Ha and Le Hoang Vinh, (2008), "Building optimal capital structure model for enterprises in Vietnam", Master thesis, University of Economics Ho Chi Minh City 15)Lee, Y.C., (2007), "Application of support vector machines to corporate credit rating prediction", Pergamon Press, Inc, Tarrytown, NY, USA, Volume 33, Issue 16)Limsombunchai, V., C Gan and M Lee, (2005), "Lending decision model for agricultural sector in Thailand", Research paper, Lincoln University, New Zealand 17)Moody's, (2004), "Moody's rating symbols & Definitions", http://www.moodys.com, accessed on September, 2009 18)Michel Crouhy, Robert Mark, Dan Galai, (2000), "Risk Management", 1st Edition, McGraw-Hill, Chapter 19)Nguyen Dang Hung, (2009), "The process of international economic integration of Vietnam in the backround of a new world economy", NJ: Ministry of Foreign Affairs Vietnam 20)Nguyen Minh Kieu, (2008), "Credit apprisal", The statistic publisher 21)Nguyen Trong Hoai, (2008), "Econometrics", Course 22)Nguyen Thanh Huyen (2008), "Credit rating system", Master thesis, University of Economics Ho Chi Minh City 11 23)Nguyen Van Cong (2006), "Determinants of capital structure of manufacturing small and medium enterprises in Dong Nai", MA thesis in Economics, Vietnam-Netherlands program 24)No 60/2005/QHll dated on 12 Sep 2000, "Enterprise Law", Vietnam 25)Ross, S.A., Westerfield, R.W., Jaffe, J.F., (2005), "Corporate Finance", ih Edition, McGraw-Hill and Irwin, Chapter and Chapter 15 26)Standard & Poor's, (2006), "Corporate rating criteria 2006", www.corporatecriteria.standardandpoors.com , accessed on September, 2009 27)Steven M Sheffrin (2003), "Economics: Principles in action", Prentice hall, Chapter 28)Tran Ngoc Tho (2007), "Corporate finance", The statistic publisher, Chapter 15 29)United Nations, (2008), "Credit rating agencies and their potential impact on development countries", Discussion papers 30)Vietcombank, Ernst & Young (2008), "Credit handbook", Joint stock commercial for foreign trade inVietnam 31)Zan Huang, Hsinchun Chen, Chia-Jung Hsu, Wun-Hwa Chen, Soushan Wu, (2004), "Credit rating analysis with support vector machines and neural networks: a market comparative study", Decision Support Systems 37 iii APPENDIX Table 4.1: Explain the meaning of variables Odd Definition ofvariables Variables I CR Current ratio = Current assets/ Current liabilities QR Quick ratio= (Current assets- Inventories)/Current liabilities IT Inventory turnover = Cost of goods sold/Average inventories RT Receivable turnover = Accounts Receivable/Annual credit sales/365 TAT Total asset turnover= Net sales/Total asset DE Debt to equity ratio= Total debt/Total assets DA Debt to total asset= Total debt/Total equity ROA Return on asset= Net income/Total asset ROE Return on common equity= Net income/Shareholder's equity 10 NPM Net profit margin= Net profit after tax/Sales 11 DR Delinquency ratio= Delinquency/ Outstanding debts 12 CF Cash flow measures the ability of the borrower to repay loan form the cash flow 13 MQ 14 RB 15 BE Management quality measure the top management team's capability in controlling and managing the business The relations with banks measure credit relationship with banks Business environment measure the percentage of sales made to the single largest customer, purchase sourced form the single largest supplier and environment risk Other activities measure diversification of activities by industry, market, position; 16 OA income from export activities; dependence on partners; profit of companies in recent years; status of enterprises 17 CIT Corporate income tax ratio = corporate income tax cost I earnings before interest and taxes IV • APPENDIX2 The Ability No to Current Quick Inventory Receivable Total asset repay ratio ratio turnover turnover turnover loans Debito total asset Debito Delinquency Net profit Return on equity ratio ratio margin asset Return on common equity Cash Management relations Business Other flow quality with environment activities Corporate income taxes banks I 92.4 1.4 0.9 10.3 55.4 2.400 0.466 0.873 0.072 0.169 0.316 100 80 100 80 100 0.125 93.2 10.6 10.6 135.8 1.400 0.052 0.055 0.124 0.173 0.183 100 100 80 80 80 0.216 92.6 1.7 1.5 10.3 78.8 1.800 0.477 0.913 0.119 0.217 0.416 100 80 80 80 80 0.173 93.8 2.4 1.4 5.4 24.8 1.100 0.147 0.173 0.130 0.143 0.167 100 100 100 80 80 0.181 85.4 1.1 0.8 18.4 39.8 2.900 0.688 2.200 0.021 0.062 0.199 100 100 100 100 80 0.134 91.8 1.4 I 60.4 0.600 0.213 0.271 0.070 0.040 0.051 100 100 100 100 100 0.211 90.2 1.1 0.6 6.5 52.2 2.100 0.568 0.031 0.039 0.083 0.193 100 80 80 80 80 0.16 88 1.5 1.4 24.5 61 1.200 0.605 1.529 0.036 0.044 0.110 100 80 100 100 100 0.101 91.2 1.5 1.2 11.4 145.5 1.900 0.647 1.833 0.130 0.253 0.718 100 100 80 80 100 0.316 10 80.2 1.1 0.2 6.7 16.4 2.800 0.838 5.185 O.oJ3 0.036 0.222 100 60 80 60 60 0.124 II 80 1.6 1.5 19.5 79.9 0.500 0.127 0.145 (0.086) (0.040) (0.051) 20 60 60 60 80 12 82.4 1.3 0.7 5.4 52 1.600 0.509 1.038 0.013 0.021 0.043 100 80 100 60 60 0.1 13 84.3 1.2 0.9 14.3 34.1 4.800 0.787 3.699 0.009 0.041 0.192 100 80 80 80 60 0.032 v I - II! 14 81.1 1.2 0.5 5.9 31.6 2.400 0.602 1.511 0.001 0.003 0.007 100 80 80 80 60 0.007 15 83 1.4 0.9 8.1 39.7 1.700 0.563 1.290 0.013 0.023 0.052 100 80 80 60 60 0.069 16 84.6 1.3 1.1 15 94.3 2.000 0.624 1.662 0.001 0.001 0.004 100 80 80 60 80 0.011 17 83.5 0.8 0.5 5.6 101.7 0.800 0.523 1.098 0.079 0.062 0.130 40 60 80 80 100 0.296 18 79.8 0.5 0.4 29.7 16.6 1.700 0.519 1.078 0.002 0.004 0.008 40 80 80 60 80 0.021 19 72.5 I 0.2 5.4 16.7 2.400 0.905 9.502 0.002 0.004 0.004 100 100 80 80 80 0.014 20 76.7 0.8 0.8 143.1 15.6 1.000 0.687 2.197 0.007 0.007 0.023 40 100 100 80 80 0.058 21 70.9 1.5 1.4 40.7 114.1 0.900 0.462 0.859 (0.036) (0.032) (0.060) 20 80 80 80 40 22 75.4 1.1 0.3 1.1 109.9 0.500 0.589 0.431 0.075 0.036 0.087 100 80 100 60 60 0.251 23 73.2 1.2 0.7 4.7 63.1 1.600 0.595 1.468 I 0.024 0.038 0.094 100 60 60 80 80 0.072 24 69.9 I 0.4 3.2 56 0.900 0.447 0.808 (0.022) (0.019) (0.035) 20 60 100 60 20 25 71.9 0.6 0.4 Ill 39.3 1.400 0.549 1.216 (0.156) (0.219) (0.486) 20 60 100 80 40 26 74.8 0.8 0.3 4.5 39.8 2.300 0.991 110.334 0.014 0.033 3.659 40 80 80 60 80 0.055 27 77.0 3.6 3.2 293.7 0.600 0.710 2.446 0.014 0.009 0.030 100 80 80 80 80 0.046 28 69.1 I I 3.6 708.3 0.300 0.631 1.707 0.007 0.002 0.005 80 80 80 60 80 0.016 29 65.8 II 0.6 5.9 93.4 1.400 0.695 2.277 0.004 0.006 0.019 80 60 80 60 60 0.015 VI • 30 67.2 1.2 0.5 5.8 35.9 0.500 0.669 2.017 (0.747) (0.378) (l.J41) 20 60 60 80 60 31 64.3 1.3 0.5 0.9 189.8 0.300 0.469 0.884 0.024 0.008 0.016 80 80 80 80 80 0.047 32 62.5 2.1 2.1 6.6 I 132.6 0.100 0.676 2.086 (0.442) (0.025) (0.078) 20 80 40 60 60 33 68.7 1.2 0.7 8.8 121.1 1.300 0.622 1.649 (0.013) (0.017) (0.046) 20 80 40 60 60 34 62 0.9 0.3 2.4 62.8 0.900 0.593 1.455 (0.004) (0.004) (0.009) 20 60 60 60 40 35 67.8 2.8 0.1 2.2 1.3 1.800 1.227 (5.402) (0 005) (0.009) (0.038) 20 80 80 60 60 36 66.9 0.9 0.2 1.4 64 0.700 0.888 7.926 0.010 0.007 0.061 20 80 80 60 60 0.028 37 56.9 l.J 0.5 1.7 106.2 0.700 0.656 1.910 0.004 0.003 0.009 80 80 60 60 80 0.011 38 59.8 0.8 0.2 1.3 65.1 0.600 0.675 2.079 0.007 0.004 0.013 20 60 60 60 60 0.007 39 52.8 0.6 0.5 1.5 1302.8 0.100 0.700 2.331 I 0.150 0.013 0.043 20 60 40 60 60 40 46.5 0.2 0.1 1.9 26 1.000 2.344 (1.744) I (0.277) (0.278) (0.207) 20 60 20 60 60 I Vll • APPENDIX3 Points Criteria 100 Repayment schedule >36 80 12-36 months 1- 12 months months The times of the extension None Total commitments No information (new 20 Non-pay debt on time borrowers) times in past 12 months times in past 12 months ~ times overdue times overdue under 30 times overdue under 30 times overdue under 30 days under 30 days for days for the past 12 months; days for the past 12 months; for the past 12 months; or the past 36 or times overdue under 30 or times overdue under 90 times overdue under 90 days for months days for the past 36 months days for the past 36 months the past 36 months Solvency in past Solvency in past 12 month Insolvency in the past 24 Insolvency in the past 12 months times in past times in past 12 months 36 months debt Overdue debt in the past 40 60 None Never incapacity payment (letter of 24 month months credit, guarantee or other commitments) Information is provided Yes, in Yes, in past 12-36 Yes, in past :S 12 month No information (new sufficient according to past 36 month borrowers) requirement of banks month None Source: VCB, Ernst & Young (2008) viii APPENDIX4 • Table 5.2: Correlations Ability to repay loans Current ratio Pearson Correlation Sig (2-tailed) Quick ratio Inventory turnover Pearson Correlation Pearson Correlation 0.142 Pearson Correlation Pearson Correlation Sig (2-tailed) Debt to equity ratio Pearson Correlation Sig (2-tailed) Debt to total asset ratio Pearson Correlation Sig (2-tailed) Net profit margin Pearson Correlation Sig (2-tailed) Return on asset Return on common equity Pearson Correlation Pearson Correlation Pearson Correlation Pearson Correlation Pearson Correlation Sig (2-tailed) Other activities Pearson Correlation Sig (2-tailed) Corporate income tax -0.561' 0.000 -0.019 0.907 0.409 0.009 0.628 0.187 Sig (2-tailed) Business environment 0.003 Pearson Correlation Sig (2-tailed) Relations with bank 0.020 0.462 0.000 Sig (2-tailed) Management quality 0.382 -0.366 Sig (2-tailed) Sig (2-tailed) Cash flow 0.343' 0.030 Sig (2-tailed) Total asset turnover 0.037 Sig (2-tailed) Sig (2-tailed) Receivable turnover 0.331' Pearson Correlation Sig (2-tailed) 0.248 0.624 0.000 0.536 0.000 0.669 0.000 0.556 0.000 0.530 0.000 0.674 0.000 *.Correlation is significant at the 0.05 level (2-tailed) • ** Correlation is significant at the 0.01 level (2-tailed) lX I! APPENDIXS Table 5.3: Model summary Model R R Square Adjusted R Square Std Error Durbin- of the Estimate Watson 0.674 0.454 0.440 8.9029 0.796b 0.633 0.613 7.3960 0.859c 0.738 0.716 6.3381 0.884d 0.782 0.757 5.8592 0.919e 0.845 0.822 5.0214 0.932( 0.869 0.846 4.6752 1.990 a Predictors: (Constant), Corporate income tax b Predictors: (Constant), Corporate income tax, Relations with bank c Predictors: (Constant), Corporate income tax, Relations with bank, Cash flow d Predictors: (Constant), Corporate income tax, Relations with bank, Cash flow, Total asset turnover e Predictors: (Constant), Corporate income tax, Relations with bank, Cash flow, Total asset turnover, Debt to equity ratio f Predictors: (Constant), Corporate income tax, Relations with bank, Cash flow, Total asset turnover, Debt to equity ratio, Other activities g Dependent Variable: Ability to repay loans X APPENDIX6 Table 5.5: Coefficients of models Coefficients Model U nstandardized Standardized Coefficients Coefficients B Std Error (Constant) 69.272 1.819 Corporate income tax 89.473 15.908 (Constant) 48.875 5.032 Corporate 63.135 income tax 14.596 t Sig Beta Tolerance 38.08 0.000 5.624 0.000 9.713 0.000 0.476 4.325 0.467 0.674 Collinearity Statistics VIF 1.000 1.00 0.000 0.820 1.22 4.250 0.000 0.820 1.22 9.485 0.000 Relations with bank 0.288 0.068 (Constant) 43.251 4.560 Corporate income tax 52.078 12.844 0.392 4.055 0.000 0.777 1.28 Relations with bank 0.232 0.060 0.376 3.869 0.000 0.770 1.299 Cash flow 0.140 0.037 0.355 3.792 0.001 0.828 1.207 (Constant) 43.355 4.216 10.284 0.000 Corporate income tax 54.555 11.910 0.411 4.581 0.000 0.773 1.294 Relations with bank 0.203 0.056 0.330 3.600 0.001 0.742 1.348 Cash flow 0.113 0.036 0.287 3.181 0.003 0.762 1.312 2.912 1.091 0.228 2.669 0.011 0.850 1.176 Total asset turnover xi • ) · J / /,/ (Constant) 58.316 5.426 Corporate income tax 52.250 10.226 Relations with bank 0.119 Cash flow Total asset turnover 10.747 0.000 0.394 5.110 0.000 0.770 1.299 0.053 0.194 2.232 0.032 0.608 1.645 0.069 0.033 0.176 2.116 0.042 0.662 1.511 4.413 1.019 0.346 4.330 0.000 0.715 1.398 2.936 -0.322 -3.695 0.001 0.603 1.657 8.553 0.000 - J Debt to equity ratio 10.850 (Constant) 50.625 5.919 Corporate income tax 38.036 11.096 0.287 3.428 0.002 0.567 1.764 Relations with bank 0.130 0.050 0.210 2.598 0.014 0.604 1.657 Cash flow 0.056 0.031 0.141 1.795 0.082 0.641 1.560 Total asset turnover 4.462 0.949 0.350 4.701 0.000 0.715 1.399 2.734 -0.326 -4.023 0.000 0.603 1.658 0.051 0.194 2.494 0.018 0.653 1.531 Debt to equity ratio Other activities 11.002 0.128 I Dependent Variable: Ability to repay loans 1':' xu ' '• ... analyses credit rating criteria affecting borrowing firms on bank credit appraisal in Vietnam through applying cross-section data from Credit Information Center which concentrate on forty firms including... What criteria are currently used in banks for credit rating of enterprises in credit appraisal in Vietnam? • Does corporate income tax factor affect lending decision of banks in credit appraisal? ... FOOTWEAR INDUSTRY IN VIETNAM Reasons of using data in Vietnam' s leather - footwear industry 23 3.2 Overview ofleather- footwear industry in Vietnam 23 3.3 Credit ratings data ofthe leather-footwear industry