Appropriate indexes to measure financial constraints of Vietnamese firms

Abstract

This paper focuses on testing the applicability of various financial constraints measurements in the context of the Vietnamese market. Using a sample of non-financial quoted firms throughout 2010-2019; our paper contributes to current corporate finance literature with a novel and simple measurement of financial shortages that is effectively applicable for Vietnamese firms, namely the Age-size-cash flow- interest coverage index (ASCIC). The index is the combination of age and size, which reflect information asymmetry; cash flow, and interest cover ratio that present repayment capacity and solvency risk respectively. The outcomes indicate that while the ASCIC index produces measurement results comparable to other indices, it utilizes a more straightforward calculation method. In light of Vietnam as a country with considerable development potential but substantial financial limitations, it is imperative to identify a financial constraint measurement index that is both simple and effective.

Keywords

• investment
• cash flow
• financial constraints
• index
• vietnam