The Risk Level of Viet Nam Insurance Industry under Impacts of a Four Factor Model during and After the Global Crisis

Abstract

Over recent years, insurance industry in Viet Nam has reached a lot of achievements. Under the volatility of stock price, and changes in macro factors such as inflation and interest rates, the well-established insurance market in Viet Nam has many efforts to recover and grow from the crisis 2008. This study analyzes the impacts of 3 factors: competitor size, tax rate policy and leverage on market risk for the listed firms in the insurance industry as it becomes necessary.
First, by using quantitative and analytical methods to estimate asset and equity beta of total 20 listed companies in Viet Nam insurance industry with a proper traditional model, we found out that the beta values, in general, for many companies are acceptable.
Second, under 3 different scenarios of changing tax rates (20%, 25% and 28%), we recognized that there is not large disperse in equity beta values, although the risk dispersion reduces to 0,032 if tax rate down to 20% for current leverage situation.
Third, by changing tax rates in 3 scenarios (25%, 20% and 28%), we recognized both equity and asset beta mean values have positive relationship with the increasing level of tax rate.
Finally, this paper provides some outcomes that could provide companies and government more evidence in establishing their policies in governance.
JEL classification numbers: G010, G390
Keywords: risk management; asset beta; financial crisis; corporate tax; leverage