Systematic risk and firm specific factors : Evidence from real estate industry in Vietnam

Abstract

This paper focuses on an analysis of the relation between systematic risk and unsystematic risk’s factors especially cash flow volatility. In a world, where information is costly, volatile cash flows create information acquisition costs that reduce value. Thus, managers act to reduce their firm’s volatility of cash flow in anticipation of higher value for shareholders. However, when managers reduce the firm’s cash flow volatility, they also affect the systematic risk of their firm’stock. The sample data of 32 Vietnam real estate companies is compiled primarily from their financial statements and other credible sources in the time span of 2010 – 2013. We make recommendations for risk management programs. Our findings also have implications for clienteles among the firm’s stockholders. The results show some statistical evidence that three variables, namely firm size, future growth and financial leverage significantly affect systematic risk.