The impact of inflation and fdi on firms’ stock performance – Evidence on vietnamese stock market

Abstract

In recent years, the global economy, notably the financial sector, has become increasingly unstable, with rising inflation in many nations, including Vietnam.Moreover, as the outbreak between Ukraine - Russia, nations that have received significant investment from Russia, such as Vietnam, have suffered. Various theories as well as hypotheses have already been developed, but the relationship between inflation, FDI, and stock performance is yet uncertain, and additional research is needed. This paper experimentally investigates the impact of inflation and FDI on firms' stock performance in Vietnam from 2011 to 2020 , and how a firm’s capital structure influences any of those effects. Our data set contains enterprises included in the VN 30 index between 2011 and 2020. One criterion for firm selection is that firms be listed and remain listed for at least 5 years out of 10 during the inquiry period and there are 20 firms in our final data sample. First, we find that inflation negatively affects firms’ stock return and this will result in poor business results, and thereby making these firms an unattractive prospective investment. Secondly, we find FDI has no significant impact on Vietnamese firms’ stock return. Finally, we find the negative effect of increasing the Inflation is significantly stronger for firms with riskier capital structure, but there is no difference in the inflation effects between financial firms with risky or safe capital structure.