The art of business valuation: Influential factors and optimal strategies

Abstract

This study investigates the factors influencing company value, measured through the Price-to-Book Ratio (PBV) and Price-to-Earnings Ratio (PER), for companies listed on the Ho Chi Minh City Stock Exchange (HOSE) from 2020 to 2023. Utilizing data from audited financial statements across various industries and sizes, the research ensures high transparency and reliability. The analysis, based on modern financial theory and empirical methods, explores how variables like company growth, size, and structure (including Long-Term Debt-to-Equity Ratio - LTDTE, and debt-to-total assets ratio - DAR) affect company value. The findings reveal that these factors can positively or negatively affect PBV and PER, influenced by economic conditions, business sectors, financial strategies, and the extent of digital transformation. Effective digital transformation enhances operational efficiency and competitiveness, while delays can diminish company value. The study utilizes descriptive statistics and correlation analysis, also a regression model using the Generalized Least Squares (GLS) method to address heteroscedasticity and autocorrelation, ensuring accurate and efficient estimates. Results indicate ROA positively impacts PBV but negatively affects PER due to altered market expectations during economic uncertainties. Company size positively influences both PBV and PER, reflecting market valuation of stability and competitiveness. DAR shows no significant effect on PBV but negatively impacts PER, highlighting financial risk concerns. LTDTE positively affects PBV but negatively impacts PER, suggesting the balance of debt usage is crucial. Asset and sales growth negatively impact both PBV and PER, emphasizing sustainable growth's importance. The study provides valuable insights for investors, managers, and stakeholders, highlighting the interplay of financial factors in determining company value. It underscores the importance of balancing debt and profitability in financial strategies and suggests that effective digital transformation and management innovation can enhance competitiveness and investor confidence, ultimately optimizing long-term company value.