Independent Variables Used in the Study

Initiative (CMI), the main areas of cooperation within the ASEAN+3 bloc will be capital mobility monitoring, regional surveillance, swap networks, regional bond market development, exchange rate and currency coordination, and staff training. Therefore, information provision measures are needed to serve the purpose of identifying inherent risks, both at the national and sectoral levels.

For the above reasons, building a XHTD model suitable for the conditions of the Vietnamese economy, this model can be compared in the markets in the region is an inevitable requirement today. Therefore, in the next chapter, the author proposes a method to build a XHTD model for enterprises listed on the Vietnamese stock market. The steps to develop the model are carried out in the following steps.

3.1. Model selection

Based on the main requirements of the ranking model:

Default probability determination: the result expressed in the rating must correspond to the probability of bankruptcy. The default probability reflected in the rating is the basis for risk management applications. Calculating the default probability is the first goal or criterion for a rating model.

Completeness: The rating results must cover all information related to the risk of bankruptcy. To ensure completeness in the credit rating procedure, the Basel II agreement requires credit institutions to consider all information available in the financial statements when rating enterprises.

Objectivity: ranking results are given by different subjects.

Recognition: In the eyes of users, the rating model must accurately assess the risk of bankruptcy of the rated entity.

Consistency: ratings should not contradict accepted theories and methods[3].

With the above requirements and the current characteristics of the Vietnamese economy, as well as the advantages of statistical models in social capital. Therefore, in his research, the author proposes to build a social capital model for enterprises listed on the Vietnamese stock market based on the approach of :

- Discriminant Analysis (MDA) model

- Logit model

This is a popular approach in countries in Southeast Asia and around the world.

3.2. Definition of a business at risk of bankruptcy

At risk of bankruptcy (default) is a concept that is not easy to translate into Vietnamese. The current translation language has many different ways of calling it such as: insolvent, at risk of bankruptcy, falling into bankruptcy, etc. The author uses the term "at risk of bankruptcy" in his research.

The risk of bankruptcy of enterprises is an objective economic phenomenon in the market economy, the consequence of which is the conflict of interests of the subjects participating in economic relations. It is not only a conflict of interests between the insolvent debtor and its creditors, but also leads to conflicts with the interests of the collective of workers working at the debtor's facility, to the common interests of society, to the security and order situation in a locality, country and the world economy.

Thus, the risk of bankruptcy of enterprises is a normal phenomenon and an inevitable consequence of the market economy. Correctly understanding and perfecting this concept is an indispensable requirement for economic entities. This concept is the basis for the State to consciously intervene in this phenomenon in order to minimize negative consequences and exploit positive aspects. It is a sign of risk recognition for economic entities when

participate in economic activities, is input data in risk management, especially in corporate bankruptcy. Therefore, according to Article 2 of the 1993 Enterprise Bankruptcy Law and Clause 1, Article 3 of Decree 189 of Vietnam, this concept has been introduced: Enterprises and cooperatives are at risk of bankruptcy when:

- Having difficulties or losses in business operations;

- Losses for two consecutive years to the point of being unable to pay due debts, failing to pay full salaries to employees according to labor agreements and labor contracts for three consecutive months;

- Having applied necessary financial measures but still unable to pay debts when due.

In practice, the conditions for determining the bankruptcy risk of an enterprise as above are very complicated, causing many difficulties in opening bankruptcy proceedings. In order to overcome this limitation, the Bankruptcy Law 2004 has stipulated in the direction of simplifying the criteria for determining bankruptcy. According to Article 3, "enterprises and cooperatives that are unable to pay their debts when due when requested by creditors are considered to be at risk of bankruptcy". Thus, this criterion has been stipulated more simply than before, easier to implement because it is not based on the time of loss, the cause of the loss situation[1]. Although this concept is more complete than the LPS 1993, it is still limited in its thoroughness. Article 3 of the LPS 2004 does not clearly stipulate the amount of debt and the time of overdue non-performance of the debtor's payment obligation. Therefore, in terms of form, a debtor only needs to owe an amount of 1 dong and be overdue for payment one day after the creditor has filed a debt collection request and can be considered at risk of bankruptcy. This can lead to abuse of the right to file a request to open bankruptcy proceedings by creditors. The experience of some countries when building the concept of bankruptcy risk according to the quantitative school often has regulations on the specific amount of debt, on the deadline for debt payment from the creditor.

debtor after the creditor has a claim for debt. For example:

The Bankruptcy Law of the Russian Federation provides that the debt amount is not less than

100,000 rubles for creditors being legal entities and 10,000 rubles for creditors being individuals.

Under the Australian Corporations Act a creditor can apply to the Court to commence winding up proceedings against a company on the grounds of insolvency if the company has a debt of at least AUD $2000 due and the company cannot demonstrate its ability to pay that debt as it falls due.

According to Basel II, bankruptcy is considered an event or occurrence in relation to the debtor when at least one of the following possibilities occurs:

- Inability to fulfill debt repayment obligations when due or inability to pay debts when due, including loan principal and interest.

- Unable to perform credit obligations when overdue for more than 90 days

day.

- Asset value is less than loan capital

- Request for opening bankruptcy proceedings or similar protection from the person

loan.

According to many experts, defining a business at risk of bankruptcy is “probably the most difficult for legislators”. Therefore, in the study, the author proposes the following definition:

A business is at risk of bankruptcy when at least one of the following events occurs:

i) Inability to perform credit obligations to counterparties

ii) Regular working capital is less than zero

iii) The market value of the enterprise is less than the total liabilities.

With the first incident, the sign to recognize is through the ratio:

DOD=

Overdue debt

(3.1)

Total bank debt

The value of this ratio shows whether the enterprise repays the loan on time or not, thereby indicating whether the enterprise's operations are really healthy. From the perspective of bank credit, this is a very important criterion when considering loans, for businesses and investors, it is a sign of whether or not to continue cooperating with this enterprise. If DOD is greater than 0, it shows that the enterprise is unable to fulfill its credit obligations to its partners. In this case, the enterprise is unlikely to continue receiving credit from its partners, which can lead to disruptions in its operations, which is a sign that the enterprise is at risk of bankruptcy.

For the second incident, regular working capital is an indicator reflecting the difference between total current assets and total liabilities, determined by the following formula:

Regular working capital

Total current assets

Total current liabilities

(3.2)

If a business wants to operate without interruption, it must maintain a reasonable level of net working capital to meet the payment of short-term debts and inventory reserves. The higher the regular working capital of the business, the healthier the financial situation and the higher the payment capacity. On the contrary, when the regular working capital decreases, the payment capacity also gradually decreases. When the regular working capital is a negative number, it shows that a part of the long-term assets of the business are formed from short-term capital, leading to an imbalance in the balance of payments, the business must use long-term assets to pay off due debts and then the business

The business is facing bankruptcy.

With the third incident, the market value of a company is calculated by multiplying the market price of a share by the total number of shares of the company. In an efficient stock market, the market price fully reflects all factors related to the company. In other words, the market price represents the real value of the underlying assets of the company. In general, the market value of a company is often determined to be much higher than its liquidation value and operating value. When a company is doing business effectively, has a healthy financial situation and good development prospects, the shares of these companies are often paid high prices. On the contrary, when a company shows signs such as: business losses, unhealthy financial situation, insolvency, poor development ability, etc. In this case, the market value of the company is often determined to be very low. Therefore, if we consider the value of a business's assets as collateral for its operations, economic entities will decide not to cooperate in business with the business, not to provide credit, etc. when the value of the business is lower than the liabilities, which leads to the risk of bankruptcy, as well as the collapse of the business. Because, according to behavioral theory and game theory, when performing any action, each individual always considers what they will gain and lose. If the action always brings benefits without any losses, they will perform it, on the contrary, if the action always creates losses without any benefits for themselves, they will not perform it. For the remaining type, the action is performed when the benefits are greater than the costs and vice versa, the action will not be performed. The effect of collateral lies in this point. When loans are granted without collateral, the borrower's capital participation is very small or not at all in the investment project, the tendency is

It is inevitable that borrowers will carry out projects with high risk to bring high profits because if the project fails, what they lose is insignificant, on the contrary, if the project is successful, their benefits are huge. The behavior of borrowers will be completely opposite when they have to mortgage their existing business to get credit. When the business is mortgaged, secured at credit institutions, the borrower will lose it if their loan is invested carelessly and risks occur, leading to bankruptcy, they will lose the most because they are the last to receive what is left after performing all debt obligations to other subjects in the process of implementing the bankruptcy of the business. That is why they must be more careful when making their investment decisions. Because in the condition that the financial market has not yet achieved the necessary perfection, collateral is the best mechanism to minimize adverse selection and dependence caused by asymmetric information, in order to ensure safety in the operations of entities in the Vietnamese economy.

3.3. Variable selection

To apply discriminant analysis and logistic regression, during the model building process it is necessary to determine which variables are the independent variables and which are the dependent variables.

Dependent variable

The dependent variable has many categories, each category represents a group and this variable has the best and unique discriminating ability on the basis of the selected set of independent variables, in other words, each observation must be arranged into a unique group.

In this study, the dependent variable (Y) is selected as follows:

Y i

Independent variable

 1 If the business is at risk of bankruptcy





 0 If the business is not at risk of bankruptcy

Once the dependent variable is selected, the next step is to determine

The independent variables to be used in the analysis. The selection of independent variables is usually done in two ways. The first approach is based on theory and previous studies. The second approach is intuition based on the knowledge of experts and intuition to select variables that have no previous studies and a reasonable theoretical basis. In both approaches, the independent variables selected are those that have an influence on the ability of the dependent variable to discriminate between groups. In the study, the independent variables selected were:

Table 3.1: Independent variables used in the study

STT

Financial indicators	Risk factor credit risk	Fake theory	Sign effect
1	Liabilities/Total Capital	Lever	+	D1
2	Equity / Total tangible fixed assets	Lever	-	D2
3	Equity/Total Assets	Lever	-	D3
4	Liabilities/Total Tangible Fixed Assets	Lever	+	D4
5	Total long-term debt/Total assets	Lever	+	D5
6	Current Liabilities/Total Assets	Liquidity	+	T4
7	Cash Capital/Total Assets	Liquidity	-	T6
8	Working Capital/Net Sales	Liquidity	-/+	T7
9	Cash Capital/Net Revenue	Liquidity	-/+	T8
10	Total Current Assets/Net Sales	Liquidity	-/+	T9
11	(Total Current Assets - Inventory)/ Business net income	Liquidity	-/+	T10
12	Working Capital/Current Liabilities	Liquidity	+	T11
13	(Current Assets-Inventories)/Current Liabilities	Liquidity	-	T12
14	Inventory/Net Sales	Work	+	H2
15	Accounts Receivable/Net Sales	Work	+	H3
16	Accounts Receivable/Operating Income	Work	+	H4

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