Risk and Return: Thai Listed Finance and Security Companies Evidence

Abstract

This research has attempted to examine the
impact of risk variables on a firm’s return. The major
distinction of this study with the prior research is to
compare the influence explanatory risk variables, which
are developed into two aspects: accounting basis;
including debt ratio, debt to equity ratio and degree of
financial leverage, and marketing basis; including value at
International Journal of Applied Computer Technology and Information Systems: Volume 6, No.1, April 2016 - September 2016
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risk at 95% confidence level. The dependent variables
were also conducted in both aspects: accounting basis;
including return on assets and return on equity, and
marketing basis, including Tobin’s q ratio (market to
book ratio). The research scope focused on Thai finance
and security companies listed on the Stock Exchange of
Thailand (SET). Data were collected in annual basis
during 2010 – 2014, except daily market price for
calculating market-based risk variable as value at risk at
95% confidence level. Panel data analysis was employed
in term of the fixed effect models for all multiple
regression models. The findings revealed that explanatory
risk variables rely on both accounting basis and marketing
basis played a key role to explain a firm’s return, except
degree of financial leverage. Interestingly, accountingbased
risk variables were negatively related to firm’s
return as return on assets and return on equity, whereas
marketing-based risk variables provided a negative sign
only for market to book ratio. Obviously, based on
adjusted R2 risk variables provided the most explanatory
power on return on assets, followed by return on equity
and market to book ratio respectively. This might be
reflected that market-based dependent variable as market
to book ratio might be impacted from internal and
external risk factors. These risks might lead to financial
cost and bankruptcy cost, resulting to decline in firm’s
return.