Fundamental analysis and the use of financial statement information to separate winners and losers in frontier markets: evidence from Vietnam

Purpose - The pupose of the paper is to study the usefulness of Piotroski (2000)'sF-score in separating winners and losers in Vietnam. Design/methodology/approach - The authors adopt a portfolio analysis and regression analysis on a sample of 501 of listed firms between 2009 and 2019 in Vietnam. Findings - The authors find that a hedge strategy that buys high-F-score firms and sells low-F-score firms yield market-adjusted return of over 30 percent annually, which is statistically and economically significant. The hedge strategy based onF-score is not only profitable for value (high book-to-market [BM]) firms but also earn abnormal returns in a sample of growth (low BM) firms, suggesting that the usefulness ofF-score strategy is not just a phenomenon in value firms as documented in previous literature. Research limitations/implications - Whilst the authors' paper documents economically significant returns obtained from theF-score strategy, the authors do not examine what drives the abnormal returns. Practical implications - The results provide supporting evidence for the use of financial statement analysis as a screening tool to improve the performance of value investment in Vietnam stock market and for the training of financial reporting and fundamental analysis in universities. Originality/value - The authors' research is the first study examining theF-score strategy in Vietnam that provides insights about the usefulness of fundamental analysis in separating winners and losers in a frontier market and contributes to the literature on fundamental analysis and market efficiency in emerging and frontier markets.