Stock Return Volatility and Financial Distress: Empirical Evidence from Vietnam

Abstract:

This study investigates the impact of stock return volatility on financial distress by employing the Generalized Method of Moments (GMM) method on a panel dataset of Vietnamese non-financial firms spanning the period from 2010 to 2024. The empirical results reveal that firms experiencing greater stock return volatility are more likely to encounter financial distress. Moreover, the findings suggest that audit quality, asset turnover, and GDP growth have positive effects in reducing this risk, whereas inflation increases the likelihood of financial distress. This research provides valuable insights for corporate executives and policymakers into the link between stock return volatility and financial distress. Furthermore, it highlights the importance of managing stock return volatility to enhance the financial stability of listed firms in emerging markets.