MINISTRY OF EDUCATION AND TRAINING HO CHI MINH CITY UNIVERSITY OF ECONOMICS
DUONG THIEN BAO
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FACTORS AFFECTING THE CAPITAL STRUCTURE OF VIETNAMESE ENTERPRISES
MASTER'S THESIS IN ECONOMICS
Major: Economics, Finance - Banking Code: 60340201
Scientific supervisor: Dr. HO THUY TIEN
HO CHI MINH CITY – 2013
With deep respect and gratitude, I would like to sincerely thank the teachers of Ho Chi Minh City University of Economics for wholeheartedly imparting valuable knowledge to me over the past years.
In particular, I would like to sincerely thank Dr. Ho Thuy Tien for her dedicated guidance in helping me complete this thesis.
Student DUONG THIEN BAO
I hereby certify that the master thesis “FACTORS AFFECTING THE CAPITAL STRUCTURE OF VIETNAMESE ENTERPRISES” is my own research work. The data and research results in this thesis are completely honest.
Student DUONG THIEN BAO
INDEX
SUMMARY i
LIST OF ABBREVIATIONS ii
LIST OF TABLES iii
LIST OF DRAWINGS iv
CHAPTER 1: INTRODUCTION 1
1.1. Urgency of the topic 1
1.2. Research subject 2
1.3. Research objective 2
1.4. Scope of research 3
1.5. Thesis layout 3
Chapter 1 4 Summary
CHAPTER 2: THEORY AND EMPIRICAL EVIDENCE ON CAPITAL STRUCTURE 5
2.1. Capital structure theories 5
2.1.1. M&M Theory 5
2.1.2. Trade-off theory of capital structure 5
2.1.3. Pecking order theory 7
2.2. Empirical evidence on capital structure 8
2.2.1. Results of CTV research in India 8
2.2.2. Results of CTV research in Iran 9
2.2.3. Results of CTV research in Jordan 9
2.2.4. Results of CTV research in Malaysia 9
2.2.5. Results of CTV research in Pakistan 10
2.2.6. Results of CTV research in Qatar 11
2.2.7. Results of CTV research in Romania 11
2.2.8. Results of CTV research in Sweden 11
2.2.9. Summary of research results of CTV in 12 countries
2.3. Factors affecting capital structure 14
2.3.1. Business size 14
2.3.2. Profit 15
2.3.3. Tangible assets 15
2.3.4. Growth opportunities 16
2.3.5. Liquidity 17
2.3.6. Business risks 17
2.3.7. Other factors 18
Chapter 2 Summary 19
CHAPTER 3: RESEARCH METHODOLOGY 20
3.1. Data 20
3.2. Variables 20
3.2.1. Dependent variable 20
3.2.2. Independent variable 21
3.3. Research model 23
3.3.1. Pooled Model 24
3.3.2. Fixed Effects Model 25
3.3.3. Random Effects Model 25
3.4. Research hypothesis 26
Chapter 3 Summary 28
CHAPTER 4: RESEARCH RESULTS 29
4.1. Descriptive statistics 29
4.2. Correlation analysis 29
4.3. Research results 30
4.4. Discussion of research results 32
Chapter 4 Summary 38
CHAPTER 5: CONCLUSION 39
5.1. Research results achieved in thesis 39
5.2. Limitations of the thesis and future research directions 40
REFERENCES 41
APPENDIX 46
SUMMARY
The study examined the factors affecting the capital structure of 214 Vietnamese non-financial joint stock companies listed on HOSE during the period 2009 - 2012 through three types of panel data models (pooled model, fixed effects model and random effects model). However, only the fixed effects model is suitable for this examination.
The results of the study show that the firm size factor (SIZE) is positively correlated with the total debt ratio and the short-term debt ratio, but does not affect the long-term debt ratio. The profitability factor (PRO) is negatively correlated with all three debt ratios. The tangible assets factor (TANG) does not affect the total debt ratio, but is negatively correlated with the short-term debt ratio and positively correlated with the long-term debt ratio. The growth opportunity factor (GROW) is positively correlated with the total debt ratio and the short-term debt ratio, but does not affect the long-term debt ratio. The liquidity factor (LIQ) is negatively correlated with the total debt ratio and the short-term debt ratio, but does not affect the long-term debt ratio. The business risk factor (RISK) does not affect all three debt ratios.
LIST OF ABBREVIATIONS
Symbol Interpretation
Average BQ
Capital Structure
HNX Hanoi Stock Exchange
HOSE Ho Chi Minh City Stock Exchange PL Appendix
PV Current price
Stock Exchange