Determinants of Capital Structure:The Case in Vietnam

Abstract

This is a quantitative research, underpinned by the philosophy of natural science and deduction approach that examines the impact of the various aspects of corporate governance mechanism on the choice of capital structure of Vietnamese listed firms. We focus on the effect of factors such as the board size, the board independence, and especially different ownership structures, which include the managerial ownership, the state ownership, the concentrated ownership, and the foreign ownership. They are the main scopes of corporate governance and are supposed to be relevant to determine the corporate financing choice. To explain the causal relationship between factors, we construct the regression model and then test it by using different statistical method approaches, including the pooled OLS, the fixed effects model, and the random effects model. Data are collected from 336 firms with shares listed in the Ho Chi Minh City Stock Exchange in Vietnam, totaling 1583 observations. Overall, the results reveal that the board size, state ownership, and concentrated ownership have positive impact on the firm's capital structure, whereas foreign ownership appears to have negative influence on the capital structure. The research does not find evidence of a the correlation between board independence, managerial ownership and corporate capital struture.

Capital Structure and Firm Profitability in Developing Countries

“…The study finds that companies have improved their market equity by opting for a capital structure solution. Vu et al (2020), Investigated 12 firms in the chemical industry in Stock Exchange for the term 2009-2013. In the mathematical analysis, they used correlation analysis and regression to study the relationship between the company's capital structure and financial results and found asset sales to be variable.…”

Impact of Activity Ratio, Profitability, Liquidity, and Asset Structure on Capital Structure in Food and Beverages Companies Listed On Indonesia Stock Exchange Period 2015-2019

“…Ahmad et al (2017) proves that profitability, asset structure, firm size and liquidity have a simultaneous effect capital structure. Vu et al, 2020 examined the influence of the board size, the board independence, and especially different ownership structures, which include the managerial ownership, the state ownership, the concentrated ownership, and the foreign ownership of the capital structure in Vietnam. Vu et al research proved that only the board size, state ownership and concentrated ownership have a positive impact, while foreign ownership has a negative effect on capital structure.…”

“…Determination in decisions related to capital structure is one of the important decisions in business (Vu et al, 2020). Determining the company's capital structure will influence the company's funding sources in the future, cost of capital, risk character, liquidity position, investor return and firm valuation (Bajaj et al, 2020).…”

Determinants of Liquidity in Manufacturing Firms

“…Musfiqur & Farjana, 2018). Therefore, board independence plays a crucial role in reducing agency conflict and is one of the most important elements of corporate governance mechanism (Vu, Tran, Doan, & Le, 2020). Studying the data of 127 large Indian firms in the period of 10 years from 2004 to 2013, Goel, Bansal, and Sharma (2015) revealed that an increase in the independence of board leads to adoption of a conservative approach to short-term capital management, which negatively affected working capital efficiency.…”