(Luận văn) determinants of capital structure for listed construction companies in vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS t to ng hi ep VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS w n lo ad ju y th yi pl n ua al DETERMINANTS OF CAPITAL STRUCTURE FOR LISTED CONSTRUCTION COMPANIES IN VIET NAM n va ll fu oi m at nh z BY z ht vb NGUYỄN THỊ MỸ KHÁNH k jm gm om l.c MASTER OF ARTS IN DEVELOPMENT ECONOMICS n a Lu n va y te re HO CHI MINH CITY, November 2013 UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS t to ng hi ep VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS w n lo ad ju y th yi DETERMINANTS OF CAPITAL STRUCTURE FOR LISTED CONSTRUCTION COMPANIES IN VIET NAM pl n ua al n va ll fu m oi A thesis submitted in partial fulfilment of the requirements for the degree of at nh MASTER OF ARTS IN DEVELOPMENT ECONOMICS z z ht vb om l.c gm NGUYỄN THỊ MỸ KHÁNH k jm By n a Lu Academic Supervisors: Assc Prof Dr NGUYEN TRONG HOAI n va y te re HO CHI MINH CITY, November 2013 CERTIFICATION t to “I certify that the substance of this thesis has not already been submitted for ng hi any degree and have not been currently submitted for any other degree ep I certify that to the best of my knowledge and help received in preparing this thesis and all sources used have been acknowledged in this thesis.” w n lo ad ju y th NGUYỄN THỊ MỸ KHÁNH yi pl n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re ACKNOWLEDGMENTS t to ng The process of writing a thesis is a collaborative experience involving the hi ep support and helps from many people I want to express my gratitude to those who give me the tremendous support to complete this thesis w n I am deeply indebted to my parents and my husband for their invaluable lo ad support and constant encouragement From my early childhood, my parents always y th teach me valuable lessons on the importance of learning The boundless love of my ju parents have accompanied with me as I continue my long journey on the pathway of yi pl intellectual acquisition al n ua I wish to express my heartfelt gratitude to Associate Professor Doctor Nguyen va Trong Hoai, Lecturer at Department of Economic Development, University of n Economics (HCMC), my supervisor, for his valuable suggestions during the time I fu ll write this thesis His wide knowledge, excellent advice and logical way of thinking m oi have provided me a good basis in present this thesis nh at In addition, my special thanks should send to Dr Trương Đang Thuy for their z z help and sharing of their resources to complete this thesis successfully and in time vb ht Finally, I take a pride in myself for working very hard to finish this thesis I jm realize that after each success stories, there is a process of lots of hard works, k gm difficulties, obstacles and overcoming Even in the hardest time when I write this n n va November 2013 a Lu Nguyễn Thị Mỹ Khánh om the great time to learn and to grow up l.c thesis, I always believe that great efforts will eventually to be paid off Thank for y te re TABLE OF CONTENTS t to LIST OF TABLES ng hi ABSTRACT .2 ep CHAPTER I INTRODUCTION .3 1.1 Problem Statement w n 1.2 Research Objectives lo ad 1.3 Research Questions y th 1.4 Research Methodology ju yi 1.5 Research contribution .5 pl 1.6 Research Structure al n ua CHAPTER II LITERATURE REVIEW .7 va 2.1 Key concepts: n 2.2 Theoretical review .8 fu ll 2.2.1 Trade-off theory m oi 2.2.2 Pecking order theory 10 nh at 2.3 Determinants of leverage: .12 z 2.3.1 Leverage and Tangibility: 13 z ht vb 2.3.2 Leverage and Profitability 15 jm 2.3.3 Leverage and Size .16 k 2.3.4 Leverage and Growth .17 gm 2.3.5 Leverage and Liquidity .18 om l.c 2.4 Empirical studies review on determinant of leverage: 19 2.4.1 Empirical evidences finding from the world: 19 a Lu 2.4.2 Empirical evidences from Vietnam : 20 n y te re 3.2 Data and description variable 25 n 3.1 Overview the construction industry in Vietnam: 23 va CHAPTER III RESEARCH METHODOLOGY .23 3.2.1 Data 25 3.2.2 Description variable 26 3.2.2.1 Dependent Variable 26 t to 3.2.2.2 Explanatory Variables 27 ng hi 3.3 Method of estimation .28 ep 3.3.1 Fixed effect (FE) estimator : .29 3.3.2 Random effect estimator (RE): 29 w n 3.3.3 Hausman specification test : .30 lo ad 3.4 Hypothesis .30 y th CHAPTER IV EMPIRICAL RESULTS .32 ju yi 4.1 Descriptive Statistic 32 pl 4.2 Empirical Result 34 al n ua 4.2.1 Hausman test: 34 va 4.2.2 Fixed effects model (FEM) .36 n 4.2.2.1 Tangibility 37 fu ll 4.2.2.2 Profitability 38 m oi 4.2.2.3 Size .39 nh at 4.2.2.4 Growth .39 z 4.2.2.5 Liquidity .40 z ht vb 4.3 Public and Private Firm Comparison 41 jm 4.3.1 Descriptive Statistic 41 k 4.3.2 Determinants of Financial Leverage 42 gm CHAPTER V CONCLUSION AND RECOMMENDATION 44 om l.c 5.1 Conclusion .44 5.2 Policy recommendation: 46 a Lu 5.2.1 Recommendations for construction firms: .46 n y te re APPENDIX n REFERENCE va 5.3 Limitation: .49 ABBREVIATIONS t to ng SMEs: small and medium size enterprises hi ep WTO: World Trade Organization w GDP: Gross Domestic Product n lo ad FE: Fixed effects y th ju RE: Random effects yi pl TEs: Transition economies n ua al n va ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re LIST OF TABLES t to ng hi Table 2.1 Summary of leverage determinant 18 ep Table 3.1 Variable, Description and expected sign 28 w Table 4.1 Descriptive Statistics of Leverage, short-term leverage, long-term n lo leverage and Explanatory Variables with construction firms 33 ad ju y th Table 4.2 Hausman Test 35 yi Table 4.3: Result of Fixed effects regression in construction sector 36 pl ua al Table 4.4 Summary of leverage determinants 37 n Table 4.5 Descriptive Statistics of Public and Private Firms 41 va n Table 4.6 Regression Result of Public and Private Firms .42 ll fu oi m at nh z z ht vb k jm om l.c gm n a Lu n va y te re ABSTRACT t to This study explores the determinant of capital structure of Vietnam listed ng construction companies using panel data for the period of 2007-2012 Tangibility, hi ep profitability, size, growth and liquidity use as independent variables Total leverage, short-term leverage and long-term leverage were dependent variable The research w finds that all the selected independent variables were significantly associated to at n lo least one of the leverage ratios except profitability Profitability seems to have no ad y th significant effect to the capital structure of Vietnamese construction listed firms A ju positive significant related to leverage and tangibility and growth variables; a yi negative relationship between leverage and liquidity also supported the implication pl ua al of pecking order theory while a positive significant of size variable confirmed to n prediction of trade off theory The study also finds that there are different in va determinants of capital structure between public and private firms in construction n ll fu industry about the profitability and growth variables Size, profitability and liquidity oi m effect to leverage of public firms while size, growth and liquidity have a relation to at nh leverage of private firms Public firms tend to use more debt than private firms z z ht vb k jm om l.c gm n a Lu n va y te re Keywords: capital structure, leverage, construction companies CHAPTER I INTRODUCTION t to ng 1.1 Problem Statement hi ep Capital structure is not a new area to study From the first research of capital structure was presented by Modigliani & Miller (1958), after that a lot of researches w try to identify determinants of capital structure But the results are still an argument n lo problem in financial and inconsistent among researchers at different countries and ad different industries Myers (1984) also showed that “the average debt ratio will vary y th ju from industry to industry because assert risk, asset type and requirement for external yi fund also vary by industry” In Vietnam, there are only a limited number of studies pl ua al on determinant of capital structure among Vietnam firms Some of these studies just n focused on listed firms (Dzung Nguyen et al 2011) or small and medium size n va enterprises (SME) (Nguyen, Tran Dinh Khoi 2006) and the empirical results also ll fu have conflicts with the results from many other researches in the world m oi Corporate financing means that all the money economy expressed through nh mobilizing and using capital in order to maximize the value of company In there, at z capital structure is the ratio between debt and equity to finance for the enterprise z vb Specifying the capital structure is an important issue not only for the manager but ht also for the financial officer to build up the logical funding policy to ensure the jm k illiquid and to salvage the effect of debt margin to upgrade the value of the gm company In the process of activity the enterprises have to face the important om l.c decisions such as investment, finance, dividing dividend, etc Each decision effects to the value and the capital structure of the enterprise Decisions involving capital a Lu structure are vital for every business organization Management has to carefully n y studies about the determinant of capital structure, each research disperse in different te re consider how factors affect to capital structure of firms There are many empirical n However, in order to achieve optimal capital structure, the manager has to va ensure that their capital structure decisions maximize their firm value