The influence of corporate social responsibility on capital structure in viet nam

Dissertation submitted in partial fulfillment of the Requirement for the MSc in Finance FINANCE DISSERTATION ON THE INFLUENCE OF CORPORATE SOCIAL RESPONSIBILITY ON CAPITAL STRUCTURE I

Dissertation submitted in partial fulfillment of the

Requirement for the MSc in Finance

FINANCE DISSERTATION ON

THE INFLUENCE OF CORPORATE SOCIAL

RESPONSIBILITY ON CAPITAL STRUCTURE IN VIETNAM

PHAM HOANG SON

ID No: 22080908 Intake 6

Supervisor: Dr Tran Ngoc Mai

September,2023

ASSIGNMENT COVER SHEET University of the West of England MSc in Finance and Investment

UNIVERSITY OF THE WEST OF ENGLAND

Student ID: 22080908

Student Name: PHAM HOANG SON

Module Code:

Module Name / Title: Proposal of Dissertation

Due Date: 10th-SEP-2023

Centre / College: Banking Academy of Viet Nam

Hand in Date: 10th-SEP-2023

For University only

THE INFLUENCE OF CORPORATE SOCIAL RESPONSIBILITY ON CAPITAL STRUCTURE

IN VIETNAM

TABLE OF CONTENTS

THE INFLUENCE OF CORPORATE SOCIAL RESPONSIBILITY ON CAPITAL

STRUCTURE IN VIETNAM 3

Abstract: 6

I INTRODUCTION 1

II LITERATURE REVIEW 3

1 The concept of social responsibility 3

2 The concept of capital structure 5

3 The link between CSR and Capital structure 6

a Theories Exploring the Link between Corporate Social Responsibility and Capital Structure6 b Empirical Findings on the Link between Corporate Social Responsibility and Capital Structure 8

III HYPOTHESIS 10

Null Hypothesis (H0): Corporate Social Responsibility does not have a significant influence on Capital Structure 10

Alternative Hypothesis (HA): Corporate Social Responsibility has a significant influence on Capital Structure 11

IV RESEARCH METHODS 12

1 Research objectives 12

2 Research data: 13

3 Research scope: 13

4 Research method: 14

V RESEARCH CONTENT 14

1 Data Collection 14

2 Research models 15

a Pooled OLS (Ordinary Least Square) model: 16

b FEM model (Fixed Effects Model): 16

c REM model (random effect model): 17

3 Main research: 18

VI RESEARCH RESULTS AND DISCUSSION 20

1 Descriptive statistics of the variables used in the model 20

2 Correlation between variables 22

3 Multicollinearity test 24

4 Suitable Model Selection 26

a Pooled OLS model estimation results: 26

b FEM model estimation results: 28

c REM model estimation results: 30

d Hauman test 34

e REM and OLS selection test (and comparative variance test)Error! Bookmark not defined f The final model chooses REM for total analysis 34

VII DISCUSSION OF RESULTS 36

VIII CONCLUSIONS 38

a Conclusion 38

b Recommendations 39

c Recommendations for businesses 39

References 47

Abstract: In recent years, the spotlight has turned towards social responsibility within the Vietnamese context The concept of Corporate Social Responsibility (CSR) is still relatively nascent, and those pioneering this field, encompassing both researchers and practitioners, encounter a plethora of challenges in effectively implementing CSR initiatives

in Vietnam With the intention of investigating the influence of CSR on company capital structure, we undertook a study encompassing a sample of 80 publicly listed Vietnamese companies spanning the period from 2016 to 2021 Employing archival data as the foundation for our quantitative research approach, we constructed regression models to scrutinize the relationship between CSR and Capital Structure in Vietnam The outcomes indicate a statistically significant relationship between these two factors Grounded in these findings, we propose several recommendations to chart viable pathways for enhancing the social responsibility endeavors of enterprises in Vietnam

I INTRODUCTION

Capital structure constitutes the amalgamation of liabilities and equity employed by businesses to fund their assets, day-to-day functions, and investment undertakings Among the pivotal determinations in business operations, the choice of capital structure holds paramount significance When enterprises engage in commercial production activities, the primary objective is to optimize the valuation of owner assets To realize this objective, a multitude of actions must be undertaken, among which the selection of a rational and optimal financial framework stands as a pivotal and imperative measure, serving as the bedrock for prudent decision-making (Do, 2018) The attainment of an optimal capital structure contributes to the minimization of capital costs while simultaneously augmenting the overall business value

Previous scholarly inquiries have concentrated on dissecting factors that wield influence over capital structure, encompassing variables such as profitability, company dimensions, and tangible assets (Nguyen & Ramachandran, 2006; Nguyen, Diaz-Rainey, & Gregoriou, 2012; Ahmad, Salman, & Shamsi, 2015; Shamaileh & Khanfar, 2014; Vo, 2017) However, the composition of capital structure is inherently malleable, contingent upon the individual traits of each enterprise, the industry in which it operates, and the pervasive influences of macroeconomic fluctuations, cultural nuances, and religious tenets Consequently, a comprehensive exploration of the factors that exert influence on the capital structure across disparate industries becomes indispensable In the context of Vietnam, a plethora of studies have homed in on specific sectors, ranging from cement and manufacturing to tourism, construction, and minerals (Nguyen, 2011; Vu & Nguyen, 2013;

Le, 2014; Phan, 2016; Nguyen, 2017; Pham, 2017) Despite this, an explicit inquiry into the interplay between Corporate Social Responsibility (CSR) and corporate capital structure remains conspicuously absent

Social Responsibility stands as a realm of exploration that delves into processes and strategies to ensure a strategic equilibrium between economic advancement and societal progress, spanning both macro levels (international, regional, national, local) and micro levels (enterprise-centric) Within this domain, Corporate Social Responsibility (CSR) emerges as a distinct field of study, with its focus directed toward elucidating the fundamental essence of a socially responsible business and the requisite actions for businesses to align with this ethos This realm encompasses a diverse array of practical

considerations, spanning business ethics initiatives, corporate governance enhancements, social policy formulations, just trade practices, conscientious investment and production paradigms, and more (Nguyen Hoang Tien, 2015) In essence, CSR embodies an ongoing commitment on the part of enterprises to contribute to their economic growth while concurrently uplifting the well-being of their workforce, communities, society, and the environment

Evolving as a burgeoning organizational phenomenon, CSR carries wide-ranging implications for practitioners, scholars, and society as a whole (Kot, 2014) A precursor to this concept was community involvement, which took root earlier in developed nations during the 1960s and 70s This evolution was facilitated by shifts in companies' perceptions and comprehension of their role within various societal frameworks (Herbuś & Ślusarczyk, 2012) Presently, CSR has solidified its standing as a globally embraced managerial concept and is making inroads into Vietnam Businesses in Vietnam, including those within the food industry, are progressively embracing CSR norms, guidelines, and behavioral standards This shift is instigated by mounting pressure from multinational corporations from developed nations operating within the Vietnamese market Despite this trend, it is still largely believed that Vietnamese businesses have not yet fully embraced social responsibility

to a satisfactory extent A survey on CSR conducted by Social Responsibility Initiatives Vietnam revealed that 90% of respondents held misconceptions about CSR and related matters In the Vietnamese context, the study of CSR remains relatively unexplored, with only a limited number of inquiries delving into these issues

Hence, this investigation is meticulously focused on scrutinizing the impact of CSR

on the capital structure of corporations within the Vietnam stock market The research methodology encompasses the utilization of secondary data sourced from the annual financial statements of 80 manufactures companies listed on the HOSE and HNX stock exchanges in Vietnam, spanning the years 2016 to 2021 The outcomes of this study are poised to enrich both the theoretical and pragmatic foundations of financial architecture, thereby offering substantial assistance to financial managers in making informed decisions pertaining to capital management within companies

The research paper comprises several key chapters Chapter II delves into the literature review, offering an in-depth exploration of Corporate Social Responsibility (CSR) and Capital Structure, summarizing existing knowledge and research Chapter III focuses on

the formulation of hypotheses related to the study's investigation into the impact of CSR on

a firm's Capital Structure Chapter IV provides an extensive overview of the research objectives, data collection methods, scope, and employed research methodology Chapter V elaborates on data collection, research models, and the primary research focus In essence, from Chapter VI to Chapter VIII, the author show the research results and discussion in this paper provide valuable insights into the relationship between CSR and financial leverage (LEV) among listed companies on HNX and HOSE during 2016-2021 This study underscores CSR's role in influencing capital structure decisions and underscores the need for tailored strategies and in-depth exploration of underlying mechanisms, while considering

local contexts and stakeholder engagement

II LITERATURE REVIEW

1 The concept of social responsibility

Corporate social responsibility (CSR) within developing nations is a topic explored

in business and management literature Various definitions of CSR exist, reflecting its broad impact that extends beyond a company's confines It significantly affects multiple facets of society, particularly concerning the state's role in the economy (Davis 1973; Carroll 1999; Matten and Moon 2005).Both large corporations and smaller entities bear responsibilities toward society that surpass mere shareholder value creation Corporations should be run to benefit all stakeholders—managers, owners, suppliers, employees, and local communities (Man and Macris 2015) Consequently, the interpretation of CSR evolves based on the geographical and temporal context of scientific and practical discourse.Presently, the World Business Council for Sustainable Development's definition of CSR is widely accepted:

"Corporate Social Responsibility is the ongoing commitment of businesses to ethical practices and contributing to economic progress, while simultaneously enhancing the well-being of workers, their families, and the broader community and society" (WBC 1998)

While the definitions mentioned above were formulated with European and American markets (the highly developed world) in mind, it's crucial to acknowledge the unique scope and agenda of CSR in developing countries, which differ from its typical expressions in advanced economies Visser (2008) argued that developing nations exhibit distinct internal and external drivers of CSR that shape local dynamics

The literature indicates that corporations operate within diverse economic, political, social, and cultural contexts in different countries, influencing their interactions with

stakeholders (Visser 2008; Lindgreen, Swaen, Campbell 2009) The unique conditions in developing countries reshape the challenges that businesses confront, blending business and social considerations (Muthuri, Gilbert 2011) In these nations, corporate social responsibility (CSR) themes do not adhere to a specific pattern, instead reflecting various themes and country-specific dynamics Existing literature tends to focus on describing CSR practices in developing countries, with limited attention to conceptual frameworks This inclination towards understanding company actions is tied to the prevalent methodology employed Case studies and interviews serve to address 'why' and 'how' inquiries and compensate for the paucity of prior findings Thus, these studies' dominant research design suggests an initial exploration of the driving forces behind CSR practices in developing countries The prominent use of qualitative research methods might signal both the challenges of empirical research in developing nations and the need for novel research avenues

While adopting CSR principles for sustainable development gains traction in developed countries, this concept is relatively nascent in developing nations, particularly in Vietnam Furthermore, there remains a dearth of CSR studies conducted within the Vietnamese context Nguyen Dinh Cung & Luu Minh Duc (2008) discussed foundational theoretical concerns, international experiences, and highlighted several CSR practices in Vietnam Their study aims to assess Vietnamese companies' current comprehension of CSR and the government's role in supporting CSR initiatives Other investigations have uncovered CSR's integration into the philosophy and operations of Vietnam's garment and textile industry For example, the case of Dap Cau joint-stock company (Nguyen Phuong Mai 2013) proposes recommendations for advancing sustainable CSR practices Similarly, authors like Tran Thi Minh Hoa and Nguyen Thi Hong Ngoc (2014) explored CSR in relation to employees, the environment, and the community through a study of Sofitel Legend Metropole and Ha Noi Sofitel Plaza in Vietnam This examination analyzes various stakeholders—owners, customers, employees, communities, and regulatory bodies—ultimately suggesting strategies to enhance CSR Nevertheless, comprehensive research within this domain remains largely absent

Vietnam that relates to the relationship between CSR and capital structure CSR has basically dealt with the same thing Besides the development benefits for each enterprise in accordance with current laws, CSR must link enterprises with common development

benefits for the community through social cooperation and interaction (Tran Anh Phuong 2009)

2 The concept of capital structure

The realm of capital structure remains a contentious domain within the field of finance Ongoing debates persist among managers advocating for their distinct approaches, between researchers and practitioners, and even amidst academic faculty conducting investigations Evidently, capital structure is a multifaceted subject that necessitates a grasp

of econometrics, microeconometrics, accounting, and mathematics Nevertheless, the foundational theories underlying capital structure exert substantial influence both within academic institutions and the practical business sphere (Modigliani and Miller, 1958; Jensen and Meckling, 1976; Myers and Majluf, 1984; Myers, 1984; Jensen, 1993)

Trade theory, pecking order theory, and representation theory constitute the primary theoretical frameworks underpinning capital structure, particularly in imperfect markets Modigliani and Miller Propositions (M&M) are foundational theories in the field of finance that explore the relationship between a firm's capital structure and its value M&M Proposition I, often referred to as the "irrelevance proposition," asserts that, under certain ideal conditions (such as no taxes, transaction costs, or information asymmetry), the capital structure of a firm has no impact on its overall value According to this proposition, investors can create their preferred mix of debt and equity to achieve their desired return, and the total value of the firm remains constant regardless of how these financing choices are made M&M Proposition II builds on this by introducing the notion that, in the presence of corporate taxes, the value of a leveraged firm can be higher than that of an unleveraged one due to the tax deductibility of interest payments However, it also highlights that excessive debt can lead to financial distress and bankruptcy costs, thus influencing the optimal capital structure While these propositions provide essential insights into the theoretical aspects of capital structure, they are often considered as idealized models and do not fully capture the complexities of real-world financial decisions where factors like taxes, bankruptcy costs, and market imperfections play significant roles in shaping firms' financing choices

The pecking order theory developed by Myers (1984) and Myers and Majluf (1984) proposes that high-growth enterprises predominantly utilize retained earnings for financing new projects rather than seeking external funding Consequently, these growth-oriented firms tend to maintain lower debt ratios When internal funding is inadequate, well-

established businesses tend to resort to debt to fuel new endeavors The agency theory posits the existence of an optimal capital structure hinging on various financing avenues, encompassing equity, debt, and other securities, as they determine benefits for stakeholders, including capital suppliers and managers ( Jensen and Meckling, 1976; Jensen, 1986;) Additionally, trade theory presents a significant perspective It revolves around managers weighing the advantages of debt against its costs to arrive at an optimum capital structure The appeal of this structure emerges from the tax advantages associated with interest payments that offset income declines (Modigliani and Miller, 1963; Myers, 1984)

However, no singular theory comprehensively encapsulates the capital structure factors This shortcoming arises due to the inherent assumptions within these theories, which cannot fully encapsulate the intricate realities of the business realm Numerous studies focus

on specific countries, where distinct determinants are theoretically considered Predictably, the outcomes diverge given the distinct characteristics of financial markets across these nations

Prior to the transformative Doi Moi movement of 1986, Vietnam exhibited minimal concern for capital structure since all businesses were state-owned Following its rapid ascent as a dynamic economy in Southeast Asia, Vietnam has achieved remarkable strides post-Doi Moi With a surge in privatization driven by policy reforms, the country embarked

on its initial foray into globalization The introduction of a stock market in 2000 spurred attention toward capital structure, as companies gained access to external funding through share issuance and trading Nonetheless, despite these developments, the World Bank (2014) still designates Vietnam as an emerging market lacking intricate financial instruments, corporate transparency, and a regulatory framework for overseeing securities listed on stock exchanges Consequently, the capital structure of listed companies in Vietnam remains influenced by numerous factors distinct from those prevalent in more developed and stable financial markets These circumstances have prompted fresh investigations into capital structure within small transition economies like Vietnam

3 The link between CSR and Capital structure

a Theories Exploring the Link between Corporate Social Responsibility and Capital Structure

As corporations increasingly value moral and environmental practices, corporate social responsibility (CSR) has grown significantly in recent years Capital structure decisions,

which determine how a company raises money for its operations and growth, continue to be

a crucial part of corporate finance With numerous theories and hypotheses put out to explain this relationship, the interaction between CSR and capital structure is a complicated and developing area of study In this essay, we examine the theories that investigate the relationship between CSR and capital structure, illuminating the complex nature of this relationship

According to the Pecking Order Theory, which Myers and Majluf first proposed in 1984, businesses have a hierarchy of preferred finance sources They prioritize using internal resources first (retained earnings), then debt, and finally issuing equity as a last choice Companies that participate in CSR initiatives may designate internally generated funds to sponsor these programs This allocation lessens the requirement for outside financing, possibly resulting in a conflict between CSR and leverage In essence, companies with significant CSR commitments might prefer stock to debt in order to preserve their financial flexibility According to the trade-off theory of capital structure, businesses try to balance the advantages of debt (such tax shelters) with the disadvantages (like financial distress and bankruptcy) CSR initiatives may impact this trade-off On the one hand, CSR can improve

a company's reputation, lower the danger of financial crisis, and boost its ability to pay off debt On the other hand, the money allocated to CSR programs could have gone toward paying off debt As a result, there are many ways that CSR activities affect a firm's risk profile and financial flexibility, which influences how the relationship between CSR and capital structure is related According to agency theory, there may be conflicts of interest between various corporate stakeholders, particularly between shareholders and management CSR initiatives can be considered as a way of balancing management's objectives with those

of shareholders and other stakeholders in order to reduce agency issues When CSR practices improve corporate governance and reduce agency costs, firms may find it easier to employ debt financing in their capital structure, as creditors have greater confidence in effective management

The stakeholder thesis emphasizes that businesses have obligations to parties other than shareholders The goals of a company's CSR initiatives may include exceeding stakeholder expectations and preserving goodwill CSR programs may result in a lower debt ratio if stakeholders, such as consumers, employees, and communities, desire less leverage due to risk or ethical considerations In this situation, a company's commitment to stakeholder satisfaction includes CSR as a key component According to the market timing theory,

businesses should base their capital structure decisions on the state of the market Firms may choose equity issuing during periods of high stock prices while turning to debt financing during market downturns CSR initiatives may affect a company's stock price and market perception, which in turn may affect its capital structure decision When stock prices are high, positive market sentiment brought on by CSR initiatives might boost equity issuance Businesses involved in CSR projects relating to environmental sustainability may find it advantageous to issue green bonds or use sustainable finance channels as a result of the development of green bonds and sustainable finance markets These instruments frequently relate to certain sustainability goals and initiatives, which has an impact on how a company decides on its capital structure

The link between CSR and capital structure is a multidimensional and dependent relationship Various theories provide insights into how CSR practices may impact financing decisions, ranging from debt usage to equity preferences This complex interplay underscores the need for further research and customized strategies that consider industry, geographic location, and the specific CSR activities undertaken by firms As CSR continues to shape corporate agendas, understanding its influence on capital structure decisions remains pivotal for sustainable and responsible financial management

context-b Empirical Findings on the Link between Corporate Social Responsibility and Capital Structure

Several studies estimating the impact of Corporate Social Responsibility (CSR) on financial activities indicate that companies disclosing CSR information enjoy lower financial costs (Goss and Roberts, 2011) Because CSR information provides significant insights to stakeholders, especially creditors, transparent information can mitigate information asymmetry between management and creditors Jang and Ardichvili (2020) observed that CSR activities enhance credit ratings and financial costs Therefore, we can infer that companies with CSR disclosures experience fewer financial constraints, implying a positive relationship between CSR disclosure and the debt ratio

Some previous studies (Raimo, 2020) found a positive relationship between a firm's CSR disclosure and its cost of equity capital and cost of debt Theoretically, firms' CSR strategies consider non-financial aspects of business operations and the potential conflicts among stakeholders, which can reduce business risks and mitigate information asymmetry between lenders and investors in the financial market (Lopatta., 2016) Thus, the social

efficiency of a firm can reduce agency costs that arise when searching for funding sources

In practice, market perception of a firm's social efficiency can encourage firms to disclose non-financial information (Healy and Palepu, 2001) Beyond market perception, the concern for stakeholders also contributes to firms actively disclosing sustainable development information (Raimo , 2020)

Yang (2017) demonstrated that based on CSR's role in reducing information asymmetry between firms and creditors, firms implementing effective CSR strategies have higher financial leverage compared to other firms Furthermore, CSR disclosure reduces the speed

of adjusting firms' capital structure and the speed of adjusting leverage toward the target level, which tends to be slower than leverage adjustment below the target level CSR reports also provide creditors with longer-term forecasts about firms, allowing these firms to maintain higher long-term leverage compared to firms not implementing CSR

Chang (2019) found a relationship between CSR and a firm's debt structure, where firms with better CSR efficiency tend to have a higher proportion of public debt to total debt The impact of CSR becomes weaker for firms in "sin" industries (alcohol, tobacco, gambling, etc.) and industries lacking trust In these cases, CSR seems to serve more as an image enhancement for firms rather than having practical significance

It is also argued that when firms pay more attention to stakeholders, more transparent information through CSR implementation will reduce constraints on accessing capital (Cheng, 2017) From the perspective of information asymmetry, institutional investors may prefer firms with high social efficiency to reduce information costs, while banks may accumulate specific information about firms based on lending relationships rather than evaluating based on social efficiency

Combining the theories of value maximization and capital structure, Harjoto (2016) hypothesized that CSR is a strategic choice for firms to internalize costs from implicit contracts between firms and their non-investing stakeholders that affect firms' operations and financial leverage Harjoto (2016) also found that CSR is positively related to firms' operating costs and provided evidence that CSR acts as a substitute for a firm's debt tax shield when the firm's financial leverage is low

When implementing this topic, the author hopes to contribute his research results to the theory of capital structure And through that, it partly provides a more scientific basis for the company's financial managers to have a better overview of the factors affecting the capital

structure, thereby building appropriate policies to can maximize enterprise value, satisfy investors' expectations, contribute to the development of the stock market in particular and the Vietnamese economy in general At the same time, it helps investors have more theoretical basis to make their investment decisions properly, increase income, improve quality of life for a more developed society

III HYPOTHESIS

Capital structure has constantly been one of the top research priorities over the past few decades Nearly all conclusions drawn from earlier empirical research show a correlation between internal company parameters such firm size, sales growth rate, financial leverage, etc and a company's capital structure Authors create several regression models with varied independent and explanatory variables, various observation samples, and different correlation coefficients depending on the study aims

In this research, due to data limitations as well as to align with research capabilities, the author only focuses on a few prominent factors existing within companies to examine the directional impact and measure the extent of influence on the capital structure of non-financial listed companies on both the Hanoi Stock Exchange (HNX) and the Ho Chi Minh Stock Exchange (HOSE) These factors include: Company Size (SIZE), Asset Structure (AST), After-tax Profit/Total Assets (ROA), State Ownership Ratio (GOV), Proportion of Independent Members in the Board of Directors (IND), and Board Size (BSIZE)

Null Hypothesis (H0): Corporate Social Responsibility does not have a

significant influence on Capital Structure

The connection between Corporate Social Responsibility (CSR) and the financial structure of businesses has drawn a lot of interest in the fields of corporate finance and strategic management This study aims to systematically investigate the possible influence

of CSR activities on the Capital Structure, a key component of a firm's financial architecture According to the null hypothesis, business decisions on capital structure are not significantly influenced by corporate social responsibility, which is defined as ethical and socially responsible business activities This theory postulates that CSR initiatives have no appreciable influence on how businesses decide to fund their operations, investments, and expansion

This theory does not discount the potential value of CSR; rather, it postulates that, if any, effects, they do not have an impact on decisions about the ratio of debt to equity that makes up a firm's capital structure Instead, it advises businesses to prioritize traditional financial variables and market dynamics when deciding the right mix of debt and equity funding, regardless of their CSR initiatives

In order to test this null hypothesis, we will carefully examine the CSR policies and financial setups of a broad sample of businesses from various industries We will thoroughly evaluate whether CSR efforts serve independently as a driving force behind organizations' financial leverage decisions by carefully evaluating historical data, utilizing advanced statistical approaches, and accounting for various confounding variables

The findings of this investigation will significantly advance knowledge of the complex relationship between moral corporate conduct and financial decisions The null hypothesis would imply that while CSR has indisputable ethical and reputational value, its direct impact

on business decisions regarding capital structure is only marginally significant This could then spur further research into the more general economic and strategic factors that influence how businesses design their financial architecture

As we begin this inquiry, we are not ruling out the chance that the null hypothesis will

be shown to be false, exposing a complex link between CSR and Capital Structure However, the initial assumption allows for a rigorous exploration of the data and the formulation of more definitive conclusions about the influence of CSR on the financial strategies adopted

by modern corporations

Alternative Hypothesis (HA): Corporate Social Responsibility has a significant influence on Capital Structure

The importance of corporate social responsibility (CSR) in influencing several aspects

of corporate decision-making has grown significantly in the world of contemporary business and finance By examining the potential connection between CSR initiatives and the Capital Structure of organizations, this study seeks to uncover a crucial part of this relationship According to the alternative hypothesis, CSR initiatives have a distinct influence on a company's capital structure, which causes a change in how organizations balance debt and equity financing (Ahmad, N., Salman, A., & Shamsi, A F., 2015) According to this theory, CSR practices are anticipated to have a substantial impact on how businesses make financial

decisions, ultimately leading them to either increase or decrease their reliance on debt financing

This hypothesis recognizes the potential for these initiatives to not only improve a company's reputation but also alter its financial architecture by taking into account many aspects of CSR, such as environmental stewardship, community participation, and ethical business practices It is anticipated that businesses actively involved in CSR will try to benefit from their ethical standing by changing their financial mix, either to lessen financial risk through lower leverage or to get advantageous terms on capital through increasing leverage (Zhu Qi, He Feiying, Zou Ziang, Yang Shenggang, 2016)

We will thoroughly examine a varied sample of organizations, examining their CSR initiatives and financial structures, to evaluate this alternative theory We will carefully evaluate whether there is a link between the degree of a firm's CSR engagement and its subsequent Capital Structure decisions using extensive historical data and cutting-edge econometric methodologies

If the alternative theory is correct, it would mean that CSR policies actively affect how businesses organize their finances, going beyond their moral and ethical consequences This

in turn may highlight how the corporate landscape is constantly changing and how sociological and environmental factors have a significant impact on both financial and strategic choices

Our inquiry into this alternative hypothesis recognizes the multifaceted and intricate nature of the interaction between CSR and Capital Structure While we remain open to the possibility of alternative findings, the formulation of this hypothesis sets the stage for a thorough exploration of the financial ramifications of CSR initiatives, contributing significantly to our understanding of the interplay between ethical business practices and corporate financial strategies

IV RESEARCH METHODS

1 Research objectives

Firstly, the purpose of this study is to determine The Influence of Corporate Social Responsibility on Capital Structure in Vietnam for 6 years from 2016-2021

Second, measure and analyze the influence of quantitative factors on capital

structure Including the following factors: Asset structure, Enterprise size, Profit after tax,

Financial leverage, Total assets, State ownership ratio, Percentage of independent members

in the Board of Directors and Board size

Third, propose some CS implications for the subjects, including: enterprises,

investors and the State in the planning of capital structure, appropriate financial leverage to maximize the value of the business At the same time, the limitations of the study and suggestions for future research are proposed

2 Research data:

There are 80 manufacturing enterprises whose shares are listed and traded on HNX and HOSE, business financial data is collected based on the business's financial statements Data on sustainable development are taken from sustainable development reports and annual reports on www.Vietstock.com and on the enterprise's website The set of indicators used to calculate sustainable development scores is the standard GRI with 30 environmental criteria and 34 social criteria, and fully satisfy the following factors:

- Enterprises have full information on financial structure for the period from 2016-2021

- Exclude enterprises that do not have enough financial statement data from 2016-2021 This is based on consideration of the effect on the results of the regression model and the purpose of collecting unbiased panel data

- Eliminate companies specializing in the financial sector (because this sector has completely different characteristics of financial statements and capital structure)

The sustainable development score is calculated as the following formula

𝐶𝑆𝑅 = ∑𝑋𝑗

𝑋𝑋

𝑗=1

In there:

CSR: Social responsibility score

Xj: jth criterion (takes value of 1 if there is information, 0 if there is no information)

X: maximum number of criteria is 64

is a difference between both objects and time, we use the REM model

The dependent variable is Financial leverage (LEV), the explanatory variable is social responsibility (CSR) and the independent variables used to consider the impact study are: Firm size (SIZE), Structure assets (AST), profit after tax/total assets (ROA), state ownership ratio (GOV), percentage of independent directors on the board (IND), Board size (BSIZE)

Up to the present time, there are many useful statistical softwares used to perform quantitative research such as: STATA, SPSS, EVIEWS With the data used for the study

in this article being tabular data, The author decided to choose Stata 16 software This software has the advantages of efficient data processing, an easy-to-use interface with full functions such as: descriptive statistics of variables, testing the suitability of the model model, verify the model's defects and correct the model's defects to build the most suitable model

V RESEARCH CONTENT

1 Data Collection

In this topic, to achieve the research objectives regarding the impact of quantitative factors on the capital structure of Non-Financial Listed Companies (NFLCs) on both Hanoi Stock Exchange (HNX) and Ho Chi Minh Stock Exchange (HOSE), the author employs

secondary data over a 6-year period from 2016 to 2021 Since the business cycle of a company typically spans around 3-6 years, the author chose a 6-year timeframe to gather research data for this study Furthermore, in order to ensure the study yields results that are most relevant to the current context, the author selected the period from 2016 to 2021 This

is the most recent period in which companies' financial statements have been audited and officially disclosed on legitimate financial websites Additionally, since the end of 2019, the outbreak of the COVID-19 pandemic has exerted multidimensional impacts on the operational performance of companies, which are reflected in the financial statements Hence, the author aims to measure to some extent the influence of the COVID-19 pandemic

on the dividend payout policy devised by financial managers of these companies

The data used in this study is panel data, which is cross-sectional time-series data Specifically, data is collected from 80 manufacturing companies over a 6-year period, with the unit of analysis being the year Therefore, the sample size used for the study comprises

480 observations (80 companies * 6 years = 480 observations)

The data for this study is collected from audited financial statements sourced from the website: vietstock.vn

2 Research models

On panel data, consider the model of the form: yit = a + bxit + czi + eit

In which: Z is the variable representing the idiosyncratic characteristics (here we consider the i-th company's idiosyncratic characteristics)

Depending on the effect of Zi eigenvectors on the model, different patterns will be formed on the panel data

- If we ignore Zi's idiosyncrasies or assume that Zi has no impact in the model Then using OLS regression on panel data as normal cross-sectional data is called Pool Regression The biggest disadvantage of this method is that the Durbin-Watson coefficient is usually less than 1, there is autocorrelation This is a common phenomenon of the model And Fixed Effect Model, Random Effect Model will overcome this phenomenon

- If we consider the impact of the eigenvalues Zi on the model to be meaningful, we use the Fixed Effect Model and Random Effect Model methods:

+ The effect cannot be calculated and is random, we use the Random Effect Model + On the contrary, if the impact is calculated and determined, then we use the Fixed Effect Model

The details of each model are as follows:

a Pooled OLS (Ordinary Least Square) model:

Pooled OLS, also known as least squares regression method, is one of the commonly used methods to estimate linear regression models This is a reliable method widely used and popular in studies The use of this model is to estimate the regression coefficients and find the correlation between the independent variables and the explanatory variable However, the OLS model uses panel data by superimposing individual items, leading to biased estimation results In the process of data collection and calculation, it is not as expected that some values of the variables in the random sample are missing or limited Therefore, it is possible to lose the true influence of the independent variable on the dependent variable, leading to inappropriate model results in real conditions

To overcome the limitations of the OLS model when using tabular data, the author additionally uses REM (random impact estimation method) and FEM (fixed effect estimation method) Then use Hausman (1978) test to see which method is more suitable When the appropriate method has been selected, the overall regression model is built according to that method and compared with the OLS method

b FEM model (Fixed Effects Model):

With the assumption that each entity has unique characteristics that can affect the explanatory variables, FEM analyzes this correlation between the residuals of each entity and the explanatory variables, thereby controlling and separating the effects of the individual (time-constant) characteristics out of the regressors so that we can estimate the real effects of the regressor on the dependent variable

The FEM model has the following form:

Y it = β 1 X it + β 2 X it + μ i t it with i = 1, 2, …, N and t = 1, 2, …, T (N - object, T - time)

The model above has introduced the index "i" for the intercept coefficient "a" to differentiate the intercepts for each different business, which can vary This difference may arise from distinct characteristics of each business or variations in management policies and operations Thus, we have a panel data including N entities and T time periods There are two methods applied to estimate the parameters of the fixed effects model The first method

is estimating the least squares regression with each dummy variable representing each observed entity in the sample The second method is estimating the fixed effects

Hence, this model can be examined similarly to an OLS model using dummies, where these dummies act as fixed factors:

Case 1: Fixing entities

Case 2: Fixing time periods

Case 3: Fixing both factors

The Fixed Effects Model (FEM) suggests that each firm possesses distinct characteristics that may influence the explanatory variables FEM can control and isolate the effects of these firm-specific (time-invariant) characteristics from the explanatory variables, enabling us to estimate the actual impacts of explanatory variables on the dependent variable These firm-specific characteristics differ for each firm but remain constant over time and are uncorrelated with the characteristics of other firms

The FEM is also known as a one-way effects model since the different slope coefficients exist between entities but remain constant over time

c REM model (random effect model):

The difference between the random effect model REM and the fixed effect model FEM is shown in the variation between entities If the variation between entities is correlated with the independent variable - the explanatory variable in the fixed effect model, then in the random effect model the variation between the entities is assumed to be random and not correlated regarding the explanatory variables

Therefore, if the difference between entities has an effect on the dependent variable, then REM will be more appropriate than FEM In which, the residual of each entity (uncorrelated with the explanatory variable) is considered as a new explanatory variable The basic idea of the random effects model also begins with the model:

Y it = a Xit + b X it + e it with i = 1, 2, …, N and t = 1, 2, …, T;

Instead of in the FEM model who is fixed, in REM it is assumed that it is a random variable with the mean who and the intercept value is described as follows:

ai = a+ εi

In there:

εi : The random error has a mean of 0 and a variance of σ2

eit: Errors of other combined components of both subject-specific and time-specific characteristics The assumption eit is not correlated with any of the explanatory variables in the model

Thereby, we have panel data including N objects and T time points In summary, in the model, the classical error is divided into 02 components The ai component represents all unobservable factors that vary between subjects but do not change over time The eit component represents all unobserved factors that vary between subjects and over time Therefore, with this model, the individual characteristics between entities are assumed to be random and not correlated with the explanatory variables

In general, the better FEM or REM model for research depends on whether or not there

is a correlation between εi and the explanatory variables X If it is assumed that there is no correlation, then REM is more suitable, and vice versa The choice of which model is more suitable among the 3 Pooled OLS, FEM and REM models will be tested in the next section

3 Main research:

Based on the results of previous research models, the author proposes a multivariable linear regression model for 80 non-financial companies listed on HNX and HOSE in the period 2016-2021 as follows:

LEVi,t = β0 + β1CSRi,t + β2 LNAi,t + β3 AST i,t + β4 ROAi,t +β5 AGEi,t + β6 INDi,t+ β7 BSIZEi,t + Ɛi,t

LEVi,t : is the dependent variable used to measure financial leverage

SIZE, CSR, LNA, AST, ROA, AGE, IND, BSIZE: are the independent variables

(explanatory variables) used to estimate the impact of factors inside the enterprise on the capital structure of that enterprise

Based on the proposed model and previous research results, the author expects the research results of social responsibility affecting the capital structure of companies listed on HNX and HOSE as follows:

Table 1: expects the research results

Dependent variable

GOV + Number of shares

owned by the State / Total number of outstanding shares of the company

IND - Number of independent

BOD members/ Total number of BOD members

6 Board size BSIZE - Total number of

members of the Board

of Directors

Note: The plus sign (+) has a positive impact on capital structure, minus sign (-) has

negative effect on capital structure

VI RESEARCH RESULTS AND DISCUSSION

1 Descriptive statistics of the variables used in the model

The table below resenting descriptive statistics of dependent and explanatory variables used in the research model of the topic, including factors affecting capital structure

of listed companies on HNX and HOSE in the period 2016-2021

Table 2: Descriptive statistics

Important information about the traits of listed firms on the Hanoi Stock Exchange (HNX) and Ho Chi Minh City Stock Exchange (HOSE) between 2016 and 2021 is revealed

by the descriptive statistics of the variables employed in this research model The data indicates an average value of 0.1585 for financial leverage (LEV), showing that businesses typically maintain a moderate level of leverage Although there are some exceptions with very low (minimum of 0.0003) or noticeably high (maximum of 1.2123) financial leverage, the comparatively low standard deviation of 0.0897 implies that the majority of businesses display financial leverage that is near to this mean

Regarding corporate social responsibility (CSR), the mean CSR score is 0.0907, indicating that these businesses engage in CSR initiatives at a generally low level The dataset's standard deviation of 0.0614 shows some range in CSR scores, demonstrating the variety of CSR methods The existence of both minimum (0) and maximum (1) values is noteworthy because it emphasizes the wide spectrum of CSR engagement, with some organizations demonstrating no CSR involvement and others displaying a significant commitment to social responsibility

A standard deviation of 0.5843 and an average value of 12.2359 for company size (SIZE) indicate that there are variances in company sizes The difference in values between the smallest (10.9502) and greatest (14.1190) values highlights the market's diversity in terms of firm sizes Asset turnover (AST) measures how well businesses use their assets to produce revenue, with an average value of 0.4001 and a standard deviation of 0.0646 The measure of profitability across businesses, return on assets (ROA), has an average value of 0.1324 and a standard deviation of 0.0916 The range, from the lowest (-0.3212) to highest (0.5111) values, displays a variety of ROA values State ownership ratio (GOV) exhibits an average score of 0.1659, along with a relatively high standard deviation of 0.2583, suggesting significant variability in governance practices among these companies The proportion of independent members in the Board of Directors (IND) has an average industry score of 0.7334, with a standard deviation of 0.2002, indicating some variability in industry scores The average value for company size (BSIZE) is 4.9333, with a standard deviation of 1.3903, indicating that there is significant variation in business sizes across the sample These descriptive statistics lay the groundwork for further investigation into the variables impacting capital structure among Vietnamese listed companies throughout the selected time period They also offer significant insights into the properties of the dataset