The impact of capital structure on firm performance of listed companies in HNX

i TABLE OF CONTENTS ABSTRACT iii ABBREVIATION iv LIST OF TABLE v LIST OF DIAGRAMS vi CHAPTER 1: INTRODUCTION 1.1 Rationale 1.2 Research objective: 1.3 Research methodology: 1.3.1 Research model a Pooled OLS: b Fixed Effects Model: c Random Effects Model: 1.3.2 Operational Research Models and Variables a Dependent variables: b Independent variables and its calculations: 1.4 Scope of research 10 CHAPTER 2: LITERATURE REVIEW 11 2.1 Conceptual Framework 11 2.1.1 Capital Structure 11 2.1.2 Optimal Capital Structure 12 a Theoretical Framework 12 b Empirical Studies about relationship between Capital Structure and Firm performance 14 CHAPTER 3: RECENT SITUATION OF INDUSTRIAL COMPANIES LISTED IN HNX 18 ii 3.1 Introduction to 112 industrial companies listed in HNX 18 3.1.1 Classification of 112 industrial companies listed in HNX 18 3.1.2 Evaluation of several financial situations 20 3.1.3 Analysis of firm performance 23 3.1.4 Analysis of capital structure 29 CHAPTER 4: EMPIRICAL RESULT 32 4.1 Descriptive statistics 32 4.2 Correlation analysis 33 4.3 Finding and analysis 35 4.3.1 ROA 36 4.3.2 ROE 39 4.3.3 Q Tobin’s 42 CHAPTER 5: DISCUSSION AND RECOMMENDATION 45 5.1 Discussion: 45 5.2 Limitations of the study: 48 5.3 Recommendation: 50 CHAPTER 6: CONCLUSION 51 REFERENCES 51 APPENDIX 54 iii ABSTRACT The study investigates the relationship between capital structure and firm performance The investigation has been performed using panel data procedure for a sample of 112 Vietnamese listed companies working in the industrial field on the HNX during the period of five years from 2010 to 2014 The study uses three performance measures (including return on equity, return on asset, Tobin s Q) as dependent variable The two capital structure measure (including leverage, short term debt) as independent variable Size, inflation ratio, tax expenses and age are control variable The results indicate that firm performance, which is measured by return on asset (ROA), return on Equity(ROE) and earning per share (EPS) have negative relationship with short term debt ratio (SDTA), leverage (LEVERAGE) as independent variable Q Tobin’s reports that there is no relationship between short term debt (SDTA) as well as leverage (LEVERAGE) and this variable iv ABBREVIATION WTO World Trade Organization TPP Trans-Pacific Partnership HNX Hanoi Stock Exchange Pooled OLS Pooled ordinary least square REM Random – effect model FEM Fixed – effect model ROA Return on Asset ROE Return on Equity EBIT Earnings before interest and tax EBT Earnings before tax VND Vietnam dong VNDbil Billion Vietnam dong v LIST OF TABLE Table 1.1: The formula for variables calculation………………………….… Table 3.1: Classification of 112 industrial companies listed in HNX…….… 19 Table 3.2: Tangible Asset Valuation 2010 – 2014 (VNDbil)… ………………23 Table 3.3: Q Tobin’s valuation 2010 – 2014 …… …………………………28 Table 3.4: Capital structure of companies 2010 - 2014 ………………… ……30 Table 4.1: Descriptive statistics data of Dependent Variables 32 Table 4.2: Descriptive statistics data of Independent Variables 33 Table 4.3: Correlation of Return on Assets (ROA) as Dependent variable .34 Table 4.4: Correlation of Return on Equity (ROE) as Dependent variable….…35 Table 4.5: Correlation of Q Tobin’s as Dependent variable …………… ……35 Table 4.6: Result equation for ROA….……………………… ………………37 Table 4.7: Final result equation for ROA….………………………………… 38 Table 4.8: Result equation for ROE….…………………………………… ….40 Table 4.9: Final result equation for ROE.………………………………… ….41 Table 4.10: Result equation for Q Tobin's………………………………… ….43 Table 4.11: Final result equation for Q Tobin's… ……………………… ….44 vi LIST OF DIAGRAMS Diagram 3.1: The average of Total Assets in different groups 2010 – 2014 ….21 Diagram 3.2: The average of ROA ratio in different groups 2010 – 2014 ……24 Diagram 3.3: The average of ROE ratio in different groups 2010 – 2014… …26 CHAPTER 1: INTRODUCTION 1.1 Rationale After the “Doi Moi” economic reform in 1986, Vietnam becomes a socialistoriented market economy that led to the replacement of the centrally-planned economy and the market-based mixed ones Based on this reform, the Vietnamese market can integrate with the global economy Several outstanding events occurred in recent years Vietnam became the WTO’s 150th official member following the formal approval of the National Assembly of the Socialist Republic of Vietnam in 2007 In November 2010, after attending three negotiations, Vietnam officially joined the TTP negotiation In comparison with WTO, participating in TPP can give a deeper commitment to Vietnam, especially in some special fields that not contain in WTO These events gave a large number of potential developments for Vietnam economy due to market expansion, technology improvement, labor force rising, and international trading efficiency One of the indication is significant growing in the number of new established domestic companies However, the number of companies increase does not have the same meaning with the increase in the effectiveness of business’ operating activities According to the Department of Statistics, only in December 2014, there are 7944 enterprises having difficulty in suspending operation, up to 30.2% from the previous month This figure includes 2088 enterprises having registered for suspending the operation and 5856 decommissioned business pending for closing code or without registered One of the major reasons for poor performance in many Vietnamese businesses is the unreasonable decision in financing capital that is closely related to the mix of debt and equity As a result, the number of research investigating the impact of capital structure on firm performances is increasing due to the financial problem in business 1.2 Research objective: The purpose of this study is to examine the relationship between capital structure and firm performance by regarding 112 industrial companies listed on Hanoi Stock Exchange (HNX) during the period of years from 2010 to 2014 In order to achieve the mentioned purpose, the researcher mainly focuses on following questions: How capital structure impact on industrial firm performance? Suggest optimal structure for industrial companies 1.3 Research methodology: 1.3.1 Research model Regarding the purpose of the study is quantifying the impact of capital structure on the performance of industrial listed on HNX, the regression model for panel data has been used The primary reason for using panel data is that this model provides more information, little multicollinearity between the variables, more efficient as well as offers opportunity for controlling unobserved individual and/ or time specific heterogeneity, which may be correlated with the included explanatory variables We used Pooled OLS, FEM and REM for estimation of the data A balanced panel data set is used which has equal number of observations for each (crosssection) and best model selection, REM versus FEM, Hausman specification test and Breusch-Pagan Lagrange Multiplier test The general form of Panel Data Model: Yt = m + β0 + β1 × X1it X2it + + βn * Xnit + ut Where: i is the ith cross section, and t is the time t Y: The dependent variable X: Independent variables a Pooled OLS: This is the simplest model that does not consider the difference between the research firm; this model is rarely used The model can be used when the groups to be pooled are relatively similar or homogenous Level differences can be removed by 'mean-centering' (similar to Within-Effects Model) the data across the groups (subtracting the mean or average of each group from observations for the group) The model can be directly run using Ordinary Least Squares on the concatenated groups If the model yields large standard errors (small T-Stats), this could be a warning flag that the groups are not all that homogenous and a more advanced approach to Random Effects Model may be more appropriate b Fixed Effects Model: FEM was developed from the Pooled when adding the difference in the company, and the correlation between the residuals of the model and the independent variables In detail, the model measure differences in intercepts for each group (calculated using a separate dummy variable for each group) The approach is also called "Least Squares Dummy Variable" method for this reason This is an OLS model with dummy variables to control for group differences, assuming constant slopes (coefficients) for independent variables and constant variance across groups Within-Effects Model avoids using dummies by mean-centering all modeled variables, including the dependent, thus increasing degrees of freedom c Random Effects Model: This approach leverages the differences in the variance of the error term to model groups together, assuming constant intercept and slopes It means that RAM has some differences in the relationship between the residuals and the independent variables of the model Compared to FEM, REM is more complex to estimate In this study, the optimal model applied will find by using the Breusch-Pagan Lagrange Multiplier test for random effect and Hausman test between FEM and RAM d Hausman test Hypothesis: Ho: Random effects model is appropriate H1: Fixed effects model is appropriate 1.3.2 Operational Research Models and Variables In this study is to quantify the impact of the capital structure to the performance of industrial companies listed on HNX authors use regression models for panel data The dependent variables that are used return on assets (ROA), return on equity (ROE) and Tobins’Q (TOBINSQ) as accounting measures for evaluating the firm performance; and independent variable are the long – term debt ratio (LEVERAGE), short – term debt ratio (SDTA) as capital structure Also is used for variables of firm size (SIZE), firm age (AGE), assets tangibility (TANG), inflation (INF) and tax (TAX) as control variables a Dependent variables: 49 professionalism How people can define the information is right or wrong? It had been become a difficult question in the Vietnamese market Secondly, the correctness and accuracy of information also can be seen as a problem in the Vietnamese market There are a number of ways to modify the financial statements through different estimation in accounting treatments Although these companies comply with the accounting standard (follow VAS and IFRS), they still can “window dressing” for the financial statements Several methods can be pointed out, which are the extension of credit limit for customers for promoting sales, the elimination of subsidiaries consolidated when adverse results, the overestimate of the construction completed for recording revenue, the reduction of total costs by "capitalization" The above are just a few examples of the ways that people can alter the financial, which makes the users of financial statements encounter many problems Finally, the lack of attention from managers about capital structure today will put a pressure on the investment opportunities and safety of capital structure Most of managers often based on their knowledge and experience to make a decision of borrowing as well as raising method In fact, almost all Vietnamese enterprises, especially small and medium ones, are strongly dependent on debt mobilization Revenue pursue in many businesses also lead to cash flow uncontrolled and the imbalance of capital using when many companies tend to use short – term debt for financing long – term debt Moreover, the highly proportion of equity capital can lead to spread investment without reasonable investment policy All exists problems below have a huge impact on the financial structure of the business, especially the loss of ability to pay, loss of business opportunities and obstacles of capital mobilization As a result, the analysis of capital structure will have several errors and unreasonable 50 5.3 Recommendation: In line with our finding, we strongly recommend that firms should take into cognizance the amount of leverage incurred because it is a major determinant of firm performance Also, firms should use more of equity than debt in financing their business activities, in as much as the value of a business can be enhanced using debt capital, it gets to a point that it becomes detrimental to the value of the business, hence firms should establish the point at which the weighted average cost of capital is minimal and maintain that gearing ratio so that the company’s value will not be eroded, as the firms’ capital structure is optimal at this point ceteris paribus Firms can also employ the use of cheap finance sources instead of expensive fixed interest bearing debts 51 CHAPTER 6: CONCLUSION Traditional capital structure theory provides models that can assess the effects of leverage on firm performance This study has examines the effectiveness of leverage as well as short – term debt ratio on firm performance in 112 industrial companies listed in HNX Among 112 selected firms, there are eight groups of working fields with different leverage and short – term debt ratios Using the panel data analysis, the study confirms that the traditional capital structure theory is valid It reaffirms that both leverage and short – term debts are statistically significant and are important determinants of firm performance, which are measured by ROA, ROE and Q Tobin’s Also, in line with various empirical studies on capital structure and firm performance, this study confirms the negative relationship between leverage (gearing) and firm performance in selected companies Moreover, the relationship between short – term debt and firm performance also is stated with a negative figure In addition, the negative figures suggest that the finance managers should use debts as last alternative in their capital structure Furthermore, macroeconomic variables have a significant effect on the performance of 112 companies Several variables namely age, inflation ratio and tax expense are strongly impact on firm performance The company should be aware these components to make a good policy for business activities or investment plan in the future To the end, our study can be extended by incorporating more controlled variables, larger sample and longer period data in the regression models to get better results Other measures and methodology can also be employed 52 REFERENCES Vietnamese: Nguyễn Văn Duy, Đào Trung Kiên, Nguyễn Thị Hằng, Đào Thị Hương (2014), “The impact of capital structure, size and revenue growth to firm performance of Fisheries companies listed on the Vietnamese Stock Exchange” Kết phân ngành theo HASIC Address: http://www.ssc.gov.vn Quyết định số 486 – TCTK/ CN việc phân ngàng cụ thể công nghiệp bảng mục lục ngành nghề cụ thể công nghiệp Address: http://www.thuvienphapluat.vn Annual Financial Statements of 112 industrial companies Address: http://www.cafef.vn, http://www.vndirect.com.vn English: Dr Suleiman M Abbadia and Dr Nour Abu-Rub (2012), “The Effect of Capital Structure on the Performance of Palestinian Financial Institutions” Modigliani, F.; Miller, M (1958) "The Cost of Capital, Corporation Finance and the Theory of Investment." American Economic Review 48 (3): 261–297 Modigliani, F.; Miller, M (1963) "Corporate income taxes and the cost of capital: a correction." American Economic Review 53 (3): 433–443 Murilata (2012), “An Empirical Analysis of Capital Structure on Firms Performance in Nigeria”, International Journal of Advances in Management and Economics, 1(5), 116-124 53 Myers, Stewart C.; Majluf, Nicholas S (1984) "Corporate financing and investment decisions when firms have information that investors not have" Journal of Financial Economics 13 (2): 187–221 10.Mr Ogebe, Ojah Patrick (2013), “The Impact of Capital Structure on Firm Performance in Nigeria”, St Augustine College of Education, Project TIME Akoka Lagos 11.Jensen, M and W Meckling (1976), ‘Theory of the Firm: Managerial Behavior, Agency Costs and Capital Structure’ Journal of Financial Economics”, Vol 3, pp 305-60 12.Zeitun & Tian (2007), “Capital structure and corporate performance: Evidence from Jordan”, Australasian Accounting Business and Finance Journal, 1(4), 40-61 13.Website: - Wikipedia, the free encyclopedia Address: http://www.en.wikipedia.org 54 APPENDIX Table 1: List of 112 securities codes and its corresponding name ID Security Classification Code Group Tên công ty DNC A1 CTCP Điện nước lắp máy Hải Phòng HJS A1 CTCP Thủy điện Nậm Mu NBP A1 NLC A1 RHC A1 CTCP Thủy điện Ry Ninh II SEB A1 CTCP Đầu tư phát triển Điện Miền Trung BTH A5 CTCP Chế tạo Biến Vật liệu điện Hà Nội BVG A5 CTCP Thép Bắc Việt CJC A5 CTCP Cơ điện miền Trung 10 CTB A5 CTCP Chế tạo bơm Hải Dương Electric power industry Manufacture of machinery and metal products CTCP Nhiệt điện Ninh Bình CTCP Thủy điện Nà Lơi CTCP Thép Dana - Ý 11 DNY A5 12 DZM A5 13 L35 A5 14 L43 A5 CTCP Lilama 45.3 15 L44 A5 CTCP Lilama 45.4 16 L61 A5 CTCP Lilama 69-1 17 L62 A5 CTCP Lilama 69-2 CTCP Chế tạo máy Dzĩ An CTCP Cơ khí lắp máy Lilama 55 18 LM3 A5 CTCP Lilama 19 LM7 A5 CTCP Lilama 20 LO5 A5 CTCP Lilama 21 MAC A5 CTCP Cung ứng Dịch vụ Kỹ thuật hàng hải 22 MCF A5 CTCP Xây lắp khí LTTP 23 MEC A5 CTCP Someco Sông Đà 24 NAG A5 CTCP Nagakawa Việt Nam 25 PMS A5 CTCP Cơ khí xăng dầu 26 PPS A5 CTCP Dịch vụ Kỹ thuật Điện lực Dầu khí Việt Nam 27 QHD A5 28 SDN A5 29 SSM A5 30 TKU A5 CTCP Công nghiệp Tung Kuang 31 TSB A5 CTCP Ắc quy Tia sáng 32 VGS A5 CTCP Ống thép Việt Đức VGPIPE 33 KSD B5 Tổng CTCP XK Đông Nam Á Hamico 34 HDAs A6 CTCP Hãng sơn Đông Á 35 HVT A6 CTCP Hóa chất Việt Trì 36 LAS A6 CTCP Hóa chất phốt phát Lâm Thao Manufacture of machinery and metal products CTCP Que hàn Việt Đức CTCP Sơn Đồng Nai CTCP Chế tạo Kết cấu Thép VNECO.SSM 56 CTCP Khoáng sản khí 37 MIM A6 38 CPC B6 39 DNP B6 40 DPC B6 41 NET B6 CTCP Bột giặt NET 42 NTP B6 CTCP Nhựa thiếu niên tiền phong 43 TPP B6 CTCP Nhựa Tân Phú 44 BCC A7 CTCP Xi măng Bỉm Sơn 45 BTS A7 CTCP Xi măng Bút Sơn 46 CCM A7 CTCP Xi măng Cần Thơ 47 CTA A7 CTCP VINAVICO 48 CVT A7 CTCP CMC 49 DAC A7 50 DID A7 51 DTC A7 52 GMX A7 CTCP Gạch ngói gốm xây dựng Mỹ Xuân 53 HCC A7 CTCP Bê tông Hòa Cầm 54 HLY A7 CTCP Viglacera Hạ Long I 55 HOM A7 CTCP Xi măng Hoàng Mai 56 HPS A7 CTCP Đá Xây dựng Hòa Phát 57 KHL A7 CTCP Khoáng sản vật liệu xây dựng Hưng Long 58 MCC A7 CTCP Gạch ngói cao cấp 59 NHC A7 CTCP Gạch ngói Nhị Hiệp Ore mining chemical and chemical industry CTCP Thuốc sát trùng Cần Thơ CTCP Nhựa Đồng Nai CTCP Nhựa Đà Nẵng Production of CTCP Viglacera Đông Anh construction CTCP Dic Đồng Tiến materials CTCP Viglacera Đông Triều 57 60 PPG A7 CTCP Sản xuấ thương mại dịch vụ Phú Phong 61 QNC A7 CTCP xi măng xây dựng Quảng Ninh 62 S74 A7 CTCP Sông Đà 7.04 63 SCJ A7 CTCP Ximăng Sài Sơn 64 SCL A7 CTCP Sông Đà Cao Cường 65 SIC A7 CTCP Đầu tư - Phát triển Sông Đà 66 TBX A7 CTCP Xi măng Thái Bình 67 TSM A7 68 TTC A7 69 VHL A7 CTCP Viglacera Hạ Long 70 VIT A7 CTCP Viglacera Tiên Sơn 71 VTS A7 CTCP Viglacera Từ Sơn 72 XMC A7 CTCP Bê tông Xây dựng Vinaconex Xuân Mai 73 BHC A7 CTCP Bê tông Biên Hòa 74 HHL A7 CTCP Hồng Hà Long An 75 KBT A7 CTCP Gạch ngói Kiên Giang 76 BHV A7 CTCP Viglacera Bá Hiến 77 TLC B7 CTCP Viễn thông Thăng Long 78 VBH B7 CTCP Điện tử Bình Hòa 79 NPS B10 80 SFN B10 Production of construction materials Fabrics, leather, textiles and CTCP Xi măng Tiên Sơn Hà Tây CTCP Gạch men Thanh Thanh CTCP Phú Thịnh Nhà Bè (may mặc) CTCP Dệt lưới Sài Gòn 58 CTCP Đầu tư thương mại TNG 81 TNG B10 82 CAN B11 CTCP Đồ hộp Hạ Long 83 CAP B11 CTCP Lâm nông sản thực phẩm Yên Bái 84 DBC B11 CTCP Tập đoàn DABACO Việt Nam 85 HAD B11 CTCP Bia Hà Nội Hải Dương 86 HAT B11 CTCP Thương mại bia Hà Nội 87 HHC B11 88 HNM B11 89 KTS B11 CTCP Đường Kontum 90 NGC B11 CTCP Chế biến Thủy sản xuất Ngô Quyền 91 SAF B11 CTCP Lương thực Thực phẩm Safoco 92 SGC B11 CTCP Xuất nhập Sa Giang 93 SJ1 B11 Công ty cổ phần Thủy sản Số 94 THB B11 CTCP Bia Thanh Hóa 95 THV B11 CTCP Tập đoàn Thái Hòa VN 96 VTL B11 CTCP Vang Thăng Long 97 ALT B12 CTCP Văn hóa Tân Bình 98 HTP B12 99 SAP B12 coloring Food industry Prints and publications CTCP Bánh kẹo Hải Hà CTCP Sữa Hà Nội CTCP In sách giáo khoa Hòa Phát CTCP In sách giáo khoa 59 Tp HCM 100 DHI B12 CTCP In Diên Hồng 101 TPH B12 CTCP In sách giáo khoa Tp Hà Nội 102 AAA B13 CTCP Nhựa môi trường xanh An Phát 103 ASA B13 CTCP Liên doanh SANA WMT 104 BBS B13 CTCP Bao bì xi măng Bút Sơn 105 BPC B13 CTCP Bao bì Bỉm Sơn 106 BXH B13 107 INN B13 CTCP Bao bì in nông nghiệp 108 SDG B13 CTCP Sadico Cần Thơ 109 SPP B13 CTCP Bao bì nhựa Sài Gòn 110 STP B13 CTCP CN & TM Sông Đà 111 VBC B13 CTCP Bao bì Vinh 112 MIH B13 CTCP Xuất nhập khoáng sản Hà Nam Others CTCP Bao bì xi măng Hải Phòng 60 Table 2: The result of Breusch and Pagan Lagrangian Multiplier test for ROA, ROE and Q Tobin’s a) ROA Breusch and Pagan Lagrangian multiplier test for random effects ROA[id,t] = Xb + u[id] + e[id,t] Estimated results: Var ROA e u Test: sd = sqrt(Var) 0081482 0033643 003439 0902672 0580024 0586433 Var(u) = chibar2(01) = Prob > chibar2 = 184.68 0.0000 61 b) ROE Breusch and Pagan Lagrangian multiplier test for random effects ROE[id,t] = Xb + u[id] + e[id,t] Estimated results: Var ROE e u Test: sd = sqrt(Var) 0303658 0141073 0137182 1742579 1187742 1171247 Var(u) = chibar2(01) = Prob > chibar2 = 172.65 0.0000 c) Q Tobin’s Breusch and Pagan Lagrangian multiplier test for random effects TOBINSQ[id,t] = Xb + u[id] + e[id,t] Estimated results: Var TOBINSQ e u Test: sd = sqrt(Var) 0964951 0432081 0473107 3106366 2078657 2175103 Var(u) = chibar2(01) = Prob > chibar2 = 246.61 0.0000 Table 3: The result of Hausman test for ROA, ROE and Q Tobin’s a) ROA 62 Coefficients (b) (B) name1 SDTA LEVERAGE SIZE TANG TAX AGE INF -.1557426 -.11491 1.25e-08 -6.40e-08 2.57e-06 -.0104224 0593662 -.1409869 -.0703134 -1.20e-08 -2.68e-09 2.09e-06 -.00406 1433591 (b-B) Difference sqrt(diag(V_b-V_B)) S.E -.0147557 -.0445966 2.45e-08 -6.13e-08 4.77e-07 -.0063624 -.0839929 0258569 0404673 1.64e-08 3.51e-08 5.19e-07 0017968 0291052 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic chi2(4) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 5.69 Prob>chi2 = 0.2235 (V_b-V_B is not positive definite) b) ROE Coefficients (b) (B) name2 SDTA LEVERAGE SIZE TANG TAX AGE INF -.3189809 -.1674056 5.36e-08 -1.88e-07 5.69e-06 -.020183 007917 -.2480351 -.0448447 -7.80e-09 -2.95e-08 3.49e-06 -.0073949 1689894 (b-B) Difference -.0709458 -.1225609 6.14e-08 -1.58e-07 2.20e-06 -.012788 -.1610723 sqrt(diag(V_b-V_B)) S.E .0533374 0835124 3.37e-08 7.21e-08 1.07e-06 0037052 0596925 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic chi2(4) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 6.90 Prob>chi2 = 0.1410 (V_b-V_B is not positive definite) c) Q Tobin’s 63 Coefficients (b) (B) name3 SDTA LEVERAGE SIZE TANG TAX AGE INF 0908637 0529757 4.34e-09 -6.40e-08 8.08e-06 -.0536409 -1.395287 1023106 0556677 -1.00e-07 7.35e-08 6.90e-06 -.0258559 -.9434744 (b-B) Difference -.0114469 -.002692 1.05e-07 -1.38e-07 1.18e-06 -.027785 -.451813 sqrt(diag(V_b-V_B)) S.E .0922967 1443782 5.85e-08 1.25e-07 1.85e-06 0064111 1061406 b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic chi2(4) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 23.15 Prob>chi2 = 0.0001 (V_b-V_B is not positive definite) [...]... can be explained by short-term debt of the firm 18 CHAPTER 3: RECENT SITUATION OF INDUSTRIAL COMPANIES LISTED IN HNX 3.1 Introduction to 112 industrial companies listed in HNX 3.1.1 Classification of 112 industrial companies listed in HNX According to the Decision number 486 – TCTK/CN, the General Statistic Office had made the rule of classifying industrial companies into several groups In the most general... asset of firm i in year t INF i,t : inflation rate of firm i in year t TAX i,t : tax paid by firm i in year t 1.4 Scope of research In term of research scope, this study primarily concentrates on investigating recent decisions in the financing mix of capital among selected enterprises The scope of timing is set during 5 – year period from 2010 to 2014 fiscal year All companies are analyzed through their... calculations: Leverage refers to the amount of long – term debt using to finance firms’ assets, which contributes to the sources of capital Most companies use debt to finance operations The cost of mobilizing capital from long – term debt is interest fee, which always is charged by the lender to the borrower Most of the businesses usually find the way to raise capital by debt because the interest rate often... comparisons of returns on equity are most meaningful among companies within the same industry, and the definition of a "high" or "low" ratio should be made within this context Tobins’Q ratio devised by James Tobin of Yale University, Nobel laureate in economics, who hypothesized that the combined market value of all the companies on the stock market should be about equal to their replacement 6 costs In. .. 2.1.2 Optimal Capital Structure The optimal capital structure indicates the best debt-to-equity ratio for a firm that maximizes its value In a simple way, the optimal capital structure for a company is the one that proffers a balance between the debt and equity thus minimizing the firm s cost of capital Theoretically, debt financing usually proffers the lowest cost of capital because of its tax deductibility... a Theoretical Framework Other theories that have been advanced to explain the capital structure of firms include Pecking Order Theory and Agency Cost Theory These theories will be discussed in turn below 13 Pecking Order Theory was first suggested by Donaldson in 1961 and it was modified by Myers and Majluf (1984) In corporate finance, Pecking Order Theory postulates that the cost of financing increases... Abu-Rub, who come from the Faculty of Administrative & Financial Science, Arab American University, Jenin, Palestine Different from the above research, this paper focused on a more detailed group of organization – the Financial Institutions only The purpose of the study was finding the relationship between the market efficiency and capital structure of Palestinian financial institutions It established... that was given by Tobin Q ratio In April, 2013, Mr Ogebe, Ojah Patrick from St Augustine College of Education, Project TIME Akoka Lagos made a research about The Impact of Capital Structure on Firm Performance in Nigeria This study sought to investigate the impact of capital structure on firm performance in Nigeria from 2000 to 2010 The author considered the impact of some key macroeconomic variables (gross... between capital structure and firm performance In the recently research, namely The impact of capital structure, size and revenue growth to firm s performance of Fisheries companies listed on the Vietnamese Stock Exchange, the author had used the panel data regression to conduct the relationship among these variables ROE was represented for dependent variable, which measured firm performance during the. .. an idea of how effectively the company is converting the money it has to invest in net income The figure gives an indication of the capital intensity of the company, which will depend on the industry; companies that require large initial investments will have a lower return on assets ROA for public companies can vary substantially and will be highly dependent on the industry This is why when using ROA ... Regarding the purpose of the study is quantifying the impact of capital structure on the performance of industrial listed on HNX, the regression model for panel data has been used The primary reason... constrained Another study on the topic The Effect of Capital Structure on the Performance of Palestinian Financial Institutions” was conducted by two professional authors in January, 2012 They... about The Impact of Capital Structure on Firm Performance in Nigeria This study sought to investigate the impact of capital structure on firm performance in Nigeria from 2000 to 2010 The author considered