Bank leverage effect case of listed companies on ho chi minh stock exchange

luận văn, khóa luận, chuyên đề, đề tài

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY o0o - TRINH THI HANG BANK LEVERAGE EFFECT – CASE OF LISTED COMPANIES ON HO CHI MINH STOCK EXCHANGE MASTER THESIS Ho Chi Minh – 2011 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY o0o - TRINH THI HANG BANK LEVERAGE EFFECT – CASE OF LISTED COMPANIES ON HO CHI MINH STOCK EXCHANGE MAJOR: BANKING AND FINANCE MAJOR CODE: 60.31.12 MASTER THESIS INSTRUCTOR: PROFESSOR BUI KIM YEN Ho Chi Minh – 2011 ACKNOWLEDGEMENT First and foremost I would like to thank my supervisor, Professor Bui Kim Yen for her guidance and support Special thanks also go to all of my lecturers at Banking and Finance Faculty, University of Economics Ho Chi Minh City for their teaching and guidance during my Master of Banking and Finance course I also wish to thank all my coworkers in Military Bank, my friends in Bank for Investment and Development of Viet Nam, Au Viet Securities for their great support during my master thesis writing Finally, my greatest thanks would go to my family including my parents, my sisters and my brothers who are the greatest encouragement for me to overcome all difficulties in my life i ABSTRACT The thesis aims to add empirical evidence to the corporate finance literature by looking at firms’ debt choice and performance This thesis also find the relationship between firms’ debt choice and bank loans in companies listed on Ho Chi Minh Stock Exchange (HOSE) of Vietnam as an emerging market The thesis consists of five chapters After an introductory chapter, the study reviews the existing literature on the capital structure controversy with an emphasis on the recent empirical works The following third chapter provides the research methodology for the study The study applies panel data procedures, least square regression to test surrounding issues of capital structure of 92 firms listed on HOSE for the period 2007 and 2010 While the main findings of this study which are consistent with theories are reported in the fourth chapter, there are new major insights that represent the special case of emerging markets in general and Vietnam in particular These main insights, as well as the main conclusions of the study, are summarized in Chapter 5, including some limitations and recommendations for future researches Our findings are that many of the factors that are found to be significant in the determination of capital structure and performance of the firms listed on HOSE are the same as those found in developed and developing capital markets such as firm size, asset turnover Besides, we find that the listed firms’ debt choice affect performance negatively In addition to the State Bank of Vietnam‘s general lending principals such as legal establishment of firm, legal purpose of loan, earning capacity of the business and profitable project, our findings suggest that banks should take more considerations on firms’ asset tangibility, size and asset turnover when making decisions on loans to corporate Keywords: Capital structure, firm performance, bank loan, Vietnam, HOSE ii CONTENTS Acknowledgement i Abstract ii Contents iii List of Figures v List of Tables vi Abbreviations vii CHAPTER 1: INTRODUCTION 1.1 Research Background 1.2 The usefulness of the research 1.3 Research objectives 1.4 Scope and methodology 1.5 The structure of the study CHAPTER 2: LITERATURE REVIEW 2.1 Introduction 2.2 Capital structure theory and firm performance 2.3 Maturity structure and bank loan theory 12 2.4 Conclusion 20 CHAPTER 3: RESEARCH METHODOLOGY 3.1 Introduction 21 3.2 Data specifications 21 3.2.1 Research sample description 21 3.2.2 Variable Explanation 22 3.2.2.1 Financial leverage 22 3.2.2.2 Return on equity 23 3.2.2.3 Return on assets 23 3.2.2.4 Asset tangibility 24 3.2.2.5 Asset turnover 24 iii 3.2.2.6 Firm Size 25 3.2.2.7 Firm age 25 3.2.2.8 Growth opportunities 26 3.2.2.9 Industrial sector 26 3.3 Hypothesis and empirical model specification 27 3.3.1 Model 1: Firm Leverage Model 27 3.3.2 Model 2: Firm Performance Model 28 3.3.3 Model 3: Bank Loan Model 30 CHAPTER 4: DATA ANALYSIS AND FINDINGS 4.1 Introduction 32 4.2 Descriptive Statistics 32 4.3 Results of Leverage Model 34 4.4 Results of Firm Performance Model 37 4.5 Results of Bank Loan Model 43 CHAPTER 5: CONCLUSION 5.1 Introduction 48 5.2 Conclusion 48 5.3 The implications of the research 49 5.4 Limitations and recommendations for future research 50 References 52 Appendix A – Regression results of models 59 Appendix B – Industry classification 72 Appendix C – Financial ratios of 92 firms listed on HOSE from 2007 to 2010 75 Appendix D – Creations of variables for the models 91 iv LIST OF FIGURES Figure 1.1: Research methodology Figure 3.1: Outline of chapter 21 Figure 3.2: Summary of research data collection 22 v LIST OF TABLES Table 4.1: Number of companies per industry 32 Table 4.2: Descriptive statistic for the variables used in the study 33 Table 4.3: The correlations between ROA and others variables 33 Table 4.4: The correlations between ROE and others variables 34 Table 4.5: The reported results of Leverage Model 34 Table 4.6: The final reported results of Leverage Model 37 Table 4.7: The reported results of Firm Performance Model (by using ROA) 38 Table 4.8: The reported results of Firm Performance Model (by using ROE) 42 Table 4.9: The final reported results of Firm Performance Model (by using ROA) with significant variables 42 Table 4.10: The final reported results of Firm Performance Model (by using ROE) with significant variables 43 Table 4.11: The reported results for TOBIT´s estimations of Bank Loan Model 44 Table 4.12: The final reported results of TOBIT´s estimations of Bank Loan Model 47 vi ABBREVIATIONS BAS Basic Material CONS Construction and material CUS Customer good and services GLS Generalized least square regression GROWTH Growth opportunities HNX Ha Noi Stock Exchange HOSE Ho Chi Minh Stock Exchange INDU Industrial sector IT Information Technology LEV Financial leverage OIL Oil and gas ROA Return on assets ROE Return on equity SIZE Firm size TANG Asset tangibility TRAN Transportation TURN Asset turnover UTI Utilities VND Vietnam Dong vii CHAPTER 1: INTRODUCTION 1.1 RESEARCH BACKGROUND The capital structure theory has been one of the most important background literatures when studying the corporate finance This theory was originated in 1958 by Modigliani and Miller who gave a rigorous proof of the independence of a firm’s values and its capital structure mix The capital structure of a firm explains the ways in which a firm finances its investment and overall operations It consists mainly of a combination of debt and equity as well as all other sources of finance available to the firm It has been obvious from various studies that one factor which has affected and will continue to affect a firm’s financial performance is the choice of its capital structure mix There have been many studies conducted to find out the optimal capital structure for corporate from this background but no formula or theory that decisively provides optimal capital structure for a firm has been found yet There are many factors affecting the choice of firm’s capital structure These factors may vary substantially from company to company, from industry to industry and from country to country While the studies on the determinants on the capital structure and the effects of capital structure on firm performance have been very popularly conducted in almost every developed country in the world, these kinds of research have still been limited in Viet Nam Meanwhile the way an organization is financed is of paramount importance to both the managers of firms and providers of funds This is because if a wrong mix of finance is employed, the performance and survival of the enterprise may be seriously affected This is the motivation for me to this study with the hope to have deeper understanding about the role of capital structure on firm’s performance Besides, we also a research on the conditions and determinants firms must have when accessing funds from banks These examinations are conducted in Viet Nam as a developing country ...MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY o0o - TRINH THI HANG BANK LEVERAGE EFFECT – CASE OF LISTED COMPANIES ON HO CHI MINH STOCK EXCHANGE MAJOR: BANKING... at firms’ debt choice and performance This thesis also find the relationship between firms’ debt choice and bank loans in companies listed on Ho Chi Minh Stock Exchange (HOSE) of Vietnam as an... regression GROWTH Growth opportunities HNX Ha Noi Stock Exchange HOSE Ho Chi Minh Stock Exchange INDU Industrial sector IT Information Technology LEV Financial leverage OIL Oil and gas ROA Return on