Capital structure and firm growth: The case of Vietnamese listed firms

Hoang, Hiep

Abstract

This thesis provides a wide range of research on capital structure within the context of Vietnamese listed firms through three specific empirical studies. The first study focuses on analysing the adjustment process of capital structure towards the target level. This study strongly confirms that the average adjustment speed towards the target capital structure of Vietnamese listed firms is approximately 30% per year. This result is considered slower than the expected rate of 60% based on the related literature for other emerging economies. Due to this empirical result, further examination of the factors affecting the adjustment speed sheds light on the most significant determinants that contribute to the higher speed of adjustment. Three factors are considered in this study (distance to target, firm size, and growth opportunities), and the results reveal that all of them positively correlate with the adjustment speed with different impact levels.
The second study concerns the determinants of capital structure. Specifically, six factors are specified to evaluate their impact on financial leverage. The results show that there is evidence to conclude certain effects of independent factors (firm size, liquidity, profitability, tangibility, growth opportunities, and non-debt tax shield) on financial leverage. Of these, positive correlations are reported for firm size, liquidity, and tangibility; meanwhile profitability, growth opportunities, and non-debt tax shield have negative impact on financial leverage.
The third study focuses on the impact of capital structure on firm growth (measured by the growth rate of financial indicators: sales revenue, total assets, and operating profit). Short-term debt and long-term debt were employed as proxies for capital structure. The empirical findings reveal that long-term financial leverage strongly affects the growth of Vietnamese listed firms in all aspects of business. Meanwhile, the short-term debt model shows moderate support for the sales and operating profit model, and only weak support for the total assets growth model.

• Thesis Type: Thesis
• Deposit Date: Nov 26, 2020
• Publicly Available Date: May 17, 2021
• Public URL: https://uwe-repository.worktribe.com/output/6886809
• Award Date: May 17, 2021