Analysis of the determinants of capital structure: evidence from real estate companies in VietNam from 2017 to 2021

0

Dissertation submitted in partial fulfillment of the

Requirement for the MSc in Finance

FINANCE DISSERTATION ON

ANALYSIS OF THE DETERMINANTS

OF CAPITAL STRUCTURE: EVIDENCE

FROM REAL ESTATE COMPANIES IN

VIETNAM FROM 2017 TO 2021

NAME OF STUDENT: NGUYEN MY LINH

ID No: 21077625

Intake 5

Supervisor: Assoc. Prof. Dr To Kim Ngoc

September 2022

1

ACKNOWLEDGEMENTS

First of all, I am grateful to Ass. Prof. Dr. To Kim Ngoc, lecturer in Banking

Academy, who has helped me a lot in completing my thesis. With her experience in

teaching and researching, her advice has made my work much more coherent and

reasonable.

Next, thanks to the University of the West of England, I have an opportunity to

study in an international, dynamic and professional environment. I also want to send my

thanks to the collaboration between BAV and UWE, for delivering the essential skills and

information for me to complete my dissertation.

After that, I would like to express my sincere gratitude to Mr. Dao Tuan Trung –

manager at Vietinbank Securities, where I’m working at, who guided and supported me

throughout the process of completing my dissertation. Besides accumulating practical in￾depth knowledge, I also had the opportunity to hone my experience as well as soft skills -

which is one of the important prerequisites to help me build my bright future career after

graduation.

Finally, I deeply appreciate my colleagues at Vietinbank Securities, who supported

me in data analysis, distributed questionnaires, and together with me made valid and

practical arguments to complete my senior seminar.

Sincerely thanks for your all supports.

2

Table of Contents

CHAPTER 1. INTRODUCTION.......................................................................................6

1.1. Research motivation..........................................................................................6

1.2. Research objectives and questions...................................................................9

1.3. The research scales............................................................................................9

1.4. Synopsis of Chapters.........................................................................................9

CHAPTER 2: LITERATURE REVIEW .........................................................................12

2.1. Theoretical framework....................................................................................12

2.1.1. Modigliani and Miller (M&M)...................................................................12

2.1.2. Trade-off theory...........................................................................................13

2.1.3. The pecking order theory............................................................................15

2.1.4. The agent cost theory ..................................................................................16

2.2. Empirical Findings..........................................................................................17

2.2.1. Overview of capital structure .....................................................................17

2.2.1.1. Definition of capital structure ................................................................17

2.2.1.2. Studies on capital structure ....................................................................17

2.2.2. Factors affecting the capital structure.......................................................19

2.2.2.1. Growth......................................................................................................19

2.2.2.2. Profitability ..............................................................................................20

2.2.2.3. Tangible assets.........................................................................................21

2.2.2.4. Liquidity ...................................................................................................22

2.2.2.5. Firm size ...................................................................................................23

2.2.2.6. Non-debt tax shield..................................................................................24

3

2.2.2.7. Inventory ..................................................................................................24

2.2.2.8. EPS............................................................................................................25

Chapter 3. Research methodology and methods .............................................................26

3.1. Introduction Vietnam real estate sector .............................................................26

3.1.1. Historical background.................................................................................26

3.1.2. Main features of Vietnamese real estate capital structure ......................28

3.2. Analysis of Vietnamese real estate in 2022: ..................................................30

3.2.1. Tightening of credit in the real estate sector and closely monitoring the

issuance of corporate bonds....................................................................................30

3.2.2. Sales revenues boost and slowdown in land fund expansion...................30

3.2.3. Pressure on home loan interest rates increases in the context of rising

deposit rates .............................................................................................................33

3.3. Research method .............................................................................................34

3.3.1. Research methodology ................................................................................34

3.2.2. Research philosophy......................................................................................34

3.3.2. Research design ...........................................................................................35

3.4. Data sources and sample selection .................................................................36

3.5. Model and variables........................................................................................37

3.5.1. Dependent variable:.....................................................................................37

3.5.2. Independent variables:................................................................................37

3.6. Methodology.....................................................................................................41

Chapter 4. Analysis and finding.......................................................................................42

4

4.1. Descriptive statistics.............................................................................................42

4.2. Empirical results: .................................................................................................44

4.3. Diagnostic test .......................................................................................................50

4.3.1. Hausman model:..........................................................................................50

4.3.2. VIF testing:...................................................................................................52

4.3.3. Heteroscedasticity Test................................................................................53

4.3.4. Autocorrelation Test ...................................................................................54

Chapter 5. Conclusions, discussion and limitation.........................................................57

5.1 Conclusion..............................................................................................................57

5.2. Recommendation ..................................................................................................58

5.2.1. For real estate companies .............................................................................58

5.2.2. For State Securities Commission..................................................................59

5.2.3. For government: ............................................................................................59

5.3. Limitation..............................................................................................................61

Bibliography......................................................................................................................62

5

Table of Figures

Figure 1. Structure of Vietnam's real estate industry. 28

Figure 2. Sales of listed real estate companies in 2022 31

Table of tables

Table 1. General credit structure of the real estate industry (unit: trillion VND) 28

Table 2. Revenue of most listed real estate companies dropped sharply in Q1/22 31

Table 3. Summarize dependent and independent variables 42

Table 4. Correlation between variables 43

Table 5. Regression analysis for different measurement of dependent variables 44

Table 6. Hausman model 50

Table 7. Testing multicollinearity by using VIF 52

Table 8. Heteroscedasticity Test 53

Table 9. Autocorrelation Test 55

Table 10. Summary the regression model results 57