Capital Structure and Its Determinants: Evidence from Vietnam

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BANKING ACADEMY

INFORMATION RESEARCH RESULTS OF RESEARCH

1. General information:

- Topic name: Capital Structure and Its Determinants: Evidence from Vietnam.

- Name of student: 1. Nguyen Gia Tan – 21A4010507 – K21CLCC

2. Le Duc Viet – 21A4011018 – K21CLCA

3. Nguyen Xuan Thu – 21A4020544 – K21CLCD

4. Dang Quang Minh – 21A4030322 – K21CLCE

- Majors: Finance Year: 3 Year of training: 3

- Instructor: PhD Nguyen Thi Le Thanh – Head of Auditing Department (Banking Academy)

2. Topic goal:

+ Determinants of capital Structure of Vietnamese-listed firms on the stock market.

+ Forming calculation methods, financial-related ratios to finalize statistical results.

+ Proxy variables will show a positive or negative impact on capital structures like theoretically

predicted signs in Table 2. Consequently, the two variables representing the Non-debt tax

shield have a negative effect on the firm’s leverage and are different from the predicted signs.

3. Novelty and creativity:

Choosing evidence from Vietnam because the institutional environment for Vietnamese firms

has some salient features, is divergent concerning high–developed countries where the state

still maintains its controlling right in a large number of major firms.

Instead of just considering the impact of financial ratios, research has not only changed how

impacts are calculated but also identified the debt maturity structure calculated based on the

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book value and market value of equity. Synonymously, the collection of big data and updating

it in the recent 4 years from 2017 to 2020, has influenced the outcome of the factors affecting

financing decisions in developed capital markets in Vietnam.

4. Research results:

The study proves that Vietnam has 2 outstanding and different characteristics compared to

developed countries, so Vietnam has a different institutional structure compared to those

countries. In addition, the results also show that the variables D/TA, NDTs and Industry have a

positive effect on financial leverage, from which we see that businesses need a large amount of

money to buy shares to implement their projects. Therefore, they borrow from banks to meet

their capital needs, so loans account for the majority of capital structure of Vietnamese

enterprises.

5. Contribution in terms of socio-economic, education and training, security, defenestrate

own and applicability of the topic

6. Scientific publication of students from the research results of the topic (specify the name

of the journal if any) or comments and assessments of the institution that applied the research

results (if any)

May 19, 2021

Students are mainly responsible for the

implementation of the topic

(Sign and write full name)

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The instructor's remarks regarding the scientific contributions of the students who have

made the document (the instructor records this section):

May 19, 2021

Instructor

(Sign and write full name)

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BANKING ACADEMY

INFORMATION ABOUT STUDENTS

RESPONSIBILITIES FOR IMPLEMENTATION OF THE TOPIC

I. STUDENT SUMMARY:

Full name: Nguyen Gia Tan

Date of birth: June 24, 2000

Birthplace: Ha Noi

Student code: 21A4010507 Class: K21CLCC Course: 5 Major: Finance

Address: No.18, 88 Lane, Hoang Nhu Tiep Street, Bo De Ward, Long Bien District, Ha Noi

Phone No: 0868235837 Email: [email protected]

II. LEARNING PROCESS (student performance from year 1 to now)

*First year: Finance Major: Finance

Study result: System 10: 7.95/10

System 4: 3.04/4

Summary of results: Good

*Second year: Finance Major: Finance

Study result: System 10: 7.92/10

System 4: 3.02/4

Summary of results: Good

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* Third year: Finance Major: Finance

Study result: System 10: 8.14/10

System 4: 3.26/4

Summary of results: Very good

May 19, 2021

Students are mainly responsible for the

implementation of the topic

(Sign and write full name)

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DECLARATION OF AUTHORSHIP

We hereby declare that this thesis was carried out by ourselves under the guidance

and supervision of PhD Nguyen Thi Le Thanh; and that the work contained and the results in

it are true by the author and have not violated research ethics. The data and figures presented

in this thesis are for analysis, comments, evaluation and are consistent with the reality of

Vietnam by our work and have been duly acknowledged in the reference part. In addition,

other comments, reviews and data used by other authors, and organizations have been

acknowledged, and explicitly cited. I will take full responsibility for any fraud detected in

my thesis. Banking Academy is unrelated to any copyright infringement caused on our work

(if any).

Author

Leader

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ACKNOWLEDGMENT

We sincerely thank the instructors and teachers in the Accounting-Auditing

Department of Banking Academy for creating the best conditions for us to carry out

this research.

Specifically, we would like to express our sincerest gratitude to the businesses

for which the author has removed conditions, surveys and other experts in related

fields, who contributed extremely valuable and reliable knowledge, for the author to be

able to complete our research.

Author

Leader

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CONTENTS

DECLARATION OF AUTHORSHIP..............................................................................1

ACKNOWLEDGMENT....................................................................................................7

CONTENTS ........................................................................................................................8

LIST OF TABLES............................................................................................................10

ABBREVIATIONS...........................................................................................................11

INFORMATION RESEARCH RESULTS OF RESEARCH........................................1

INTRODUCTION ............................................................................................................13

CHAPTER 1. LITERATURE REVIEW .......................................................................16

1.1. Theories on the determinants of the capital structure..................................................16

1.1.1. Model Based on Trade-off theory ............................................................................16

1.1.1.1. Trade-off hypothesis.............................................................................................16

1.1.1.2. Agency Theory ......................................................................................................18

1.1.2. Asymmetric Information ..........................................................................................25

1.1.2.1. Interaction of Investment and Capital Structure....................................................25

1.1.2.2. Signaling with Proportion of Debt ........................................................................30

1.1.2.3. Models Based on Managerial Risk Aversion ........................................................32

1.1.3. Summary..................................................................................................................34

1.2. The measurements of capital structure ........................................................................35

1.3. The Determinants of Capital Structure........................................................................36

CHAPTER 2. DATA AND METHODOLOGY ............................................................42