Luận văn thạc sĩ UEH determinants of capital structure of listed real estate companies in vietnam

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY THE HAGUE

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DETERMINANTS OF CAPITAL STRUCTURE

OF LISTED REAL ESTATE COMPANIES

IN VIETNAM

BY

DO QUANG THAI

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, DECEMBER 2014

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UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY THE HAGUE

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DETERMINANTS OF CAPITAL STRUCTURE

OF LISTED REAL ESTATE COMPANIES

IN VIETNAM

A thesis submitted in partial fulfilment of the requirements for the degree of

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

DO QUANG THAI

Academic Supervisor:

NGUYEN HOANG BAO

HO CHI MINH CITY, DECEMBER 2014

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ABSTRACT

This research focuses on the impact of determinants to capital structure with

respect to 56 listed real estate companies in Vietnam from 2010 to 2013. Basing on two

theories of trade-off and pecking order, capital structure, which is defined by debt ratio,

is expected to provide the current prospect of Vietnamese real estate sector. The trade￾off theory mentioned about the establishment of optimal capital structure for

enterprises, while theory of pecking order implied the financing decisions by board of

managements.

For the methodology, Fixed Effect Model is used to test the results of regression

model. Non-random statistics of Fixed Effect Model would be more efficient and

consistent in order to reduce the level of bias. The data set will be arranged by panel

data, which combined both cross section and time series, helped to improve the

significant results of regression model.

Policy implications carefully mentioned about the limitation of both Pecking

order and Trade-off theories in Vietnam evidence. For Pecking order, board of

management prefers to use external financing budgets by issuing new bonds or stocks

rather than internal financing capital. The abuse of debt financing is also pointed out

the hard pressures on banking system, securities markets, and the corporate governance

structure of the listed firms. Besides that, Trade-off theory has limited its effect in

Vietnam due to centrally planned economy. The government needs to change its

administration in some listed real estate companies to create fair environment for the

whole market.

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TABLE OF CONTENTS

CHAPTER I: PRESENTATION OF THESIS RESEARCH…………… 1

1.1 Problem Statement…………………………………………………….1

1.2 Research Objectives………………………………………………...... 3

1.3 Research Questions……………………………………………………4

1.4 Scope of study………………………………………………………... 5

1.5 Structure of thesis research……………………………………………6

CHAPTER II: LITERATURE REVIEW………………………………... 7

2.1 Review of Empirical Studies…………………………………………. 7

2.2 Hypothesis of Variables…………………………………………….....11

2.2.1 Dependent Variable: Debt Ratio………………………………… 11

2.2.2 Independent Variables……………………………………………11

CHAPTER III: RESEARCH METHODOLOGY……………………......12

3.1 Analytical Framework………………………………………………... 12

3.2 Regression Model…………………………………………………….. 16

3.2.1 Assumptions of Regression Model……………………………… 16

3.2.2 Limitations of Regression Model………………………………...17

3.2.3 Equation of Regression Model…………………………………...17

3.2.4 Data……………………………………………………………… 18

3.2.5 Research Method…………………………………………………19

CHAPTER IV: RESULTS AND EXPLANATIONS……………………..20

4.1 Overview of Real Estate Companies in Vietnam…………………….. 20

4.2 Impacts of Vietnamese Real Estate Market…………………………...22

4.2.1 Inflow Capital to Real Estate Market…………………………….22

4.2.2 Land and Property Law………………………………………….. 24

4.2.3 Urbanization in Vietnam………………………………………… 24

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4.2.4 Economic growth rate (GDP’s Growth rate)……………………. 25

4.3 Descriptive Statistics…………………………………………………. 26

4.4 Leverage Testing……………………………………………………... 32

4.5 Results of Regression Model………………………………………….34

4.5.1 Multicollinearity Test by Correlation Matrix…………………….35

4.5.2 Using Wald-Test to Adjust Core Regression Model……………..36

4.5.3 Regression Model………………………………………………...36

4.5.4 Jarque-Bera Test for Normality (in Residuals)………………….. 37

4.6 Result Explanations…………………………………………………... 38

CHAPTER V: CONCLUSIONS………………………………………….. 40

5.1 Summary of Research Methodology…………………………………. 40

5.2 Major Findings……………………………………………………….. 41

5.3 Policy Implications……………………………………………………41

5.4 Limitations…………………………………………………………….42

5.5 Further Researches…………………………………………………… 43

REFERENCES……………………………………………………………….44

APPENDIX…………………………………………………………………..49

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LIST OF TABLES

Table 2.1: Expected signs of five related determinants……………………... 14

Table 4.1: Correlation matrix of debt ratio and five related determinants…..31

Table 4.2: T-statistic of debt ratio and each of determinants………………...31

Table 4.3: Leverage test of debt ratios……………………………………….32

Table 4.4: Results of regression model by FEM……………………………..34

Table 4.5: Regression model without DEBT_INTEREST………………….. 37

LIST OF FIGURES

Figure 2.1: The Trade-off Model……………………………………………. 8

Figure 2.2: The Pecking Order……………………………………………….9

Figure 3.1: Analytical framework of capital structure’s determinants……… 12

Figure 4.1: VN Index and Real Estate Index from the period 2010-2013…...21

Figure 4.2: FDI flows to Vietnam from 2006-2013………………………….23

Figure 4.3: Number of Urban Cities in Vietnam from 1985-2012………….. 24

Figure 4.4: Vietnam GDP’s Growth Rate from 2004-2013………………….25

Figure 4.5: Descriptive Statistic of debt interest and debt ratio……………...26

Figure 4.6: Descriptive Statistic of depreciation ratio and debt ratio……….. 27

Figure 4.7: Descriptive Statistic of size and debt ratio……………………… 28

Figure 4.8: Descriptive Statistic of profitability and debt ratio……………... 29

Figure 4.9: Descriptive Statistic of volatility and debt ratio…………………30

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