Luận văn thạc sĩ UEH determinants of leverage , case study of vietnam seafood processing and

UNIVERSITY OF ECONOMICS

HO CHI MINH CITY

VIETNAM

INSTITUTE OF SOCIAL STUDIES

THE HAGUE

THE NETHERLANDS

VIETNAM- THE NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

DETERMINANTS OF LEVERAGE: case study of

VIETNAM SEAFOOD PROCESSING AND EXPORTING

INDUSTRY both for listed and unlisted firms

By

PHAM THI TRUC LAM

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

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

Academic Supervisor:

Assoc. Prof. NGUYEN TRONG HOAI

HO CHI MINH CITY, DECEMBER 2012

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CERTIFICATION

"I certificate that the substance of the thesis has not already been submitted for any

degree and is not currently submitted for any other degree.

I certify that to the best of my knowledge and help received in preparing the thesis

and all sources used have been acknowledged in the thesis."

Signature

Pham Thi True Lam

Date .................. .

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ACKNOWLEDGMENTS

First and foremost, I would like to send my dearest thank to my supervisor, Assoc.

Prof. Nguyen Trong Hoai for his guidance and support.

In addition, I would also like to express my gratitude to all persons and

organizations for their support, provision of assistance and information that made

this thesis possible. I am also grateful to the lecturers and staff of the project who

helped improve my knowledge and fulfill the programme .

Finally, I am greatly indebted to my family for their love for and support of me,

keeping me in good condition for learning. I am also grateful to my close friends for

their warm encouragement.

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ABSTRACT

Although there are many prior studies about leverage as well as capital

structure on the world in general and Vietnam in particular, results of these

researches are still inconsistent. Moreover, in context of Vietnam, most of studies

about leverage are of listed firms. So, this study works with data of both listed and

unlisted firms. The purpose of this study is to examine the relative importance of

some factors to the leverage of Vietnam seafood processing and exporting

enterprises. A sample of 20 listed and 15 unlisted enterprises for a period of 3

years from 2009 to 20 11 was chosen and tested base on pecking order theory and

trade off theory. The results finding from the thesis is that firm growth

opportunities and firm size have positive related to leverage, profitability, liquidity

have a negative effect to leverage whereas tangibility assets and non-debt tax

shield have no impact on leverage of Vietnam seafood processing and exporting

enterprises.

Key words: leverage, pecking order theory, trade off theory

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CONTENTS

Certification ........................................................................................................................... i

Acknowledgement ................................................................................................................. ii

Abstract ................................................................................................................................. iii

Contents ................................................................................................................................ iv

List of Tables ......................................................................................................................... vii

List of Abbreviations ............................................................................................................. vii

CHAPTER I: INTRODUCTION FOR THE STUDY ........................................................ 1

1.1 Problem statement: .................................................................................................... 1

1.2 Research objectives: .................................................................................................. 3

1.3 Research questions: .................................................................................................... 3

1.4 Research Methodology: ............................................................................................. 3

1.5 Structure of the thesis: ............................................................................................... 4

CHAPTER II: LITERATURE REVIEW FOR DETERMINANTS OF LEVERAGE ...... 5

2.1 Key Concepts: ............................................................................................................ 5

2.2 Related theories: ........................................................................................................ 6

2.2.1 The Modigliani-Miller theorem: ......................................................................... 6

2.2.2 Agency cost theory: ............................................................................................ 7

2.2.3 Trade-off theory: ................................................................................................. 8

2.2.4 The pecking-order theory: ................................................................................... 8

2.3 Determinants of leverage: ........................................................................................ 10

2.3.1 Leverage and Profitability: ................................................................................ 12

2.3.2 Leverage and firm size: ..................................................................................... 13

2.3 .3 Leverage and Firm Growth: .............................................................................. 15

2.3.4 Leverage and Non-debt tax shield : ................................................................. 16

2.3.5 Leverage and tangible assets: ............................................................................ 17

2.3.6 Leverage and liquidity: ..................................................................................... 19

2.4 Empirical review on determinants of leverage: ....................................................... 20

2.4.1 Empirical evidences finding from the world: ................................................... 20

IV

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2.4.2 Empirical evidences finding from Vietnam perspective: .................................. 24

2.5 Chapter remarks: ...................................................................................................... 25

CHAPTER III: RESEARCH METHODOLOGY ............................................................. 27

3.1 Data and variables description: ................................................................................ 27

3.1.1 Data: .................................................................................................................. 27

3 .1.2 Description of variables: ................................................................................... 27

3.2 Methods of estimation: ............................................................................................ 29

3.2.1 Ordinary Least Squares (OLS) estimator: ......................................................... 30

3 .2.2 Fixed Effects (FE) estimator: ............................................................................ 31

3.2.3 Random Effects Estimator (RE): ...................................................................... 32

3.2.4 Hausman specification test: .............................................................................. 32

3.3 Hypotheses ............................................................................................................... 33

3.4 Chapter remarks: ...................................................................................................... 33

CHAPTER IV: OVERVIEW OF SEAFOOD PROCESSING AND EXPORTING

ENTERPRISES ................................................................................................................. 3 5

4.1 Introduction of the seafood export industry: ........................................................... 35

4.2 Analysis of capital structure of the seafood enterprises: ......................................... 38

4.2.1 Debt to equity ratio: .......................................................................................... 38

4.2.2 The equity growth rate: ..................................................................................... 41

4.3 Chapter remarks: ...................................................................................................... 42

CHAPTER V: EMPIRICAL RESULTS ........................................................................... 43

5.1. Descriptive statistics ............................................................................................... 43

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5.2 Analysis of the correlation between all variables: ................................................... 44

5.3 Test multicollinearity: .............................................................................................. 45

5.4 Empirical results: ..................................................................................................... 46

5.4.1 OLS estimator: .................................................................................................. 46

5.4.2 Hausman specification test: .............................................................................. 48

5.4.3 Fixed effects estimator: ..................................................................................... 49

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5. 5 Chapter remarks: ...................................................................................................... 53

CHAPTER VI: CONCLUSION, POLICY RECOMMENDATION AND

LIMITATION .................................................................................................................... 55

6.1 Conclusion ............................................................................................................... 55

6.2 Policy recommendation ........................................................................................... 57

6.3 Limitation and suggestion for further study: ........................................................... 61

Reference ...................................................................................................................... 62

Appendix ...................................................................................................................... 68

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