Abstract
The paper aims to investigate the factors affecting firm capital structure in the context of Vietnam. The research sample includes 290 non-financial listed companies on Vietnamese stock market. This study applied Generalized Method of Moments (GMM) to explain the research results. The paper investigates six factors influencing on firm capital structure including return on assets (ROA), return on equity (ROE), firm size, tangible assets, risks, and growth. The empirical results show that return on assets, tangible assets, risks, and growth have a statistically significant positive effect on the firm capital structure while return on equity has a statistically significant negative effect on the firm capital structure. In addition, when dividing companies into sectors, the study realized that determinants of capital structure in some sectors are consistent with results for entire sample. Finally, firm size has the same impact on capital structure in oil & gas companies and material companies whereas it is not statistically significant for other companies. These evidences provide a new insight to managers on how to determine the reasonable capital structure.
Highlights
In term of practices, capital structure solutions are always a top concern of businesses
Some authors argued that firm size has the positive effect on capital structure (Trinh & Phuong, 2016; Akgul and Sigali, 2018; Huong, 2018), but some argue that firm size has the negative effect on capital structure (Al-Singlawi and Aladwan, 2016) or has no statistically significant impact on capital structure (Guruswamy and Marew, 2016)
The results showed that: for Japanese domestic firms, determinants of capital structure included profitability, size, and other factors such as firm age, agency costs, business risks, collateral value of assets, free cash flow; for multinational firms, the determinants of capital structure are similar to domestic firm and some more factors have positive effect on firm leverage of multinational firms are: collateral, growth, non-debt tax shields and bankruptcy risk
Summary
Capital structure solutions are always a top concern of businesses. Since the study of Modiglani & Miller (1958), there are many studies on determinants of capital structure, both developed countries and developing countries. Previous researches normally studied determinants on capital structure in whole group of companies (Huang and Song, 2002; Fraser et al, 2006) or a specific type of companies (Sheikh and Wang, 2011 at manufacturing firms; Almanaseer, 2019 at banks). Very few studies have conducted research for various type of companies and make comparison of the determinants of capital structure among companies. Researches on the factors affecting the capital structure have been carried out mainly in developed countries for decades while very few studies in developing countries and in transitional economies like Vietnam. This topic needs to be researched in Vietnam to provide more empirical evidences on factors affecting capital structure to supplement the literature of capital structure
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