Impact of Ownership Structure and Corporate Governance on Capital Structure: The case of Vietnamese Firms

Abstract

This article attempts to explore how corporate governance and ownership structure affect capital structure in the context of an emerging economy like Vietnam by considering impact level of three groups of factors which are corporate governance, ownership structure and firm elements. Method of Multivariable Regression Analysis used with cross-panel data collected from non-financial firms listed on Ho Chi Minh Stock Exchanges in the period 2009-2012 shows that corporate governance measures have a significant impact on decision of capital structure, while ownership structure has not given evidences with statistical significance of its impact on capital structure choice, except the fact that managerial ownership has negative impact on capital structure of State-owned Enterprises (SOEs). Especially, the study shows that characteristics which cause effects on corporate governance measures of Vietnamese SOEs include Board size, Non-executive Directors (NEDs), CEO duality and corporate ownership structure. Besides, pecking – order theory can explain basically the impact of classical firm elements such as growth, profitability, tangibility and firm size on capital structure of Vietnamese firms. Finally, our research concludes that ownership structure and corporate governance have a certain impact on decisions of capital structure.