Abstract
This study is conducted to examine how macro determinants affect capital structure of non-financial joint stock companies in Vietnam. The two-step system GMM is used to analyze data which is a combination of two sources: financial statements of 464 listed joint stock companies on 3 main stock exchanges (HOSE, HNX, and UPCOM), and World Bank database in the period of 2008-2015. The findings show that firms’ capital structure decisions are impacted by elements which reflect macroeconomic conditions. In detail, the inflation rate has positive influence while corporate income tax rate is on the contrary. Besides, the affectation of financial development and institutional quality on capital structure of these enterprises is found clearly. Not only macro factors, this research explores but also other determinants which are characteristics company such as size, profitability, and payment capacity. Finally, it is noticeable that capital structure decisions depend on capital structure of the previous year.
Highlights
Structuring capital is one of the most important decisions of corporate financial officers
As mentioned in literature review, six variables which describe firm’s characteristics affect capital structure in most of studies. It is not clear on the impact of the business environment. In this paper, these six independent variables remain unchanged in the model, we add each variable group of macro influence into the model gradually
It results from the perfect multicollinearity between those variables after testing Pearson autocorrelation coefficient and variance-inflation factor (VIF)
Summary
Structuring capital is one of the most important decisions of corporate financial officers. It was further developed by many following theories such as the Trade-off theory of capital structure (Kraus and Litzenberger, 1973); the Pecking order theory (Myers, 1984; Myers and Majluf, 1984); the Agency costs theory (Jensen and Meckling, 1976); the Market timing theory (Graham and Harvey, 2001) In parallel with these theories, the explorations from the empirical studies proved that the decision to choose a capital structure was affected by factors that reflected the company's unique characteristics, such as size, profitability, opportunity for growth, tangible assets, liquidity, risks of bankruptcy... Many recent studies have examined the impact of the company's characteristics and of factors which reflected the government policies, law, macroeconomic status or financial development of the host country where the firm operated (Bokpin, 2009; Bostos et al, 2009; Kayo and Kimura, 2011; Camara, 2012; Mokhova and Zinecker, 2014; Memon et al, 2015; Temimi et al, 2016; Belkhir et al, 2016)
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