Abstract
The goal in this paper is to assess the determinants of capital structure for Vietnam’s seafood processing enterprises (SEAs) in comparison with enterprises of other processing industries (DIFs). The result of this study was based on applying Shumi Akhtar’s model (2005) [22] and Shumi Akhtar, Barry Oliver’s (2005) [23] and using data of 302 enterprises, including 63 in fisheries industry, across 5 years from 2004 to 2008. Total observations were 772, including 284 and 488 for models applied to seafood processing enterprises and others respectively. The results show that capital structure differs between SEAs and DIFs. Accordingly, size and collateral value of assets were found to be significant determinants of capital structure for both SEAs and DIFs. For SEAs, profitability, growth, agency costs and interest expense affect the capital structure and play a crucial role. Meanwhile, bankruptcy risks and age of enterprises are essential determinants for DIFs. In relation to interaction effects, size and collateral value of assets are significant in explaining the differences in the capital structure of SEAs relative to that of DIFs. Finally, determinants of capital structure rarely varied over the sample period for both SEAs and DIFs. The findings suggest implications for Vietnam’s seafood processing enterprises (SEAs) on flexible usage of financial leverage. Specifically, to increase or decrease the level of financial leverage, SEAs need to take into account size, collateral assets, profitability and growth rate of enterprises as well as recommend measures to cope with shocks in variations of bank interest rates.
Highlights
Corporate capital structure has been remaining a debating issue in modern corporate finance
Models presented by Shumi Akhtar are defined as below: Model 1 is applicable to Australian multinational corporations (MCs): LTD = α + β1DIVER + β2FX + β3PR + β4TW + β5LP + β6JM + β7BC + β8NDTS +β9PROF +β10SIZE +β11CVA +εi
The results show that determinants of capital structure for Japanese domestic corporations consist of enterprise age, agency costs, business risks, collateral value of assets, free cash flow, profitability and size of enterprise; while determinants of capital structure for Japanese multinational corporations include agency costs, bankruptcy risks, business risks, collateral value of assets, growth, non-debt tax shield, profitability and size of enterprise
Summary
Corporate capital structure has been remaining a debating issue in modern corporate finance. TAÏP CHÍ PHAÙT TRIEÅN KH&CN, TAÄP 14, SOÁ Q1 - 2011 of capital structure, Shumi Akhatar (2005) [22] and Shumi Akhtar, Barry Oliver (2005) [25] use financial leverage (LTD) to measure capital structure and it is defined as: LTD = Long term debt/ (Short term debt + Market value of equity) This measure is relevant to the research by Burgman (1996) and Chkir & Jean-Clause (2001). Previous researches show that larger scale enterprise generally has higher level of debt This suggests a positive relationship between capital structure and corporate firm size. Size of equity is seen as a representative factor of firm value It is a determinant of capital structure, playing a significant role in theory, if enterprise possesses larger equity size, it will result in decreased probability of mobilizing long term debt.
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