Factors Affecting Capital Structure of Vietnamese-Listed Construction Companies

Abstract

This research aims to investigate and points out major determinants of capital structure of listed construction enterprises in Vietnam during 2014 - 2019, and thereafter, prescript recommendations on how business executives can maintain a healthy capital structure. The authors have studied several research models and estimation methodologies including Pool OLS, Fixed Effect Model and Random Effect Model with regards to secondary data set of 94 firms as well as inspection data of 472 samples in order to devise the model used in this research. After analyzing descriptive statistics of macro and micro factors that influence an enterprise capital structure, the research apply a regression model to pinpoint the micro determinants of the ratio of total debt of the enterprise. The regression research results reveal six key determinants of capital structure. On the one hand, four variables are statistically significant at 1% level, which are enterprise scale (SIZE), liquidity (LIQ), return on assets (ROA), corporate income tax (TAX) and company age (AGE). Apart from that, growth rate (GROW) is statistically significant at 5% level. In contrast, tangible assets (TANG) has no impact on capital structure. Other than that, business managers can refer to research to make decisions over capital structure to ensure the development plan for construction enterprises.