STATE BANK OF VIETNAM
BANKING ACADEMY

NGUYEN THI TUYET LAN
TARGET CAPITAL STRUCTURE OF
CONSTRUCTION INDUSTRY ENTERPRISES LISTED
ON THE STOCK MARKET OF VIETNAM
Major: Finance and banking
ID: 62340201
PhD DISSERTATION SUMMARY

HANOI - 2019


THE DISSERTATION IS COMPLETED
AT BANKING ACADEMY
Scientific instructors:
1. Assoc. Prof. Le Van Luyen
2. Assoc. Prof. Nguyen Thi Hoai Le
Reviewers:
1.
2.
3.
The dissertation will be defensed before the Dissertation
Assessment Council at Banking Academy
At:
Date:

This dissertation can be found at:
- National Library
- Banking Academy’s library

For example, researches by Le Dat Chi (2013), Vo Thi Quy (2014), Le Thi Thanh Tu
(2012), Do Van Thang and Trinh Quang Thieu (2010), Le Hoang Vinh (2009). In the
context that the world economy is in recession and the domestic economic situation still
has many difficulties, in order to survive and develop, businesses need to maximize their
internal strengths. Building a proper capital structure is also a way for businesses to
promote that power. Capital structures that depend mostly on debt or skews to the use of
equity may be appropriate at this stage but not at another stage.
Thus, in the world and in Vietnam there have been many researches on capital
structure. Dealing with capital structure, first, managers must consider what are the factors
affecting capital structure and how they affect capital structure. Then, managers should
also know the effect of capital structure on the performance of their companies. There have
been many empirical studies on the factors affecting capital structure, each study dispersed
into different areas. However, the factors affecting capital structure and the impact of
capital structure on the performance of the construction industry are almost limited.
Therefore, the author chooses the topic: "Target capital structure of construction industry
enterprises listed on the stock market of Vietnam" as the dissertation topic.
2 Research objectives
This dissertation analyzes the target capital structure through analyzing the capital
structures of listed construction companies on Vietnam's stock market. The results of
empirical analysis will be one of the important bases for investors and managers to decide
more appropriate capital structure to improve the performances of enterprises. Specifically,
the study will answer the following questions:


i)

What are the factors that affect the capital structure of listed construction
companies on the stock market of Vietnam?
ii)
How does capital structure affect business performance (profit margin) of

research. In this research, a model is developed to test the hypotheses and interviews and
surveys are conducted to allege the research result. Thus, this dissertation has developed
one more step in term of methodology and research tools for this topic.
This dissertation is first developed to provide an academic analysis on how to build
target capital structures for enterprises and assess its impact on business performances. I
expect that the method suggested from this research will be applied in the financial
management process of enterprises in the construction industry in particular and those of
businesses in Vietnam in general.
Practical aspects:
First, the dissertation’s result provides researchers and financial managers with
comprehensive view of how to approach and measure enterprises’ target capital structures.
Secondly, the research evaluates the impact of target capital structure on
enterprises’ performance. It has showed that using debts will result in positive
performances of businesses at first. However, once the threshold is exceeded, the use of
debt will adversely affect the performance of enterprises.
Thirdly, this dissertation uses both quantitative and qualitative research methods.
Through the quantitative model developed, the research has constructed the target capital
structure and evaluated its impact on the performances of enterprises in the construction


industry which are listed on Vietnam stock market. At the same time, the dissertation
exploits a qualitative research tool which is in-depth interviews with financial managers to
evaluate the quantitative research result. Thus, this dissertation can be a reference for
research methodology, research design, research model and data processing for
researchers, lecturers and students of the same interest.
5. Dissertation’s structure
Apart from the table of content, list of abbreviations, List of tables, list of charts, list of
reference and appendices, the dissertation is structured into 5 following chapters:
Chapter 1: Overview of researches and theoreotical basis about capital
structure and target capital structure of enterprises

on capital structure of enterprises are done using data for a short period of 2 to 3 years which
are not long enough to see the long-term trend. Therefore, this dissertation, on the basis of
inheriting the advantages of the previous studies such as the theoretical basis of the factors
affecting the capital structure of enterprises and the impact of capital structure on business
performance of enterprises, etc., will fulfill the following research holes: i) Summarize and
give theoretical views on the target capital structure of enterprises; ii) Analysis of factors
affecting capital structure, thereby building the target capital structure for enterprises; iii) The
dissertation analyzes the impact of target capital structure on business performance of listed
construction companies on Vietnam's stock market; iv) The thesis conducted in-depth
interviews with financial managers of enterprises to reaffirm the quantitative research result.
1.2 Theoreotical basis about capital structure and target capital structure


1.2.1 Overview of capital structure
1.2.2 Theories about capital structure
Durand’s traditional theory about capital structure
Modigliani and Miller’s capital structure theory
Trade-off theory about capital structure
Pecking order theory
The market timing theory
1.1.2 Target capital structure of enterprises
The target capital structure is the capital structure associated with the
operational objectives of the business at each stage, when the business objectives of the
enterprise change, the target capital structure also changes. Thus, the target capital
structure is not a static concept. Measuring the target capital structure is to measure the
capital structure associated with the business objectives. More specifically, the target
capital structure is planned by the company to mobilize more capital. Target capital
structure may change when the conditions change. Target capital structure is a structure
that a business often uses when deciding to expand its business capital. In fact, the
capital structure of enterprises can fluctuate around the target structure for two reasons.

CCVit = + Xit + it
(*)
where CCVit is the capital structure of enterprises i at time t, which is measured by total
debt on total assets (Tran Thi Bich Ngoc, 2017; Vo Minh Long, 2017; Dang Thi Quynh Anh and
Quach Thi Hai Yen, 2014; Zeitun and Tian , 2007; Ebaid, 2009 and Pratheepkanth, 2011); X it is


the vector of factors affecting capital structure; it is noise. The estimated results of the model (*)
are the enterprise's target capital structure at time t.
1.3 Factors affecting capital structure
1.3.1 Microeconomic factors
1.2.1 Macroeconomic factors
1.4 Impact of target capital structure on enterprises’ performance
1.4.1 Enterprises’ business performance
1.4.2 The role of capital structure to enterprises’ business performance
CHAPTER 2: RESEARCH METHODOLOGY
This dissertation exploits both quantitative and qualitative research methods.
Quantitative research is used to evaluate factors affecting enterprises' capital structure, and
via this model, the dissertation builds the target capital structure for construction industry
enterprises listed on Vietnam stock market. After that, the dissertation assesses the impact
of target capital structure on enterprises' performance. Finally, the dissertation uses a
qualitative research tool which is in-depth interview with financial management managers
to evaluate quantitative research results from the perspective of experts and practical
applications.
2.1 Analytical framework and research model
Based on the trade-off theory of capital structure, pecking order theory, theory of
corporate finance and based on the results of empirical researches summarized in Chapter
1, the dissertation uses the analytical framework as shown in Figure 2.1 below.
Figure 2.1 The dissertation’s analytical framework
Enterprise scale

capital structure on business performance. Finally, to reevaluate the results of quantitative
research, the author conducts in-depth interviews with financial managers of construction
enterprises listed on Vietnam's stock market.


Based on the research model of Drobetz and Wanzenried (2006) and research by
Tran Hung Son (2011), the dissertation builds the model of factors affecting capital
structure as follows:
CCV = β0 + β1*SIZE + β2*NDTS + β3*PRFT + β4*TANG + β5*TAX +
β6*GROWTH + β5*RISK + β5*LIQ + β5*DIV + β5*UNIQ + ui
(2.1)
Based on the research model of Doan Vinh Thang (2016) and Doan Ngoc Phuc
(2014), the dissertation builds the model estimating the influence of the target capital
structure on the performances of enterprises as follows:
HQHĐ = β0 + β1*CCVMT + β2*SIZE + β3*PRFT + β4*TANG + β5*GROWTH +
β6*LIQ + ui
(2.2)
2.2 Data sources
The research data used for quantitative research are taken from StockPlus with
research subjects that are companies in construction industry in Vietnam listed on the two
exchanges namely HNX and HOSE in the period of 2005-2017.
2.3 Estimation method
2.4 Qualitative method
Besides the quantitative research method discussed above, the dissertation uses
additional qualitative research method to re-evaluate the result found by the quantitative
research. Specifically, the dissertation surveyed a number of listed construction enterprises
on the Vietnamese stock market. The author conducts in-depth interviews with financial
managers of enterprises on their assessment of the model used by this dissertation to build
enterprises’ target capital structure, and has them compare it with the actual ways exploited
by enterprises to build their target caiptal structure. Also, enterprises’ financial managers

ENTERPRISES LISTED ON THE STOCK MARKET OF VIETNAM
4.1 Statistical description and correlation among variables
4.2 Estimation result and discussion
4.2.1 Estimation result and discussion about factors affecting the capital structures of
construction industry enterprises listed on the stock market of Vietnam
The model used for analysis is a robusted random effect model because Hausman
test gives a large p-value. The estimated effects of the factors affecting capital structure of
listed enterprises in Construction industry are shown in Table 4.3.
Estimation result shows that tangible fixed assets (TANG), Actual Tax Rate (TAX),
Growth Opportunities (GROWTH), Risk (RISK), do not affect the target capital structure
of listed enterprises in construction industry. This result does not support research
hypotheses H4, H5, H6, H7. In contrast, the regression coefficients of the Scale factors
(SIZE), Non-debt tax benefits (NDTS), corporate profitability (PRFT) Liquidity (LIQ),
Dividend payment ratio (DIV) and the characteristics of corporate assets (UNIQ) are
significant at 10% level. This implies that these factors affect the capital structure of
enterprises listed in Construction industry in Vietnam. Some have positive effects and
some have negative effects.
In addition, the estimation of the capital structure derived from the model is the
target capital structure of enterprises (Doan Vinh Thang, 2016). Based on the model’s
estimation result, the author builds the average target capital structure of listed construction
enterprises on Vietnam stock market over the years as shown in Table 4.4.
Table 4.4 Average target capital structure of construction industry enterprises listed
on the stock market of Vietnam for the period from 2005 to 2017
Lower bound of target
Upper bound of target
Year
capital structure
capital structure
2005
0,641

0,658
2016
0,626
0,642
2017
0,614
0,638
Source: Calculated by the author
Accordingly, the average target capital structure of construction industry enterprises
listed on Vietnam stock market over the years is relatively stable (about 60%).
4.2.2 Estimation result and discussion about the impact of target capital structure on
performance of construction industry enterprises listed on the stock market of Vietnam
The model used for analysis is a robusted fixed effect model because Hausman test
give small p-value results. The estimation of the effects of target capital structure on the
performance of listed construction enterprises is shown in Table 4.5 and Table 4.6.
Estimation result with ROA (Table 4.5) indicates that regression coefficient
associated with target capital structure is negative and significant at 10% level of
significance. This implies that target capital structure has adserve effect on the rate of


return on assets of listed construction enterprises in Vietnam. This result does not support
the research hypothesis H11. However, the result supports the view of Maslis (1983).
Accordingly, if the debt ratio is in the range of 0.23 to 0.45, the debt ratio positively affects
the performance of businesses. If the debt ratio is higher, it has a negative effect on the
performance of the businesses. Similarly, Dilip Ratha's (2003) study shows that financial
leverage negatively affects the performance of enterprises in developing countries. On the
other hand, for a long period from 2006 to 2012, the lending interest rates increased. As a
result, using a lot of debts is not conducive to the performances of enterprises.
The estimation result with ROE (return on equity) is shown in Table 4.6. Similar to
the estimation result with ROA, the capital structure also has the opposite effect on ROE of

CONSTRUCTION INDUSTRY ENTERPRISES LISTED ON THE STOCK
MARKET OF VIETNAM
5.1 Prospectives of the construction industry
5.2 Solutions to build the target capital structure and enhance business performances
of construction industry enterprises listed on the stock market of Vietnam
5.2.1 Properly adjust enterprise scale
5.2.2 Enhance business operating efficiency
5.2.3 Increase equity and exploit more capital mobilization channels
5.2.4 Invest in the renovation of fixed assets
5.2.5 Innovate operating method
5.2.6 Expand the list of collaterals
5.2.7 Complete the enterprise evaluation system
5.2.8 Enhance information transparency
5.2.9 Complete forms of financial support for enterprises
5.2.10 Develop and expand loan markets
5.3 Policies and laws related to Construction industry
5.3.1 Policy to stimulate the demand of Real estate market
5.3.2 Bidding Law 2013 And Decree 63 on bidding
5.3.3 New legal framework for PPP form
5.3.5 Development plans
CONCLUSION
1. General conclusion
Based on the theoretical basis of corporate capital structure, this study has analyzed
the factors affecting the capital structure of listed construction industry in Vietnam from
2005 to 2015. Empirical research result shows that factors that affect capital structure
include Scale (SIZE), Non-debt tax benefits (NDTS), Business profitability (PRFT) and
Liquidity (LIQ). In contrast, factors that do not affect the target capital structure include
tangible fixed assets (TANG), Actual Tax Rates (TAX), Growth Opportunities
(GROWTH), Risks (RISK), Ratio dividend payment (DIV) and specific characteristics of
corporate assets (UNIQ).

.


LIST OF THE AUTHOR’S PUBLISHED RESEARCHES
1. Nguyen Thi Tuyet Lan (2017), "The impact of capital
structure on business performance of construction
companies listed on Vietnam stock market", Banking
Science and Training Review, No. 185 October 2017,
page 59-66.
2. Nguyen Thi Tuyet Lan (2017), “Study the factors
affecting the target capital structure of listed
construction companies on the stock market of
Vietnam”, Banking Science and Training Review, No.
178, March 2017, page 39-47, 56.
3. Le Van Luyen, Nguyen Thi Tuyet Lan (2017), "Factors
affecting the access to loans of construction enterprises
in Vietnam", Promoting Financial Inclusion in Vietnam International Conference, page 33 – 40.
4. Nguyen Thi Tuyet Lan, Mai Thi Nhi (2015), "Empirical
evidence of the optimal capital structure threshold of
listed companies on HOSE", Banking Science and
Training Review, No. 158 July 2015.
5. Nguyen Thi Tuyet Lan (2018), "Vietnamese Enterprise
in the Industrial Revolution 4.0", Review of Finance,
2nd period - June 2018 (683), page 57-59
6. Nguyen Thi Tuyet Lan (2016), "ETF - Opportunities
and Challenges for Investors", Proceedings of Scientific
Conference: Development of Exchange Traded Funds
(ETF) in Vietnam, Falculty-level conference, Bach
Khoa Publishing House, May 2016, p. 154-159.
7. Nguyen Thi Tuyet Lan (2015), "Accelerating the