Download miễn phí Luận văn Capital structure and firm performance: case study: listed companies in hochiminh stock exchange



TABLE OF CONTENTS
ACKNOWLEDGEMENT .i
ABSTRACT . ii
TABLE OF CONTENTS . iii
LIST OF FIGURES . v
LIST OF TABLES .vi
ABBREVIATIONS . vii
CHAPTER 1: INTRODUCTION . 1
1.1 BACKGROUND . 1
1.2 RESEARCH PROBLEMS . 3
1.3 RESEARCH OBJECTIVES . 4
1.4 RESEARCH METHODOLOGY AND SCOPE . 5
1.5 STRUCTURE OF THE STUDY . 5
CHAPTER 2: LITERATURE REVIEW . 7
2.1 INTRODUCTION . 7
2.2 CAPITAL STRUCTURE . 7
2.3 FIRM PERFORMANCE . 11
2.4 HYPOTHESIS AND EMPIRICAL MODEL . 12
2.4.1. Model 1: The Leverage Model . 12
2.4.2. Model 2: The Firm Value Model . 15
CHAPTER 3: RESEARCH DESIGN . 18
3.1 INTRODUCTION . 18
3.2 DATA . 18
3.3 RESEARCH DESIGN . 18
3.3.1. Research Sample . 19
3.3.2. Data Analysis Method . 20
3.4 VARIABLES MEASUREMENT FOR MODEL 1 . 20
3.4.1. Dependent Variables . 20
3.4.2. Independent Variables . 21
3.5 VARIABLES MEASUREMENT FOR MODEL 2 . 21
3.5.1. Dependent Variables . 21
3.5.2. Independent Variables . 22
3.6 FRAMEWORK OF THE STUDY . 23
3.7 SUMMARY . 24
CHAPTER 4: EMPIRICAL RESULTS OF THE RESEARCH. 25
4.1 INTRODUCTION . 25
4.2 CHARACTERISTICS OF RESEARCH SAMPLES . 25
4.3 DESCRIPTIVE STATISTICS . 26
4.4 REGRESSION ANALYSIS . 29
4.4.1. Model 1: The Leverage Model . 29
4.4.2. Model 2: The Firm Value Model . 32
CHAPTER 5: CONCLUSIONS, RECOMMENDATIONS AND LIMITATIONS . 38
5.1 INTRODUCTION . 38
5.2 CONCLUSIONS . 38
5.3 RECOMMENDATIONS . 39
5.4 LIMITATIONS . 40
REFERENCES . 41
APPENDIX A . 44
APPENDIX B . 45
APPENDIX C . 51
1.1 BACKGROUND
The theory of the capital structure is an important reference theory in firm's
financing policy. The capital structure refers to firm includes mixture of debt and
equity financing. The topic of optimal capital structure has been the subject of
many studies.
The modern theory of the capital structure originate from the contribution of
Modigliani and Miller in 1958, under the perfect capital market assumption1
Jensen and Meckling (1976) introduce the concept of agency costs and investigate
the nature of the agency costs generated by the existence of debt and outside
equity. When considering corporation tax, bankrupt costs and agency costs at the
same time, trade-off theory can be introduced to derive the existence of the
optimum capital structure. Leland (1994) extends the results of Merton (1974) and
Black and Cox (1976) to include taxes, bankruptcy costs to derive the optimal
capital structure. Deangelo and Masulis (1980) argue that the existence of non-debt
corporate tax shields such as depreciation deductions is sufficient to overturn the
leverages irrelevancy theorem. Hovakimian, Opler, and Titman (2001) test the
hypothesis that firms tend to a target ratio when they either raise new capital or
retire or repurchase existing capital. They found firms should use relatively more
debt to finance assets in place and relatively more equity to finance growth
opportunities.
that if
there is no bankrupt cost and capital markets are frictionless, if without taxes, the
firm value is independent with the structure of the capital. In 1963, under
considering the corporate taxes, Modigliani and Miller modified the conclusion to
recognize tax shield. Because debt can reduce the tax to pay, so the best capital
structure of enterprises should be 100% of the debt. But this seems to be
unreasonable in the real world.
It has also been argued that profitable firms are less likely to depend on debt in
their capital structure than less profitable ones. It has been argued that firms with a
high growth rate have a high debt to equity ratio. Bankruptcy costs (proxied by
firm size) are also found to be an important effect on capital structure (Kraus and
1
Perfect capital markets means that the following assumptions hold: (a) there are no taxes, (b) there are no
transaction costs, (c) there is symmetrical information, (d) there are homogenous expectations, and (e)
investors can borrow at the same rate as corporations.
Litzenberger, 1973; Harris and Raviv, 1991). If these three factors are considered
as determinants of capital structure, then these factors could be used to determine
the firm performance.
In practice, firm managers who are able to identify the optimal capital structure are
rewarded by minimizing a firm’s cost of finance thereby maximizing the firm
revenue. If a firm capital structure influences a firm performance, then it is
reasonable to expect that the firm capital structure would affect the firm health and
its likelihood of default. From a creditor’s point view, it is possible that the debt to
equity ratio aids in understanding banks’ risk management strategies and how
banks determine the likelihood of default associated with financially distressed
firms. In short, the issue regarding the capital structure and firm performance are
important for both academics and practitioners.
There is lack of empirical evidence about the effect of firm performance on capital
structure in Vietnam. Then, the first objective of this study is to examine the effect
which firm performance has on capital structure of listed companies in Hochiminh
Stock Exchange. Trần Hùng Sơn and Trần Viết Hoàng (2008) find a positive and
significant impact of firm leverage on firm accounting performance, but have not
used market performance measures. Thus, the second objective of this study is to
examine the effect which firm capital structure has on corporate market
performance.
This study contributes to literature in two directions: (1) by using ordinary least
square regression model to investigate the relationship between capital structure
and firm performance to fill the gap in corporate finance literature in Vietnam; (2)
by employing different measures of capital structure such as short-term debt to
total assets, long-term debt to total assets, total debt to total assets, and total debt to
total equity to investigate the effect of the debt structure on corporate market
performance in Vietnam. This study contributes to practical implications by
investigating the effect of capital structure on corporate performance using market
measures to provides evidence about whether the stock market is efficient or not. It
also provides managers a structure approached to plan their firm capital structure
strategies and improve the firm value.

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