Determinants of Capital Structure of the Listed Companies on Vietnam Stock Market

Abstract

Capital structure decisions are highly important to any firms as the firms constantly make investment decisions for their sustenance and growth. In the same line, the objective of this study is to identify determinants of capital structure of listed firms on Vietnamese stock exchanges. The study has used panel data from 420 non-financial publicly traded firms during 2010-2014. Multiple regression analysis was employed to examine the relationship between the firm's capital structure and the nine related explanatory variables (business risk, profitability, firm size, firm growth, asset tangibility, liquidity, effective tax rate, non-debt tax shields, and lending interest rate). The study reveals that financial leverage of Vietnamese listed firms decrease with profitability, business risk, non-debt tax shields, liquidity and increase with firm growth, firm size. Besides, asset tangibility and liquidity have significant and negative impact on total debt ratio and long-term debt ratio but having positive relationship with short-term debt ratio. This study not only contributes to the literature on the determinants of firm's capital structure but also is useful for financial managers, investors, and financial management consultants.