The capital structure trends of profitable firms in Vietnam

Abstract

This paper gives contribution to the dynamic aspect of capital structure study applied for listed companies in developing market, particularly Vietnam - one of the most competitive economies in the Asia region. Authors use partial adjustment model through a fixed effect model estimator to investigate the determinants of the capital structure, the existence of its target and estimate the speed of adjustment of non-financial firms listed on the HOSE and HNX from 2006 to 2014. Specifically, the regression model was conducted to test the relationship between dependent variable estimated by book value of leverage and independent variable namely included profitability, growth, firm size, tangibility, liquidity, industry median leverage, tax and GDP growth. The findings are proofs of target capital structure and these firms are found to adjust quite rapidly to their target level compared with other countries in the world. Afterwards, the group ran some of detection tests such as multicollinearity, serial correlation and heteroskedasticity to prove that it is reliable that there is no any error in our model.