THE IMPACTS OF CAPITAL STRUCTURE ON THE LISTED FIRM’S VALUE IN THE CONSTRUCTION INDUSTRY IN VIETNAM

Abstract

The financial crisis broke out in 2008, including the weakening of numerous banking systems, spreading low credit trust, real-estate crisis, and currency devaluation in large scale in the US and many European countries derived from the United States. During that period, Vietnam was also one of the countries being strongly affected. Vietnamese economy had faced a lot of difficulties, and the Vietnam construction industry in particular was in one of the worst situations. Thus, this resulted in sharply fallen industry growth rate in the difficult period of 2010-2013. However, sins of growth had begun to show again in the period of 2014-2015. This paper’s purpose is to research the effects of Capital Structure to the firm value of the construction sector in Vietnam from the period 2011-2015, which is the period of consequence after the resolution period of the financial crisis. The research assumes that the Capital Structure is a factor that can greatly affect the value of business in the construction industry. With the usage of data from 61 construction firms listed on HOSE and HNX from 2011 to 2015, the relationship between Capital Structure and firm value is studied in order to find the best way to enhance firm value. In addition the use of the theories from the previous studies such as M&M, Trade-off Theory, and Pecking Order Theory, the linear regression method is used to determine the optimal Capital Structure, thus helping businesses to improve their firm value.