Financial Development and the Determinants of Capital Structure in Vietnam

26 Pages Posted: 7 Mar 2012

See all articles by Dung Thuy Thi Nguyen

Dung Thuy Thi Nguyen

University of Otago - Department of Accountancy and Finance; Academy of Finance

Ivan Diaz-Rainey

CEFGroup & Department of Accountancy and Finance, University of Otago

Andros Gregoriou

University of East Anglia

Date Written: February 22, 2012

Abstract

This paper explores the capital structure of listed Vietnamese companies in the broader context of financial development (the recent expansion of domestic equity and debt capital markets). Accordingly, the paper provides the first insights into the capital structure of listed companies in one of the most dynamic economies in the Asia-Pacific region and in an economy that has experienced rapid change in recent years. We employ a panel GMM (generalized method of moments) system estimator to analyse the determinants of the capital structure of 116 non-financial firms listed on either the Ho Chi Minh Stock Exchange or the Hanoi Stock Exchange for the period 2007-2010. From this analysis we conclude that despite the emergence in recent years of equity and (to a lesser extent) corporate debt capital markets, the capital structure of Vietnamese enterprises are still dominated by the use of short-term financing sources. Further, our results show that state controlled enterprises continue to have preferential access to finance and that high growth firms still rely principally on external debt rather than equity issuance. These results indicate that policymakers need to continue to pursue policies that will deepen capital markets and ensure that bank finance is allocated on a purely commercial basis.

Keywords: Capital structure, Financial development, Vietnam, GMM system estimator, Doi Moi, Emerging markets

JEL Classification: G32, G38, N25, P34, O16

Suggested Citation

Thuy Thi Nguyen, Dung and Thuy Thi Nguyen, Dung and Diaz-Rainey, Ivan and Gregoriou, Andros, Financial Development and the Determinants of Capital Structure in Vietnam (February 22, 2012). Available at SSRN: https://ssrn.com/abstract=2014834 or http://dx.doi.org/10.2139/ssrn.2014834

Dung Thuy Thi Nguyen

University of Otago - Department of Accountancy and Finance ( email )

PO Box 56
Dunedin, 9054
New Zealand

Academy of Finance ( email )

8 Phan Huy Chu
Phan Chu Trinh Street
Hanoi
Vietnam

Ivan Diaz-Rainey (Contact Author)

CEFGroup & Department of Accountancy and Finance, University of Otago ( email )

Dunedin
New Zealand

Andros Gregoriou

University of East Anglia ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

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