MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERISTY PHD THESIS SUMMARY ANALYSIS OF THE DETERMINANTS OF CAPITAL STRUCTURE OF VIETNAMESE INDUSTRIAL FIRMS Major Specialized Code number : : : Business Business administration 62.34.01.02 PHAN THANH HIEP HANOI, 2017 THIS THESIS IS COMPLETED IN FOREIGN TRADE UNIVERSITY SUPPERVISOR: ASSOC PROF, DR NGUYEN DINH THO Reviewer 1: ASSOC PROF, DR DINH TRONG THINH Reviewer 2: ASSOC PROF, DR NGUYEN HUU ANH Reviewer 3: ASSOC PROF, DR LE THI KIM NHUNG The thesis will be defended at Assessment Thesis Council of Foreign Trade University At date month Can refer to the thesis: - Vietnam National Library - Library of Foreign Trade University year INTRODUCTION Rationales The main content of this thesis is researching the factors impact on the capital structure of Vietnamese industrial firms The capital structure issue has not been defined clearly but following most academic papers in this field, within this thesis, the term of capital structure will be understood as the correlation between debt and equity in total assest of firm In corporate administration, managing capital structure plays an extremly important role Some theories showed that it affects to the value of firm Besides that, it also affects the profitability of firm So the issue of managing capital structure is very important and need to be anaylized deeply However, the capital structure is not running independently by the intent of the managers It would seem that there are some factors impact on capital structure of firm So, analyzing how these factors impact on the change of capital structure is a very significant research and it would help the directors to manage the capital structure It also would seem that capital structure of firm varies from different industries For example, capital structure of commerce firms is different from it of heavy industrial firms So, it is necessary to focus on a specific industry to analyses Base on this view, this thesis has chosen industrial firms which plays important role in the modernization and industrialization process of Vietnam to research Finally, the concept of capital structure and the impact of some determinants to the capital structure of Vietnamese firms have been studied for years In theorem research, these papers refer to almost of capital structure theories such as: trade off theory, perking order theory, agency-cost theory, signaling model theory, market timing theory… In empirical research, there have been multiple samples to be collected and analyzed, but the results seem to be different from each paper Especially, most of capital structure papers for Vietnamese firms focus mainly on the impact of determinants to the capital structure and dropt the impact of the capital structure to the value of firm This is a very important issue because it may lead to the endogenous problem among variables in the model Most of the papers in this field in Vietnam use Fixed effect model (FEM) and Random effect model (REM) to run the regression In the theory, these two models are unable to overcome the endogenous problem So, using the model of Generalized Method of Moments (GMM) which can solve the endogenous issue could be viewed as a new solution of this thesis in the way to approach the research of determinants of capital structure Literature review This content will be show in the chapter of the thesis Objectives of the research The main objective of this paper are defining and analyzing the impact of some determinants on the capital structure of industrial firms in Vietnam Object and scope of the research 4.1 Objects Objects of this research contain three issues: - Theories of capital structure - Theories of impacts of some determinants on capital structure - Empirical studies about the impacts of some determinants on capital structure - Industrial firms in Vietnam 4.2 Scope of the research Scope of the research is limit in some issues: - In the content of capital structure theories: this thesis mentions some key fundamental theories about capital structure and impacts or some determinants on capital structure - In the content of impacts of some determinants on capital structure, this thesis approaches the problem by clarifying the determinants into two categories: (1) business factors and (2) corporate governance factors - Firms in research sample: audited financial report of 95 Vietnamese listed industrial firms in period of 2006 – 2015 Methodology Following most of economic researches, this thesis uses simultaneously two study methods: qualitative method and quantitative method to complete the objectives of the thesis New contribution of the thesis In the perspective of science, this thesis contributes some points as: (1) this thesis runs empirical studies for impacts of determinants on capital structure (2) this thesis uses two models for studying the impacts of some determinants on capital structure, the first one uses business factor variables and the other uses corporate governance factor variables, (3) This thesis use GMM model which could be viewed as a new economic methodology in Vietnam, (4) Mentioning the optimum capital structure for Vietnamese industrial companies by running the threshold regression model, (5) This thesis focuses on Vietnamese industrial companies, which could be the leading team in the economic growth of Vietnam In the perspective of practical application, this thesis makes some new points as: (1) providing the actual view of capital structure of Vietnamese industrial firms to the managers, (2) showing the ways how the capital structure affects the firm’s value, then suggesting some solutions for the managers to improve the firm’s value, (3) showing the determinants of capital structure then giving some advices for the directors to manage capital structure Dissertation Structure Apart from the Forewords, Conclusion, Appendix, Reference and lists, this dissertation contains chapters Chapter 1: Literature review Chapter 2: Theories of capital structure and impact of determinants on capital structure Chapter 3: The actual status of capital structure of Vietnamese industrial firm Chapter 4: Data description, research models and methodology Chapter 5: Analyzing the regression result of impact of determinants on capital structure model Chapter 6: Solutions and recommendations to improve capital structure policy of Vietnamese industrial firms Chapter 1: Literature reviews of determinants of capital structure 1.1 Literature reviews of business factors impact on capital structure 1.1.1 Some important international studies 1.1.1.1 In the period of before 2000 Survey of Harris and Raviv (1991), which summarizes the empirical results in the studies of: Bradley (1984), Long and Malitz (1985), Kester (1986), Marsh (1982) and Titman and Wessels (1988) shows the specific finding as below: Table 1.1: Summary of how business factor impact on capital structure in some empirical studies before 2000 Bradley Determinants et al Volatility Long and Titman Kester Marsh Malitz Wessels -* - and Bankruptcy threat - -* - Tangibility + + +* - -* - -* Development oppoturnity + -* Firm’s size -* Non debt tax shield + Advertising expenditure - - Research and development fee - - Profitability +* The uniqueness of firm Source: Survey of Harris and Raviv (1991) + -* - In the above table, the plus mark represents the positive relationship, minus marks show the negative relationship, blank gap show the paper not sdudy these factors, * mark may show the correlation level but without any statistic meanings 1.1.1.2 Some important studies after 2000 Some important studies in this period are: Huang and Song (2006), Chen (2003), Pandey (2002) and some other studies 1.1.2 Some important studies in Vietnam 1.1.2.1 The research of Tran Dinh Khoi Nguyen and Rammachandran (2006) for small and medium business 1.1.2.2 The research of Doan Ngoc Phi Anh (2010) with path analysis model 1.1.2.3 The research of Okuda and Lai Thi Phuong Nhung (2010) and the static trade-off theory 1.1.2.4 The research of Le Dat Chi (2003) and the perking order theory 1.1.2.5 The research of Le Thi Phuong Vi and Phan Thi Bich Nguyet for the stateowned factor impact on the capital structure of firm 1.1.2.6 The research of Dang Thi Quynh Anh and Quach Thi Hai Yen (2014) for the determinants of the capital structure of firms listed in HOSE 1.1.2.7 The research of Tran Hung Son (2012) for the study sample with Vietnamese industrial firms 1.1.3 Summary of how business factors impact on capital structure in some empirical studies Table 1.2: Summary of determinants of capital structure in some empirical studies Factor Trends Some important studies Titman and Wessels (1988), Antonio, Guney and Paudyal (2002), Hall, Hutchison, Michaels (2004), Firm size Positive Deesomsak (2004), Huang and Song (2006), Pandey (2002), Frank and Goyal (2007), Doan Ngoc Phi Anh (2010), Okuda and Lai Thi Phuong Nhung (2010), Dang Thi Quynh Anh and Quach Thi Hai Yen (2014) Profitability Positive Erol (2004), Pandey (2002), Dang Thi Quynh Anh and Quach Thi Hai Yen (2014) Meyrs and Majluf (1984), Kester (1986), Thies and Klock (1992), Titman and Wessels (1988), Chen (2003), Hall, Negative Hutchison, Michaels (2004), Deesomsak (2004), Tran Dinh Khoi Nguyen (2006), Pandey (2002), Doan Ngoc Phi Anh (2010), Okuda and Lai Thi Phuong Nhung (2010) Growth Positive / Myers (1977), Chen and Zhao (2006), Pandey (2002), Opportunity Negative Frank and Goyal (2007) Positive Bhaduri (2002) Negative Titman and Wessels (1988), Pandley (2002) Growth Speed Positive Tangibility Negative Chen (1998), Pandley (2002), Chen (2003), Huang and Song (2006), Tran Hung Son (2012) Huang and Song (2006) Tran Dinh Khoi Nguyen and Ramachandran (2006), Doan Ngoc Phi Anh (2010) Pandly (2002), Huang and Song (2001), Bradley et al Negative (2006), Pandey (2002), Doan Ngoc Phi Anh (2010) Volatility Liquidity Relationship with bank Corporate income tax (1984), Titman and Witsell (1988), Huang and Song Positive Tran Dinh Khoi Nguyen and Ramachandran (2006) Negative Deesomsak (2004) Petersen and Rajan (1994), Donnelly, Berry, and Positive Thompson (1985), Tran Dinh Khoi Nguyen and Ramachandran (2006) Positive Negative M & M (1963) Tran Hung Son (2012), Dang Thi Quynh Anh and Quach Thi Hai Yen (2014) 1.2 Literature reviews of business factors impact on capital structure 1.3 Literature reviews of corporate governance factors impact on capital structure There are some important studies in this topic such as: Ahmad et al (2015), Agyei et al (2014), Jaradat (2015), Tran Dinh Khoi Nguyen and Ramachandran (2006), Le Thi Phuong Vy and Phan Bich Nguyet (2015) Table 1.3: Summary of how corporate governance factors impact on capital structure in some empirical studies Factors Impacts on capital structure Positive The board size CEO duality Ahmad and et al.(2015), Agyei and et al (2014), Jaradat (2015) Negative Ranti (2013) Positive Ranti (2013) Negative Agyei and et al (2014) Without statistic meaning Board structure Some important studies Positive Jaradat (2015) Agyei and et al.(2014) Agyei and et al.(2014), Tran Dinh Khoi Organizational ownership structure Positive Nguyen and Ramachandran (2006), Le Thi Phuong Vy and Phan Bich Nguyet (2015), Doan Ngoc Phi Anh (2010) Gender structure of board Non executive member in board Positive Jaradat (2015) and Agyei and et al.(2014) Positive Agyei and et al.(2014), Jaradat (2015) Defining research objectives After analyzing the literature review, this thesis defines some issues need to be studied more such as: Firstly, for the concept of affects by some factors to the capital structure of Vietnamese industrial firms, the thesis needs to approach by two categories of factors: (1) business factors and (2) corporate governance factors Secondly, the literature review shows that the relationship between capital structure and ROA/ROE/TobinQ indicators is endogenous So, the GMM model need to be used to replace FEM and REM model Last, the overview shows that the endogenous relationships between capital structure and profitability could be exist, so to solve this issue, using GMM model could be more suitable rather than using FEM and REM models CHAPTER 2: THEORIES OF CAPITAL STRUCTURE, IMPACT OF CAPITAL STRUCTURE ON FIRM VALUE AND IMPACT OF DETERMINANTS ON CAPITAL STRUCTURE 2.1 The definition and measurements of Capital structure In the study of Bui Van Van et al (2015), the definition of capital structure is defined: capital structure is the concept shows the correlation of parts in total capital of firm The total capital of firm is divided into two parts: debt and equity The term of debt are also divided into two parts basing on the borrowing time: short term debt and long term debt In this thesis, some terms of capital structure are referred as: total debt ratio, long term debt ratio, short term debt ratio, long term capital ratio and equity ratio The measurement of above terms is: Total debt ratio = Total debt / total asset Equity ratio = Total equity / Total asset Short term debt ratio = Short term debt / Total asset Long term debt ratio = Long term debt / Total asset Long term capital ratio = (Equity + long term debt)/ Total asset 11 3.2.2 The total debt ratio of Vietnamese industrial firms is lower than the ratio of non financial listed firms 3.2.3 The long term debt ratio of Vietnamese industrial firms is lower than the ratio of non financial listed firms and getting lower 3.2.4 There are differences in the movement of short term debt ratio of Vietnamese industrial firms and non financial listed firms in Vietnam 3.2.5 There are differences in the movement of short term debt ratio of and long term debt ration of Vietnamese industrial firms 3.2.6 Vietnamese industrial firms are borrowing short term debt more than long term debt 3.2.7 The relationship among capital structure and economy crisis and interest rate The economy crisis in the period 2008 – 2011 with two shock of interest rate in 2008 and 2011 could not show any significant impact on capital structure of Vietnamese industrial firms but may impact on ROA 3.2.8 There are differences between capital structure of state owned companies and private companies 3.2.9 The relationship between ROA and capital structure of Vietnamese industrial firms The statistic analysis may show the possibility that the relationship between ROA and total debt ratio could be negative 3.2.10 The relationship between capital structure and the growth speed of firms 3.2.11 The relationship between the liquidity and capital structure 3.3 The summary of actual facts of capital structure of Vietnamese industrial firms The advantage point in capital structure status of Vietnamese industrial firms is the compatibleness, but it also show some disadvantages such as: (1) the issue of 12 using long term debt to finance short term asset is not necessary, (2) the surplus of long term capital is not optimal status for firms (3) The trend of reducing long term debt and maintaining the surplus of long term capital structure simultaneously could limit the opportunity for firms to expand scale of business CHAPTER 4: THE RESEARCH DATA DESCRIPTION, RESEARCH MODEL AND METHODOLOGY 4.1 The research data description This thesis build up a panel data from financial report of 95 Vietnamese industrial firm from 2006 – 2015 for research sample 4.2 The empirical research framework 4.3 The models for testing the determinants of capital structure 4.3.1 The model of business determinants of capital structure 4.3.1.1 Regression model, variables measurement and assumptions The regression equation is: CAP.STRUC i t = αi + β1 SIZE + β2 ROA + β3 TOBIN.Q + β4 GROWTH + β5 TANG + β6 VOLATILITY + β7 LIQUIDITY + β8 TAX + β9 INTEREST + β10 YEAR.DUM + εi t 4.3.1.2 Regression methods and tests The regression method of this model is SGMM There are three endogenous variables: the lag of capital structure, profitability, TobinQ and volatility The remaining variables are instrument variables For the tests, SGMM model uses two basic tests: Arellano-Bond (AR2) and Hansen test 4.3.2 The model of corporate governance determinants of capital structure 4.3.2.1 Regression model, variables measurement and assumptions The regression equation is: 13 CAP.STRUC i t = αi + β1 B.SIZE + β2 CEO.DUAL + β3 CEO.GEN + β4 CEO.AGE + β5 SIZE + β6 STATE + β7 GROW + εi t 4.3.2.2 Regression methods and tests The regression methods of this model are Fixed Effect Model and Random Effect Model For the tests, there are three tests will be checked: autocorrelation test, heteroskedasticity test, and Hausman test (if necessary) 4.4 The model for testing the impacts of capital structure on the business effectiveness and firm value CHAPTER 5: ANALYZING THE REGRESSION RESULT OF DETERMINANTS OF CAPTITAL STRUCTURE MODEL 5.1 The model of business determinants of capital structure 5.1.1 Descriptive statistics and correlation matrix of variables Table 5.1: Descriptive statistics of capital structure variables Variables Number of observation Mean Standard deviation Min Max BTDTA 855 0,438702 0,213648 0,030923 1,173151 BLDTA 855 0,08983 0,139485 0,719237 BSDTA 855 0,348872 0,178588 0,006971 0,80502 MTDTA 855 0,445037 0,248727 0,01127 0,950953 MLDTA 855 0,091262 0,144424 0,736801 MSDTA 855 0,354571 0,209072 0,007768 0,909376 Source: Calculated by Stata program 14 Table 5.2: Descriptive statistics of independents variables Variables Number of observation Mean Standard deviation Min Max tobinq 855 1,184366 0,886036 0,298066 14,92568 roa 855 0,081122 0,087285 -0,64551 0,783739 size 855 26,93751 1,467045 22,40122 31,32545 grow 855 0,154552 0,319884 -0,68624 3,311883 TANG 855 0,250017 0,193343 0,12134 0,97642 volatility 855 2,734085 3,270647 0,12453 44,57315 tax 855 0,149423 0,256785 -4,57276 3,819248 liquidity 855 2,450976 2,36708 0,113778 23,23605 interest 855 0,038155 0,036473 0,370879 dumyear 855 0,222222 0,415983 Source: Calculated by Stata program 15 Table 5.3: Correlation matrix of variables size grow tang volatility tax liquidity interest tobinq size grow 0,1735 tang -0,0589 -0,0022 volatility 0,0749 0,0942 -0,0934 tax 0,043 -0,0331 -0,1412 -0,0108 liquidity -0,1664 -0,0556 -0,1237 0,0247 0,0024 interest -0,0454 -0,027 0,255 -0,0424 -0,1035 -0,136 tobinq 0,1286 0,0892 -0,0386 0,264 -0,009 0,0765 -0,1161 roa 0,0753 0,1613 -0,1426 0,2131 0,049 0,2499 -0,2638 0,3001 Source: Calculated by Stata program 5.1.2 Regression results and tests The regression results are collected and showed in the table below The result of AR2 and Hansen test show that the regression results are confident because there is not any auto correlation in second order differences and the instrument variables in the model are compatible roa 16 Table 5.4: The regression results of the model of business determinants of capital structure by SGMM method Factors Book value of the total debt ratio Book value of the short term debt ratio Book value of the long term debt ratio Market value of the total debt ratio Market value of the short term debt ratio Market value of the long term debt ratio roa -0,3999*** -0,2740*** -0,0825*** -0,5389*** -0,4133*** -0,1534*** tobinq 0,0021825 -0,0010 0,0079 -1,3227*** -0,099*** -0,0117* size 0,0076597** 0,0066* 0,0011 0,0229*** 0,12** 0,00457* grow 0,037*** - - - 0,024* - tang -0,015 -0,0609** -0,028 0,0311 -0,127*** 0,031818 volatility 0,0001147 -0,0014 0,0009357 -0,01 -0,1363* 0,0037 tax - - - - - - liquidity -0,0175*** -0,0195*** 0,00165 -0,024*** -0,0234*** 0,0016 -0,4233*** -0,1633*** -0,316* - - 0,266*** 0,0435*** interest -0,6849 *** YEAR.DUM 0,0093 -0,0037 - 0,015*** 0,102*** 0,060*** AR2 Test z = 1,13 Pr > z = 0,258 z = 1,28 Pr > z = 0,200 z = 0,57 Pr > z = 0,569 z = 0,85 Pr > z = 0,394 z = 0,66 Pr > z = 0,510 chi2(55) = chi2(55) = chi2(55) = chi2(69) = chi2(69) = chi2(55) = 67,93 Prob > chi2 = 0,113 66,05 Prob > chi2 = 0,146 61,53 Prob > chi2 = 0,254 80,91 Prob > chi2 = 0,155 82,53 Prob > chi2 = 0,127 71,12 Prob > chi2 = 0,071 Hansen Test z = 0,81 Pr > z = 0,418 17 5.1.3 Regression results analysis 5.2 The model of corporate governance determinants of capital structure 5.2.1 Descriptive statistics and correlation matrix of variables Table 5.5: Descriptive statistics Variables Number of observation Mean Standard deviation Min Max size 828 27,00158 1,431704 23,27481 31,32545 grow 828 0,1589255 0,320169 -0,68624 3,311883 state 828 0,2608696 0,439374 b_size 828 1,313281 0,432808 0,693147 2,70805 ceo_dual 828 0,339372 0,473782 ceo_gen 828 0,9130435 0,286198 ceo_age 828 50,45169 6,983576 25 72 Source: Calculated by Stata program 18 Table 5.6: VIF Statistic Variables VIF 1/VIF size 1,51 0,66026 b_size 1,44 0,692519 state 1,16 0,861421 ceo_dual 1,12 0,896453 ceo_age 1,11 0,900923 ceo_gen 1,08 0,926713 grow 1,04 0,965943 Mean VIF 1,21 Source: Calculated by Stata program 5.2.2 Regression results and tests Table 5.7: Woolridge Test result of autocorrelation on each models Variables BTDTA Woolridge Test F( 1, 91) = Pr > F Conclusion 60,290 0,000 autocorrelation BSDTA F( 1, 91) = 36,159 0,000 autocorrelation BLDTA F( 1, 91) = 127,326 0,000 autocorrelation MTDTA F( 1, 91) = 73,205 0,000 autocorrelation MSDTA F( 1, 91) = 58,188 0,000 autocorrelation MLDTA F( 1, 91) = 48,751 0,000 autocorrelation Source: Calculated by Stata program 19 Table 5.8: Test results off heterokedasticcity on each models Variables Regression method FEM Test WALD Chi2 Pr > Statistic Chi2 5583,64 0,000 Heterokedasticity 1835,90 0,000 Heterokedasticity 5988,57 0,000 Heterokedasticity 1733,99 0,000 Heterokedasticity Conclusion BREUSCH AND BTDTA REM PAGAN LAGRANGIAN FEM WALD BREUSCH AND BSDTA REM PAGAN LAGRANGIAN FEM WALD 2.700.000 0,000 Heterokedasticity BREUSCH AND BLDTA REM PAGAN 1800,57 0,000 Heterokedasticity 13399,06 0,000 Heterokedasticity 1230,00 0,000 Heterokedasticity 16837,69 0,000 Heterokedasticity 1115,57 0,000 Heterokedasticity LAGRANGIAN FEM WALD BREUSCH AND MTDTA REM PAGAN LAGRANGIAN FEM WALD BREUSCH AND MSDTA REM PAGAN LAGRANGIAN FEM WALD 3.000.000 0,000 Heterokedasticity BREUSCH AND MLDTA REM PAGAN 1658,53 LAGRANGIAN Source: Calculated by Stata program 0,000 Heterokedasticity 20 Table 5.9: The regression results of the model of corporate governance determinants of capital structure by FGLS method Independent variables BTDTA BSDTA BLDTA MTDTA MSDTA 0,0275*** 0,037393*** 0,0022 grow 0,0144** 0,0003 state 0,0373** b_size -0,0004 -0,01244 -0,0031 -0,0189 -0,07056*** -0,00241 ceo_dual -0,0073 0,010773 -0,0015 -0,01252 -0,00379 -0,00080 size ceo_gen 0,002866 -0,05082*** 0,0454*** 0,0697*** 0,061844*** 0,0017 0,038041*** 0,047313*** MLDTA -0,00598 0,04707** 0,0091* 0,00387** -0,00132 -0,09334*** 0,04366*** 0,108425*** 0,091429*** 0,00174 ceo_age 0,0001 0,000617 0,0000 0,000425 -0,00014 0,00003 cons -0,3856 -0,72765 -0,0143 -0,66727 -0,89972 -0,06516 Source: Calculated by Stata program 5.2.3 Regression results analysis 5.3 Regression models Analysis 21 CHAPTER 6: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE CAPITAL STRUCTURE POLICY OF VIETNAMESE INDUSTRIAL FIRMS 6.1 The context of the process for making decision on managing capital structure of Vietnamese industrial firms 6.1.1 Macro economics context 6.1.1.1 GDP and GDP growth 6.1.1.2 Inflation and interest rate 6.1.2 The growth of stock market and bond market 6.1.3 The context of the lending operation in the bank system in 2007 - 2015 6.1.4 The context of the policies and law by the government 6.1.4.1 The supporting policy for the small and medium business 6.1.4.2 The priority policy for the supporting industrial business 6.1.4.3 The priority policy for the state owned company 6.2 Some solutions to improve the efficiency of managing capital structure of Vietnamese industrial company 6.2.1 The solutions base on the empirical tests about the impact of determinants on capital structure 6.2.1.1 Solution base on the impact of size factor on capital structure 6.2.1.2 Solution base on the impact of profitability factor on capital structure 6.2.1.3 Solution base on the impact of growth opportunity factor on capital structure 6.2.1.4 Solution base on the impact of growth speed factor on capital structure 6.2.1.5 Solution base on the impact of liquidity factor on capital structure 6.2.1.6 Solution base on the impact of interest factor on capital structure 6.2.1.7 Solution base on the impact of tangibility factor on capital structure 22 6.2.1.8 Solution base on the impact of state ownership factor on capital structure 6.2.2 The solutions base on the applications of capital structure theories 6.2.2.1 The perking order theory 6.2.2.2 The trade off theory 6.2.2.3 The market timing theory 6.2.3 Some solutions for specific group of Vietnamese industrial firms 6.2.3.1 For the firms violated the rules of compatibleness in managing capital structure These firms need to find out some solutions to overcome the gap between the value of the long term asset and the value of total long term capital (equity + long term debt) by increasing the value of equity or long term debt 6.2.3.2 Review the issue of reducing the long term debt ratio and the solution of diversifying the capital suppliers 6.2.3.3 For the industrial firms with the total debt ratio exceed the rate of 65% When the total debt ratio of firm exceeds the rate of 65%, the decision of borrowing more is very likely lead to the reduction on ROA and ROE indicators In opposition, the decision of reducing the debt, could lead to the positive effects in the firm’s value 6.2.3.4 For the industrial firms with the total debt ratio is under the rate of 65% The solution for firms in this case is keep borrowing more to increase ROE indicator but the manager should always concern the impact of reducing ROA when applying this solution It is better if this solution comes together with the solution to improve the ROA indicator of firms 6.2.3.5 For the listed Vietnamese industrial firms and taking the advantage from the development of stock market and the bond market The listed Vietnamese industrial firms could take the advantages of being a listed company by using the flexible rule and marketing timing theory in managing 23 capital structure These companies can easily reduce the equity ratio by paying dividend if they need to that or issuing shares or corporate bond if they need more capital to invest in business without concerning the banks 6.2.3.6 For the Vietnamese industrial firms which has not been publically listed in the stock market 6.3 Some suggestions for the State agencies 6.3.1 For the government 6.3.1.1 Maintaining the policy of settling the macro economics, supporting the small and medium businesses and supporting the firms in supporting industry sector 6.3.1.2 Pushing up the process of the privatization of the state owned companies 6.3.2 For the State Bank of Vietnam and the system of commercial banks 6.3.2.1 Maintaining the interest rate in the economy 6.3.2.2 Overcoming the problems of raising and lending long term debt in the banking system 6.3.3 For the state security commission of Vietnam and the Ministry of Finance 6.3.3.1 Supporting the listed industrial firms to raise fund in the stock market and bond market 6.3.3.2 Developing the bond market, especially the corporate bond CONCLUSION The findings from four models in this thesis show that both trade off theory and perking order theory could be used to explain the movement of capital structure of Vietnamese industrial firms Specifically, the trend of how determinants impact on the capital structure is summarized as: 24 - For the factors of firm size and growth speed, the regression models show the results of a positive relationship between these factors and capital structure - For the factor of tangibility and liquidity, the empirical studies show that these factors have negative impact on the short term debt ratio - For the interest rate factor, the empirical studies show that this factor has negative impact on all the debt ratios: total debt ratio, long term debt ratio and short term debt ratio - For the economic crisis factor in 2008 and 2011, the empirical studies show that this factor has positive impact on the capital structure calculated by the market value but almost has no impact on the capital structure calculated by the book value - For the factor of state owned characteristic, the empirical studies show that this factor has positive impact on the capital structure - For the factor of CEO gender, the empirical studies shows that firm with male CEO tend to borrowing more than firm with female CEO For the issue of solution for managing the capital structure of Vietnamese industrial firms, this thesis suggests groups of solutions for all industrial companies including: - Group of solutions base on the regression results of impacts of some determinants on capital structure - Group of solutions base on applying the capital structure theories on managing capital structure on Vietnamese industrial firms - Group of solutions to solve some specific issues about the capital structure of Vietnamese industrial firms which are analyzed in chapter of this thesis; solutions base on the optimum capital structure issue which are referenced in the appendix of this thesis and solutions base on the conditions of the capital market which are analyzed in the first part of chapter One highly concerned point of the finding is the suggestion about the optimum capital structure for Vietnamese industrial firms is the debt ratio is around 64.33% LIST OF RESEARCH PUBLICATIONS OF AUTHOR Phan Thanh Hiep, “Solutions for monetary policy of Vietnam at the end of 2011”, Banking Journal, No 16 – 2011 Phan Thanh Hiep, “Determinants impact on capital structure of industrial firms: Research from GMM model”, Review of Finance, No – June, 2016 (634) Phan Thanh Hiep “Impacts of capital structure on operating efficiency of Vietnamese industrial firms”, Review of Finance, No – June, 2016 (635) ... Doan Ngoc Phi Anh (2010), Okuda and Lai Thi Phuong Nhung (2010), Dang Thi Quynh Anh and Quach Thi Hai Yen (2014) Profitability Positive Erol (2004), Pandey (2002), Dang Thi Quynh Anh and Quach... Nguyen and Ramachandran (2006), Doan Ngoc Phi Anh (2010) Pandly (2002), Huang and Song (2001), Bradley et al Negative (2006), Pandey (2002), Doan Ngoc Phi Anh (2010) Volatility Liquidity Relationship... OF RESEARCH PUBLICATIONS OF AUTHOR Phan Thanh Hiep, “Solutions for monetary policy of Vietnam at the end of 2011”, Banking Journal, No 16 – 2011 Phan Thanh Hiep, “Determinants impact on capital