Firm-specific Factors as Determinants of Capital Structure: Evidence From an Emerging Country

ABSTRACT

The paper investigates the impact of firm-specific factors on capital structure of 102 non-financial firms listed on Ho Chi Minh Stock Exchange (HOSE) in Vietnam between 2008 and 2018. The paper identifies the firm-specific factors including firm profitability (ROA), tangibility (TANG), liquidity (LIQ), firm size (SIZE), foreign ownership (FO) as core determinants of capital structure. Besides, the author employs dynamic panel data to examine the influence of previous decision on capital structure on the one in the current time. Different approaches consisting of Pooled Regression (OLS), Fixed effects model (FEM), Random effects model (REM) and Generalized Method of Moment (GMM) are adopted to test the hypotheses and control autocorrelation, heteroscedasticity and potential endogeneity issues. The results reveal the positive impact of firm size and previous capital structure on current capital structure. Also, they report that liquidity, tangibility, firm profitability and foreign ownership are negatively correlated to capital structure. The study greatly contributes towards the enrichment of empirical evidence on capital structure in the situation of emerging economies.

KEYWORDS

Firm-specific factors, capital structure, GMM, emerging country, Vietnam

Cite this paper

Thu-Trang Thi Doan. (2019) Firm-specific Factors as Determinants of Capital Structure: Evidence From an Emerging Country. International Journal of Economics and Management Systems, 4, 298-304