Thesis Summary Finance - Banking Factors Affecting The Debt Structure Of A Company Listed On The Stock Market Of Vietnam.pdf

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY NGO VAN TOAN FACTORS AFFECTING THE DEBT STRUCTURE OF A COMPANY LISTED ON THE STOCK MARKET OF VIETNAM THE[.]

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

NGO VAN TOAN

FACTORS AFFECTING THE DEBT STRUCTURE OF A COMPANY

LISTED ON THE STOCK MARKET OF VIETNAM

THESIS SUMMARY

Industry code: 9.34.02.01

Lecturers:

1 Assoc Prof Dr Le Thi Lanh

2 Dr Le Thi Anh Dao

HO CHI MINH CITY, MAY 27, 2022

CHAPTER 1: TOPIC OVERVIEW 1.1 The urgency of the topic

In addition to the issues often studied by trainees in modern corporate finance, the program is very important to the company's value, especially in the context of emerging and developing economies in Vietnam In the context of Vietnam's econo-

my, where capital markets are inefficient, assuming a perfect capital structure does not exist, debt structure is believed to influence firm value, and the choice of the debt ma-turity structure the proper maturity can affect the value of the company, in addition, this choice also helps the company avoid maturity mismatch by aligning the asset structure with the reduced liabilities It minimizes the negative impact of the cost of capital, can resolve agency conflicts, and can reliably signal the quality of a firm's as-sets (Cai et al., 2008) To ensure the continuity of this study is a continuation of exist-ing studies (Ngo Van Toan & Pham Thi Thu Hong, 2015; Tran Thi Thuy Linh & Nguyen Thanh Nha, 2017; Ngo Van Toan, 2018; Nguyen Thanh Liem et al., 2018; Le Thi Lanh et al., 2021) on the debt maturity structure in Vietnam, with a focus on find-ing new empirical evidence on the factors affecting the debt maturity structure of listed companies Vietnam stock market

In addition to the researched firm characteristics, attention is focused on nal factors such as the development of the stock market and the development of the banking sector (Nguyen Thanh Liem et al., 2018; Thuy An Chung & Quynh Trang Phan, 2020) However, the empirical results are still not consistent, both in terms of characteristics and external factors (institutional quality and macroeconomics), for several reasons such as market conditions and other factors Financial intermediaries, legal issues, and representations of these factors for experimental results have not yet been consistent

exter-There is an increasing interest in assessing the influence of factors on the debt maturity structure However, one activity that has not yet been noticed concerning the study of the debt maturity structure is the moderating role The moderating role helps

to find relationships previously ignored or unclear and helps to extend the theory, which is considered a proxy for academic development Thus, when assessing the in-fluence of factors on the debt maturity structure, where the company operates and is

listed on the Vietnamese stock market, in an incomplete market condition,

institution-al quinstitution-ality factors, financiinstitution-al development, and long-term financing of the economy are believed to be the factors affecting the debt maturity structure It is necessary to focus

on the moderating role of these factors on the effect of debt ratio on the debt maturity structure To the author's knowledge, this has not been focused on in recent years, es-pecially in Vietnam's economy

From theoretical and practical problems, it is necessary to identify the research problem as the factors affecting the company's debt maturity structure in the context

of Vietnam's economy Along with firm characteristics, institutional and nomic factors need to be taken into account As the debt structure is analyzed as the central element of the company's capital structure, the mentioned debt structure is the most prominent feature of the debt maturity structure (Stephan et al., 2011; Alcock et al., 2012); Lemma & Negash, 2012; Colla et al., 2020), so the attention of this study is focused on determining the factors that affect the debt maturity structure From the above analysis, it is shown that the factors affecting the use of debt can increase the company's value in the context of the economy, as in the case of Vietnam, which is an essential issue to be studied What should a company in Vietnam need to do to borrow long-term debt and have a reason for the debt maturity structure? This issue in Vi-etnam has not received much research attention from scientists Vietnam This is an omission, causing the company to lack a solid basis when making decisions related to selecting a reason for the debt maturity structure to finance the company's operations Due to the important role of the debt maturity structure in the operation of the compa-

macroeco-ny, to solve this problem, the special task is to find the optimal solutions, thereby helping the company to operate well in the context of the economy of the country

Therefore, the author of the thesis boldly conducts the research topic “Factors

affect-ing the debt structure of company listed on the stock market of Vietnam” as the topic

of his doctoral dissertation

1.2 Research status related to the thesis

1.3 Research objectives and questions

1.3.1 Objectives of the study

1.3.1.1 Overall objectives

The overall objective of the thesis is to evaluate the factors affecting the debt maturity structure for the case of companies listed on the Vietnamese stock market In addition, the idea considers the moderating role of institutional quality, financial development, and long-term financing sources of the economy on the influence of debt ratio on the debt maturity structure for the case of listed companies on the Vietnamese stock market The thesis provides policy implications for company managers and policymakers

1.3.1.2 Detail goal

1 Evaluation of factors affecting the debt maturity structure for the case of companies listed on Vietnam's stock market, including company characteristics, macroeconomic factors, and institutional quality 2 Evaluation of the moderating role

of institutional quality on the effect of debt ratio on the debt maturity structure for the case of companies listed on the Vietnamese stock market 3 Evaluation of the moder-ating role of financial development on the effect of debt ratio on the debt maturity structure for companies listed on the Vietnam stock market 4 Evaluation of the mod-erating role of the economy's long-term financing on the effect of debt ratio on the debt maturity structure for the case of companies listed on the Vietnamese stock market 5 Provide policy implications for company managers and policymakers

is measured by the ratio of long-term (short) debt to the company's total debt The research problem of the thesis is inherited The focus is on assessing the factors that affect the debt maturity structure and the speed of adjustment of the debt maturity structure, assessing the moderating role of institutional quality factors, financial development, and long-term funding sources of the economy on the effect of the debt ratio on the debt maturity structure The object of the thesis focuses on the factors

affecting the debt maturity structure (short-term and term debt structure); term debt is a debt with a length of one year or more (short-term debt is a debt with a long-term maturity) Maturity within 12 months) and have an apparent interest rate The factors that the study assesses are company characteristics, institutional quality, and macroeconomics

long-1.4.2 Research scope

About the content: This study focuses on non-financial companies listed to research the influence of factors on the debt maturity structure of the company The factors that can affect the debt maturity structure of the company focus on two groups

of elements: characteristics of the company, institutional quality, and macroeconomics About time: The study is carried out from 2007 to 2020 Regarding space: Research on the factors affecting the debt maturity structure of companies listed on the Vietnam Stock Exchange (VNX) includes two companies Its subsidiaries are Hanoi Stock Exchange (HNX) and Ho Chi Minh City Stock Exchange (HOSE)

1.5 Research Methods

Research and develop two models to test The research model has the presence

of lagged dependent variable participating in the model as an independent variable so that endogenous phenomena may occur; the study proposes to use the systematic GMM estimator (Blundell & et al Bond, 1998) to deal with endogeneity, autocorrelation, and variance of the model The study uses the Arellano - Bond (AR) test on autocorrelation to check the suitability of the GMM estimation method and uses the Hansen test results to assess the reliability of the model Model 1 was developed to evaluate the factors that affect the debt maturity structure and the adjustment speed of the debt maturity structure Model 2 was developed to assess the moderating role of institutional quality, financial development, and long-term funding sources of the economy on the effect of debt ratio on the debt maturity structure The data processing method for model 1 is a self-regression model, an approach based on a partial regression model; this model is used in studies on capital structure and debt maturity structure (Ozkan, 2000; Antoniou) & associates, 2006; Deesomsak et al., 2009; Terra, 2011; Krich & Terra, 2012 and Matues & Terra, 2013) For model 2, the study takes into account the moderating role, approaches in building a model to

evaluate the moderating role by continuous moderator variable, creating the interaction variable by the observed product as suggested by Henseler & Chin (2010); Henseler & Fassott (2010); Rigdon et al (2010) and Hair Jr et al (2021)

1.6 New points and contributions of the thesis

1.6.1 New points of the thesis

The thesis expands the scope of explanation of corporate debt maturity ture through new factors affecting the debt maturity structure of companies Compared with studies on debt structure, Colla et al (2020) deals with issues such as agency costs, information asymmetry, taxes, asset maturities, or as Serves et al (2006) refer

struc-to it as better information for the market, improved asset quality, addressing term investment shortfalls, taking risks on the value of long-term debt, and matching

short-of cash flows from assets financed by debt Thesis systematic theory on factors affecting the debt maturity structure, achieving a greater explanatory level than existing research on issues such as institutions and such problems as creditor rights and information availability The results show the influence of factors from company characteristics and institutional and macroeconomic quality From there, propose appropriate solutions to solve practical problems and verify the theoretical issues presented

The thesis achieves three of the four experimental research objectives The first objective has shown the expansion of factors such as financial development affecting the debt maturity structure and the speed of adjustment debt maturity structure In addition, the thesis evaluates the moderating role of financial development and long-term financing sources of the economy on the influence of debt ratio on debt maturity structure This is thought to be a new contribution that has not been identified in the past by previous studies Finally, the thesis shows that under the initial assumptions when implementing developed economies, it may not be true in emerging economies such as Vietnam due to limitations in market conditions, so when researching instead

of focusing on the long-term debt maturity structure, it should shift that focus to the short-term debt maturity structure, thereby making more appropriate recommendations

1.6.2 Dissertation contribution

1.7 The meaning of the thesis

1.8 Thesis structure

The thesis is structured into five chapters as follows: Chapter 1: Introduction; Chapter 2: Theoretical framework and overview of previous studies; Chapter 3: Research methods; Chapter 4: Research results; Chapter 5: Conclusion and policy implications

CHAPTER 2: THEOR ITICAL FRAMEWORK AND LITERATURE REVIEW 2.1 Conceptual framework

Debt structure

The study of debt maturity structure focuses on the identification and interpretation of the decision to choose the debt maturity structure of the firms Studies appearing very early in the 1980s to mid-1990s include Barnea et al (1980), Brick & Ravid (1985), Flannery (1986), Barclay & Smith (1995), and Diamond (1991) , Stohs & Mauer (1996) Most of these studies focus on the debt maturity structure of firms in developed countries The first studies supporting the use of short-term debt by firms include Flannery (1986), Myers (1977), and Barnea et al (1980) Research supporting the use of long-term debt by firms includes research by Brick & Ravid (1985), Stohs & Mauer (1996), and more recently, has spread to emerging economies such as Cai's study & associates (2008), Deesomsak et al (2009), Terra (2011), Stephan et al (2011), and Lemma & Negash (2012) mainly study the debt ma-turity structure of the industry, electronic engineering

Macroeconomic factors

Studies have shown changes in the value of financial assets in response to roeconomic factors such as inflation rate, exchange rate, interest rate, GDP, money supply, unemployment rate business, dividends, etc (Fosu et al., 2014) This study focuses on the following selected macroeconomic factors: inflation (Etudaiye-Muhtar

mac-et al., 2017), economic growth (Etudaiye-Muhtar mac-et al., 2017), long-term funding long-term finance (Stephan et al., 2011), and financial development (Pistor et al (2000); Buchanan & English, 2007; Kirch & Terra, 2012)

Institutional factor

The institutional factor that the thesis is interested in and its influence on the debt maturity structure is that institutional quality is a factor that belongs outside of the organization (Kirch & Terra, 2012)

Firm characteristics

Zou & Stan (1998) described firm characteristics as the demographic and administrative factors of the firm, referred to as part of the company's internal environment Firm characteristics that affect the debt maturity structure of the company can be mentioned as debt ratio (Barclay et al., 2003; Giannetti, 2003; Johnson, 2003; Myers, 1997; Stohs & Mauer, 1991), financial maturity assets (Morris, 1976), firm size (Barnea et al., 1980; Etudaiye-Muhtar et al., 2017), growth opportunities (Antoniou et al., 2006; Diamond, 1991, Guedes & Opler, 1996), Myers, 1977), tax effects (Kane et al., 1985), income volatility (Dang, 2011), liquid assets (Stephan et al., 2011), firm asset quality (Stephan & et al., 2011) associates, 2011)

Adjustable speed

Adjustment speed is a well-studied concept in the field of capital structure The concept is based on the fact that businesses have a target capital structure for the coming year and strive to achieve this goal; The speed at which the firm tries to achieve this goal is called the adjustment rate The concept of adjustment speed has been successfully applied to evaluate the financing decisions of firms In the study of debt maturity structure, Lemma & Negash (2013) tested the speed of debt maturity structure adjustment in the context of South African countries

Moderating role

The moderating role describes a situation where the relationship between two variables is not constant, and it varies depending on the values of a third variable, called the moderator variable (or research concept moderator construct) changes the strength or direction of the relationship between two concepts in the model Hair Jr et

al (2017) summarizes the most important differences related to the scale of the latory variable, including the distinction between categorical and continuous modera-tors Some studies have evaluated the moderating role of financial development in the relationship between real income, energy consumption, and CO2 emissions (Chen et al., 2019), while the moderating role of institutional quality is also taken into account

regu-by Dada & Ajide (2021) in the study of the underground economic relationship and environmental pollution The moderating role in the thesis is mentioned in assessing the influence of debt ratio on the debt maturity structure

2.2.1 Factors belonging to company characteristics

2.2.2 Institutional quality and macroeconomic factors

2.2.3 The influence of factors on the adjustment speed of CTKHN

2.3 Some comments and research gaps

From the review of the research related to the debt maturity structure and the speed of adjustment of the debt maturity structure, there are some comments as follows:

Research gap

The factors affecting the debt maturity structure continue to be studied in countries with different economic conditions However, the factors affecting debt ma-turity structure have yet to have consistent results The reason is that the market conditions in which companies operate vary, and issues such as institutional quality, financial development, and long-term financing of economic resources have not been fully considered Therefore, it is necessary to evaluate the influence of the factors on the debt maturity structure and the speed of adjustment of the debt maturity structure because the final results are not available yet

The moderating role of factors in the study of nuclear science in recent years has been ignored and/or not focused on research; only a few studies by Dang (2011), Stephan et al (2011), and Ngo Van Toan & Pham Thi Thu Hong (2015), and Etudaiye-Muhtar et al (2017) evaluate the interaction effect

The moderating role is a way of expanding the scope of theory and which theory is good to explain the occurrence of different phenomena; the importance is when, where, and under what conditions This is very consistent with the research on the debt maturity structure because the moderating role is able to explain the when, where, and under what conditions of the debt decision However, this is said to be the research that has not been mentioned when studying the factors affecting the debt ma-turity structure and the adjustment speed of the debt maturity structure Because of the above reasons, the thesis focuses on the following issues:

1 Moderating role of institutional quality on the effect of debt ratio on the debt turity structure for companies listed on the Vietnam stock market A debt ratio and debt maturity structure are complementary financial policies (Terra, 2009) This is said to be suitable for Vietnam's economic conditions where the business environment

ma-is gradually improved, and the legal provma-isions protecting the rights of creditors and the enforcement of loan contracts will be one of the key factors determinants of long-term funding However, this effect may not be obvious; under the conditions that the market conditions in the transition period may differ from those of developing economies, there may appear to be a moderating role of the institutional quality factor for the economy with the effect of debt ratio on the debt maturity structure The mod-erating role has been taken into account in the relationship between the underground economy and environmental pollution (Dada & Ajide, 2021); however, in the relationship between the debt ratio and the debt maturity structure, no research has mentioned it

2 For financial development, corporate financing has certain benefits, showing the dynamism of financial resources, and increasing transaction efficiency to capital However, much of the empirical evidence showing the effect of financial development

is still unclear (Deesomask et al., 2009; Kirch & Terra, 2012) While the moderating role of financial development in the relationship between real income and energy

consumption and emissions (Chen et al., 2019) has been taken into account, this erating role has not been taken into account mentioned in the relationship between debt ratio and debt maturity structure in recent years

mod-3 The source of long-term financing of the economy in a country, namely the capital market, mainly the stock market, and the bond market These are supposed to be sources of funding in the economy which are of a long-term nature to the business However, in the bond market, not all companies can use it; only a number of large or highly reputable companies can use this market This is most evident in developing economies if gradually improving market conditions help companies reduce the transaction costs associated with using the economy's long-term financing In addition, it can spill over to the secondary market and economic growth Under changing market conditions like Vietnam, companies listed on the stock market may have specific limitations, which may cause adverse effects on the debt maturity struc-ture The moderating role of the economy's long-term financing on the effect of debt ratio on the debt maturity structure needs to be taken into account From the comments and research gaps, the thesis implements the following research objectives:

1 Assessing the influence of factors on the debt maturity structure and the adjustment speed of the debt maturity structure; 2 Assessing the moderating role of institutional quality on the influence of debt ratio on the debt maturity structure; 3 Assessing the moderating role of financial development on the influence of debt ratio on the debt maturity structure; 4 Evaluation of the moderating role of long-term financing of the economy on the effect of debt ratio on the debt maturity structure

CHAPTER 3: METHODOLOGY 3.1 Research process

3.2.2 Moderating role of institutional quality on the effect of debt ratio on the

debt maturity structure for the case of companies listed on the Vietnamese stock

market

3.2.3 Moderating role of financial development on the effect of debt ratio on the

debt maturity structure for the case of companies listed on the Vietnamese stock

market

3.2.4 The Moderating role of the economy's long-term financing on the effect of debt ratio on the debt maturity structure for the case of companies listed on the Vietnamese stock market

The following table shows the variables used for the thesis and the expected sign of this study

Table 3.1: Summary of variables and sign expectations of the model

Determinant Factors Theoretical theories Research expectations

+

Source: compiled by the author

3.3 Research models

MODEL 1

This model 1 was developed to evaluate the influence of factors on the debt maturity structure and the effect of the elements on the adjustment speed of the debt maturity structure in the case of companies listed on the Vietnam stock market

The regression model is as follows:

Where Y i t, is the optimal debt term structure of the company i at a time t, Y i t, 1

is the company's i late debt maturity structure at the time t; X i t, is representative of

the set of explanatory variables including firm i characteristics at the time t; Inflation

at year t; Economic growth at year t; is representative of factors such as long-term funding of economic resources, financial development, institutional quality at the time t; i is the unobservable, time-constant effect on the particular company; t it deals with time-specific effects that are common to all companies but vary over time; i t,error components do not change over time;  and  are the estimated regression co-efficients, respectively

Theoretical and empirical findings suggest that firms that make actual debt turity structure adjustments are geared towards the target debt maturity structure (Brick & Ravid, 1985; Kane et al., 1985; Jun & Jen, 2003; Ozkan, 2000; Antoniou et al., 2006) In addition,  in Y i t,1it indicates the adjustment coefficient while the tar-get debt maturity structure adjustment speed An adjustment coefficient between 0 and

ma-1 would reveal the presence of a dynamically optimal debt maturity (Antoniou et al., 2006; Dang, 2011; Alcock et al., 2012)

This Model 1 is estimated according to variables such as long-term financing of the economy (model 1.1), financial development (model 1.2), and institutional quality (model 1.3), respectively, in turn, added to model 1

Where is the debt ratio for the company at the time multiplied by factors such

as long-term financing of the economy, financial development, and institutional ty?

quali-Model 2 is an extension of quali-Model 1 and previous experiments on the debt turity structure (Barclay & Smith, 1995; Ozkan, 2000) to show the moderating role of institutional quality factors and long-term funding sources of the economy and finan-

ma-cial development on the effect of debt ratio on debt maturity structure As in model 1, the delayed debt maturity structure is included to control the dynamics of the debt ma-turity structure

The assumption of the moderating role of institutional quality factors, term funding sources of the economy, and financial development on the effect of debt ratio on the debt maturity structure may have the following results: 1 Incremental in-fluence: the presence of a moderating role increases the predictor's impact on the out-come; 2 Diminishing effect: the presence of a moderating role reduces the predictor's influence on the result; 3 Antagonistic effect: the emergence of a moderating role re-verses the impact of the predictor on the outcome

long-This model 2 is estimated according to variables such as financial development (model 2.1), long-term financing of the economy (model 2.2), and overall institutional quality (model 2.3), respectively variables in turn added to model 2

3.4 Research Methods

3.4.1 Variable measurement

3.4.2 Data analysis and processing methods

The partial adjustment model approach

Approach to building a model to evaluate the moderating role

Stability test

3.4.3 Model tests

3.5 Data collection methods

CHAPTER 4: RESULTS AND DISCUSSION 4.1 Capital markets, financial development, and institutional quality

4.1.1 Capital market

4.1.1.1 Banking and stock market

4.1.1.2 Long-term funding of the economy

4.1.2 Financial development

4.1.3 Institutional quality

4.2 Empirical research results

4.2.1 Descriptive statistics of research data

4.2.2 Analyze the relationship between variables

4.2.3 Check for multicollinearity

4.3 Regression results and results discussion

4.3.1 Results and discussion regression results of model 1

To assess the influence of factors on the debt maturity structure, this model 1 is estimated according to models 1.1 (long-term financing of the economy), model 1.2 (financial development), and model 1.3 (financial development), institutional quality

Table 4.1: Regression results of model 1

Note: Standard errors are in [] *Significant at 10% level **Significant at 5% level ***Significant at 1% level

Testing the research model

Analysis of regression results

To evaluate the financial development factor to the debt maturity structure more specifically This study continues to test Model 1.2 with lower indicators of overall financial development and depth, accessibility, and efficiency indicators In addition, model 1.2 is also estimated from (1) to (8) as two estimates for the index of financial institutions and financial markets and six estimates for the index of financial institutions and financial markets, respectively, lower levels of financial institutions and financial markets (depth, accessibility, and efficiency)

Table 4.2: Regression results of model 1.2

Note: Standard errors are in [] *Significant at 10% level **Significant at 5% level ***Significant at 1% level

This empirical evidence is considered new compared to previous studies cause this study exploited the full range of IMF data on financial development This

be-result shows the following points to pay attention: Financial market development has a positive influence on the debt maturity structure and the adjustment speed of the debt maturity structure This result is considered to be consistent with the situation of Vi-etnam's economy; that is, the development of the financial market is said to be benefi-cial for the debt maturity structure Financial markets have developed that allow indi-viduals and companies to diversify their savings and companies to raise funds through stocks, bonds, and the foreign exchange market; In addition, this result also reflects that the efficiency and approach to financial market development have a positive in-fluence on the debt maturity structure and the adjustment speed of the debt maturity structure This effect shows that the convenience of transactions in the market makes the debt maturity structure longer In addition, the level of capital market activity is said to be efficient, which leads to a more extended debt maturity structure

Table 4.3: Regression results of model 1.2 (continued)