Luận văn thạc sỹ quốc tế impact of capital structure FULL DISSERTATION (1)

Along these lines, high profits could be related with high target debtproportion, which may emerge for various reasons, for example, possible tax costcutting from debt benefits, less liq

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Module Title: Dissertation

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Date of Submission: 21 September 2017

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DISSERTATION ON THE IMPACT OF CAPITAL STRUCTURE ON FIRM

PERFORMANCE

BY TANG DUC TU ID: 77182404

21 september, 2017

Capital Structure is regard as the decision made for funding activities, whichencompass both elements of debt and equity for funding the assets Whetherfinancial structure affect the firm’s operation is still under investigation due todivergences in different academic frameworks This paper adapts prior studies tolook at Vietnamese case, even though there were many inconsistencies in theoutcomes and the conclusions might be confusing The case study will examineselected firms in Vietnam in 10-year period (2007 – 2016) using OLS, Random andFixed Effects regression model to test the theories and variables such as debt ratiofrom both long and short term, so on and so forth

It is concluded that it is relevant to say that financial structures affect performance

of a business This paper shed light on how authorities can build a policy on marketsecurity when debt funding made the market instable They should revise restrictionpolicy as well as encourage business to raise long-term investment, which can be apositive influence on the financial structure of a firm

Contents

LIST OF TABLES

Table 4.1 Definition of detail number

Table 4.2 Pearson Correlation Matrix

Table 4.3 Result of Hypothesis 1

Table 4.4 Result of Hypothesis 2

Table 4.5 Results of Hypothesis 3

Table 4.6 Regression results of ROA and capital structureTable 4.7 Regression results of ROE and Capital structure

CHAPTER ONE: INTRODUCTION

1.1 Background of the research

Financial structure can be defined as monetary choice embraced by a company insubsidizing its joint speculation This involves the mix of arrears and financialownership to back company's resources The characteristic dangers in industrycontext have added to each allied association cooperating its monetary choicetowards accomplishing ultimate goal Abu-Rub (2012) argues that capital choicealters as indicated by the scale of danger identified with each financing alternativesand in addition the connection amongst deviation and investment revenue.Businesses try to embrace a combination of capital structure that ensures least cost

to accomplish the chief objective of augmenting association's execution The effect

of financial structure on operation of a company has been questionable because oflarge-scale discussion from differing ways of thinking Researchers contend mainlyabout unrelated and related hypothesis of capital structure The previous claim thatunder extremely prohibitive suppositions of immaculate financial markets, it is notcapitalist' analogous desires, symmetric data and no insolvency cost, money relatedformation to decide capabilities of a business At the same time, the latter whichassume blemished financial markets have displayed and indisputably uncoveredpessimistic and optimistic main connection between money related structure andexecution of a company (see for instance, Zeitun and Tian, 2007; Onaolapo andKajola, 2010; Skopljak and Luo, 2012)

However, according to Modigliani and Miller (1958) any company’s worth in markethas nothing to do with its investment choice is equivalent to the anticipated return

of invested money Similarly, the standard expense to invest in any business doesnot depend on its investment choice and is equivalent to how much pure flow of itsclass gets capitalized The doubtful idea of MM recommendations combined withtheir resulting work in 1961 and 1963 activated dubious contentions This in any

case, brought forth the enthusiasm of numerous researchers who took a gander atdiffering measurement to investigate the impacts of less prohibitive presumptions

on the connection between finance system and the company’s value (Eriotis, 2007).Following work of Miller (1977), exhibited another test by pointing that underspecific conditions, the duty shield advantage of loan financing at the firm scale isprecisely off set by the uninspiring expense of obligation from personal income tax.Modigliani and Miller hypotheses, in any case, accepted that speculators and firmshave same level access to the finance markets, which tolerate with custom madeleverage (Brealey and Myers, 1996) As contended, financial specialists can makeany leverage they needed yet not offered, or the financial specialists can dispose ofany use that the firm went up against yet was not needed Thus, firms' use choicesdon't impact its value (Afrasiobi and Ahemadina, 2011) The supporters (Adelegan,

2007, pratheepkanth, 2011) of Modigliani and Miller hypothesis have given exactproof that capital structure is irrelevant

However, given the situation that the flawed financial market has not have itsinternal and external fitly alternated, this fact is reflected by the various recenttheories along with their anticipations Thus, relevance theories recommended thatimpact from many elements such as tax, agency, liquidity, market timing, etc.greatly affect financial choices of action and thusly the firm’s value (Jensen andMeckling, 1976; Ross, 1977, Leland and Pyle, 1977; Kim et al., 1977; Fama, 1980,Myers and Mauflis, 1984; Myers, 1984; and Fama and French, 1998) In particular,these speculations that have been progressed to clarify the finance systemincorporate theory regarding tradeoff, agency costs, pecking order, market timingneutral hypothesis According to Kim and Babbel (1995), many body of thought hasstarted to compromise gradually though many different factors have been deeplyemphasized

The main issues among the hypotheses can be limited to augmentation of investors'value The partition of proprietorship and control in a professionally oversaw firm asaccepted by agency cost framework may bring about administrators applyinginadequate work exertion, enjoying perquisites, picking sources of info or yields thatsuit their own inclinations, or generally neglecting to amplify firm value (Jensen andMeckling, 1976) Thus, the cost for agency of outside proprietorship is covered byincentive from managers optimizing their own utility, instead of the firm’s value

Many frameworks stated that financial structure may help moderate these agencyexpenses Debt funding is used to control shrewd conduct for individual benefit ofsome managers It decreases the free money streams with the firm by payingsettled premium installments and cores directors to stay away from negativespeculations and work in light of a legitimate concern for investors In any case, if aventure yields extensive returns, investors catch a large portion of the pick up And

in case the venture fizzles, debt holders are to bear the consequences.Subsequently, investors may profit by betting on business activities that highlyhazardous, regardless of the possibility that they are value-diminishing "assetsubstitution effect" as mentioned by Jensen and Meckling (1976) Obviously, whenleverage turns out to be generally high, agency expenses for external debt are high

as well, including higher foreseeable bankruptcy costs or financial adversity costswhich may stem from divergences among bondholders and investors Similarly,Nosa and Ose (2010) and Huan and Ritter (2004) as supporters of trade-off theorystated that firm’s power allocation might be thruster by three opposing factorsnamely agency costs, benefits of tax and bankruptcy expenses Also in Onwumere

et al, (2011), at high power position, investors’ value may not be improved whenprohibitive pledges incorporated into finance obligation assertions restrict thecapacity of firms to optimize its assets As a result, a business may choose to boostsits value by excessive utilization of debt Many prior researchers over the lastdecade such as Berger and Patti (2002), Zeitun and Tian (2007); Ebaid, (2009);Onaolapo and Kajola (2010); Akbarpour and Aghabeygzadeh (2011); Skopljak andLuo (2012) have conducted academic researches to shed light on the matterwhether and how financial system how impact on business operation Bunn andYoung (2004) discussed regarding trade off theory that in deciding on powerallocation, business try to equalize debt benefits and the potential expenses offinancial adversities due to high debt status On one hand, it is debated by peckingorder theories advocate that company does not aim at optimizing financial system;but on the other hand, trade-off theory fires back by saying business uses theminimum resistant and expensive funding mix (Kasoxi and Ngwenya, 2010) Alongthese lines, the latter gives no thought to any profit collected from the utilization ofdebt against liquidation cost but instead take a gander at obligation as optionbecause of lacking inner funds Additionally, the pecking order hypothesis sayleverage proportion to be negatively affects firm’s operation This relationship has

been affirmed in numerous academic researchers in Lemmon and Zender (2008) orOnaolapo and Kajola (2010) Meanwhile, the former argue that power proportionsare affirmative for firm’s performance which has been affirmed in numerous work aswell (in Sola, 2010; Nosa and Ose, 2010) However, signaling theory expresses thatsupervisors have impetuses to utilize different apparatuses to send signs to themarket about the distinction that exist amongst them and other weaker firms One

of the key instruments to send these signs is the utilization of obligation.Employment of debt as a financial choice shows that manager has optimistic futureexpectation regardless the uninspiring current equity situation Consequently, thevast majority of the contentions of relevancy theory are hung on dangers andreturns nature utilizing financial combination available to each company Generally,the essential point of decision making in finance by means of equity and debt is toboost the market value of a firm at lowest possible cost (Khrawish and Khraiwesh,2008) Thus, use of various levels of obligation and equity in the association'sbudgetary structure is one of the firm-particular techniques utilized byadministrators in enhancing its effective execution

In spite of the fact that, the suspicions of irrelevance hypothesis grounded on theideal capital market setting such as no tax nor bankruptcy cost, reasonableshareholders, fair competition and market productivity This prompted Modiglianiand Miller (1958) contention that in a universe of certainty in returns, thequalification amongst obligation and value stores decreases generally to wording Inthis way, regardless of by debt or by equity is the firm established on, marketassessment of any firm bear no effect whatsoever from financial structure Yet, inthe realm of flawed capital market that exists in our reality, most finance systemmight be applicable The underlining contention of conventional framework offinancial structure is underscored on frictionless nature of MM hypothesis that fillsthe hypothesis inadequate Ross (1977) focuses that if MM hypothesis is finishedand thought to be right, at that point capital structure is vague or arbitrary in fact,and to some degree restraining premise on which to build up a clarification offinance structure One conceivable way to deal with the issue is to adjust the MMhypothesis to assess the auxiliary highlights of this present reality" Ross (1977)focused deeper that since intrigue installment on debt are deductible in figuringcorporate wage charge; the value of the firm should ascend with the substitution of

debt for profits Along these lines, high profits could be related with high target debtproportion, which may emerge for various reasons, for example, possible tax costcutting from debt benefits, less liquidation risks and conceivably higheroverinvestment, and different things to break even with (Hovakimian et al., 2004).The implausible nature of MM hypothesis; and ensuing work by Jensen and Meckling(1976) in regards to the impact of capital structure on firm execution because oforganization expenses of a firm and different variables has brought forth variousexperimental tests as mentioned before Despite the significance of the vastmajority of the underscored factors, there is changed observational proof on theeffect of finance structure on the operation of a firm in Vietnam Trial of the agencytheory regularly regression measures of financial system on firm execution markersand some control factors (Allen and Emilia, 2002) As a result, this will utilize thesemeasures on panel info regression models to look at the effect of financial structure

on the execution of Vietnamese quoted companies utilizing the latest accessibleinformation of the firms to fill the research hole

1.2 Current issues of the research

Different firms have various approaches to access the source of finance They canget financial source inside and outside firms Different choice of fundingmobilization has advantage and drawbacks The adoption of suitable capitalstructure is useful to boost the corporate performance and lessen threats Forexample, decisions of share issuance for capital mobilization can decrease theleverage ratio and ease the risks related to liability and solvency By contrast, firmscan govern their business operations without the share of right with othershareholders Therefore, the determination of capital structure has the large effect

on the corporate performance for all listed firms, which are attempting to enhancethe business activities

In the situation of intense competition, firms are trying to strengthen the corporateperformance for profit improvement Researchers in the earlier studies exploredseveral factors affecting corporate performance, such as capital structure, firmculture, and labor The financial system decision on the performance of a firm hasbeen making elusive effects due to far-reaching arguments from a variety of

viewpoints The existing empirical studies that demonstrate the influence of debtand equity mix on the performance of each firm in Vietnam is concentrated tocapital structure measurements amidst entrenched conflicting views implicit fromthe deviation among their conclusions Hence, the outcomes and assumptions onthe studies may be ambiguous As an example, Adelegan (2007) proved negativehowever inconsequential correlations between business performance and leverage.While, Onaolapo and Kajola (2010) conducted a survey on the control of capitalstructure on firm performances and stated that capital structure results in adversitywhich often time some weighty impact on the operation of a firm What is more,Dare and Sola (2010) noted some positive momentous association of leverage ratiowith a firm operation in term of effectiveness in a capital structure related studywith the subject as petroleum industry in Vietnam.

Nonetheless, the agencies of financial structure, including total, long term and shortterm debt ratio have a better shot at acquiescing more neutral findings, due todifferent practical insinuations regarding different forms of debt instruments Still, innascent debt market which is unusual to Vietnam, most businesses’ peripheral debtfinance is occupied by short term backings, which inflicts the business with evenmore excessively costly trouble For instance, it is believed by Titman and Wessels(1988) that implementing an altered measurement for leverage ratios as a result ofsubstantial findings is a good thing since some concepts of financial structure havedifferent inferences for not agreeing on the constricted classification of leverageratios Likewise, due to the fact that short- term, long- term and total debt obligatediverse threats and reoccurrence profiles, it would be fascinating to distinguish theconsequences of them (Zuraidah, et al., 2012)

This revelation elevates a significant research question on the efficiency of financialstructure, in complementing effective operation of quoted firms in Vietnam Topursue the answer for this issue, this paper hence attempts with different systems

of financial structure to inspect the influence of financial structure on the operation

of Vietnam quoted firms by employing

1.3 Objective of the Study

The research aims to explore factors affecting corporate performance in Vietnameselisted firms The specific objectives are to:

• Investigate the theories relating to capital structure

• Examine determinants of capital structure impacting firm performance inprevious studies

• Use regression model to analyze the effect of capital structure on firmperformance

• Discuss the achieved results with other researches

ii The impact of long term debt ratio on corporate performance is not

beneficial and noteworthy

iii The impact of short term debt ratio on corporate performance is not

constructively momentous

1.6 Research’s scope

This examination work secured Vietnamese cited firms that are inside non financialareas grouping Henceforth, institutions such as commercial banks, or bankingsectors in general, and insurance agencies, as well as other specific financialbusinesses are rejected in the case The legitimization for this is financial segments

are exceptionally controlled; especially the authority’s regulation, which moderatelyimpact their own financial structure to operation

This investigation covers ten-year the period (2007-2016) The year 2001 waspicked as the origin year since it was the year banking industry got first handexperience with universal banking As bond markets are immature and latent,commercial banks and other financial business assume a critical part in givingcredits to Vietnamese firms This period, 2007-2016 additionally witness somecritical policy revisions Remarkable among the reforms are reviving of DomesticDebt Market in 2003; Amendment of Companies Income Tax 2007 (Act No.11) or thefamous Personal Income Amendment Act, and so on

1.7 Significance of the Research

Noticeable financial expert has done observational examination on the importanceand immateriality of financial structure on firm value in various wards Theirdiscoveries so far have been essentially substantially relatable to both learning andimprovement As saw by the analyst, most research in Vietnam are significantly onthe effect of capital structure on the firm execution with limited knowledge offinancial structure This paper tried to fill the exploration quest in Vietnam byinvestigating the effect of financial structure on the operation of Vietnamese quotedfirms Reliably, this examination will make strong commitment on the academicframework "financial structure and firm operation" It will likewise uncover firmsfinancing habits and its effect on the financial execution To be exact thisexamination will have tremendous advantage to the followings:

Economic Analysts

The study can help economist who wants to analyze the inherent characteristics ofdebt and equity status of each examined company and also expose the threat ofinterest abiding resources Hence, operators can refrain from inappropriatepractices in financing pattern discovered through the sampled firms

Stockholders and Businesses

Stockholders can benefits from the result of this study since it help them be moreaware of the risk in their investments Also enhance knowledge for companies whointent to lower price of their idle assets as well as its accompanied risks, henceavoid instability in profits.

According to the work of Modigliani and Miller, in an active market, the sole vitalelement that determines a corporate’s market value is the stream of profit produced

by its assets, regardless of any rational stockholders or taxes that hold either strong

or risky debts (Meyers, 2010)

Hence, financial structure has no impact on a quoted firm’s value in the market Thestudy, which also assimilates tax in their following findings, makes an argument onthat the value of a quoted firm is a growing function of control resulted fromcorporate level costs of interest in tax deduction (Berens and Cuny, 1995 and Hull,1999)

Habitually holders of quoted firm attain no benefits whatsoever from utilizing deduction debt, rather than equity assets given that so much as personal incometax and corporate tax are eligible to apply to (Bailey, 2010) Both empirical andtheoretical studies springing from MM theorems have analyzed a variation of capitaleffects in connection to leverage such as bankruptcy and agency effects but thenagain prevailing divergence still rises among opinions on tax shield advantage inaddition to strength of these effects (Hull, 2007)

tax-Ross (1977) argues that the irrelevance theory adopts the notion of the existingsymmetric information with the hypothesis that there will be no methodical liaisonamong financial verdict and corporate value However, the orthodox approachassumes that with asymmetric information financial decision can put impact onevaluating firm’s value (Leland and Pyle, 1977) The authors imply affirmativestatistic even though not one causal connection between debt and value of mostprobably analogous projects could be found Similarly, Jensen and Meckling (1976)argue that the net effect of the amplifying usage of peripheral debt upsurges thetotal agency expenses and upturns prime segment of peripheral debt gained fromthe extrinsic equity sale number Desai et al (2003) speculates that it is the debtusage that grows as corporate tax rates increases rather than equity finance.Consequently, high corporate tax rates can result in greater corporate liability owing

to firm’s need to fully take advantages of the privilege of debt tax shield Identicalargument was established in Miller (1977) study which implies yearly deviation indebt percentage mirrored mostly the recurring movement of the economy

On the other hand, trade-off theory demonstrated that optimal assets structure of

a corporation is a trade-off between utilizing privileges from tax shield and beingcharged by bankruptcy costs from retaining peripheral money (debt), keepingconsistency of the corporate is assets and investment plan (Myers, 1984, Bradley etal., 1984, Zambuto et al., 2011) Henceforth, firms that try to maximize their profitmanage an ideal capital configuration by counterbalancing the corporate tax shieldbenefits against personal income, debt-associated cost such as bankruptcy andagency cost Meanwhile, corporates that implement striking financial demand donot plan their debt ratio, because the ordering regulates their select of emergence

of different assets The amount of asymmetric information decides the comparativeexpenses of each source of financial backing The stricter the asymmetricinformation gets, the more uncertain the investment would get, and perpetually thehigher the cost for the security (Octavia and Brown, 2008) The existence ofasymmetric information help corporates in bettering their business by funds acquirefrom internal sources rather than external ones

However, agency theory discusses that the selection of fiscal system can help loweragency expenses which result from the parting between proprietorship and power.Agency expenses of external equity can be cut down and firm value can be added

by high leverage ratio through pressuring or reassuring managers to be moreattentive to shareholders’ interest (Berger and Patti, 2002)

Nonetheless, the assumed enticement to the company will favor stockholders at theoutflow of debt-bearers The modification of leverage ratio to reach incremental ratemay result in high agency budget if not realistically applied As argued by markettiming theory, timely market-oriented financial structure decision is another realisticchoice to optimally boost assessment Correspondingly, corporates release equitywhen stock values seem to be overrated and purchase again when they aredevalued In other word, the fluxes of the stock price act as the determiningelement to make financial structure decisions

2.2 Capital structure ratios

This section shall review some at academic work regarding financial structure Theacademic materials oppose the notion that leverage ratios are fit to measures offirms’ financial operation system qualitatively As a part of firm assets, leverageratio is backed with any sort of fixed-charge funding like loan or contracts.Therefore, leverage is an instrument if the conservatively engaged increasepotential profits of the remaining titleholders Goldsmith and Lipsey (1963), resistthe assumption that leverage ratio is rather a measure of impending profits thanactual capital ones Thus, leverage ratio implies the effects of conceivabledeviations in price-pointing out factions that tend to be exposed to, or favored by,cost changes of several type Leverage ratio signposts the company's vulnerability

in fulfilling debt service costs A firm with high leverage ratio tackles a higherdanger of its equity capital being wiped out when unfavorable outcomes from itsrisky assets come into existence Higher leverage ratio also amplifies market risk asleverage company may be forced to sell properties in order to lower exposureduring marketplace adversity Therefore, firm that is severely backed by loanprovides creditors with less security in case of liquidation For instance, if abusiness's assets are funded by 75 percentages of loan, in case the assessmentdrop down to only 25 percent, creditors’ investments are threatened In contrast, ifonly 25 percent of a company's resources come from debt, property value onlydecline to 75 percent before endangering the creditors’ moneys

Notwithstanding, leverage ratios raise company’s vendors’ concern because of itsimpact on the rate of return, in which owners anticipate on to realizing theirspeculation and the level of possible risk Nwude (2003) hypothesize on theargument that corporate with high leverage ratio might confront bigger fixed-costinterest rate, plummet in revenue and cash flow is restricted by fiscal leverage lead

to cut-price or even no dividends, ultimately result in reduced share price.Nonetheless, this can upturn the likelihood of interest nonpayment, thusaccumulating risk of bankruptcy For short, a company’s leverage ratio essentiallyhas great impact on potential revenues of the company

2.2.1 Total Debt Ratio

Total debt ratio represents a business’ total assets that are funded by peripheraldebt, including both short-term and long-term liabilities Nwude (2003) opposesagainst that these measures only parts of the company’s assets backed byinvestors The higher total debt ratio gets, the company’s fixed-interest expenseswill also rise, ultimately if total debt ratio gets too big, suppose say there were to be

an economic recess, the company will be able to generate consistent flow of cash topay for interest Academic works researching on the impact of debt ratio forecastthat it has positive correlation with scale of investment For instance, Long andMalitz (1985) discovered a momentous positive connection between fixed plant andequipment’s investment scale and the amount of loan The total debt ratio iscalculated by taking total debt and divides it to the total assets of a company.Through a significant number of empirical researches, this proxy variable proves to

be the most outstanding measurement of a company’s leverage ratio (Zeitun andTian, 2007; Onaolapo and Kajola, 2010; Tze-Sam and Heng, 2011; Kasozi andNgwenya, 2010; Baker and Wurgler, 2002; Ju et al., 2004; and Booth et al., 1999;Khan, 2012; Azhagaiah and Gavoury, 2011)

Total Debt Ratio= (Total Debt)/(Total Assets)

2.2.2 Debt equity ratio

Debt equity ratio, analogous to debt ratio, shows relations between company’sfunded debt and funded equity This method of evaluating leverage ratio is indeednot a new one; it is basically debt ratio demonstrated in another way Debt equityratio is used to estimate the measure of total debt to remaining owners’ equity(Nwude, 2003) Therefore, it shows if the company is more dependent on loan(debt) or investors wealth (equity) on operations and forming assets Manyresearchers in different prerogatives have utilized this method of evaluating a firm’sfinancial structure in their case studies (Zeitun and Tian, 2007; Majumdar andChhibber, 1999; Azhagaiah and Gavoury, 2011)

Debt equity ratio= (Total Debt)/(Shareholders’ Funds)

2.2.3 Long term Debt Ratio

Despite the fact that this formula merge with the previously discusses twomeasures, some researchers specifically employ this formula simply because mostinterest charges are acquired through long-term loan, and since long-term debt put

on the corporate fixed payment duties for years Titman and Wessels (1988) arguethat suggestive results are decent proof for implementing other measures ofleverage ratio as well because different financial structure’s concepts have differentsuggestions for not grouping all of them as “debt ratio” Long term debt ratio, whichhas been implemented in several case studies (Titman and Wessels, 1988; Zeitunand Tian, 2007; Tze-Sam and Heng, 2011; Long and Malitz, 1985; Booth et al.,1999), is measured by having long term debt divided by company’s total assets

Long Term Debt Ratio =(Long Term Debt)/(Total Assets)

2.2.4 Short term Debt Ratio

Short term debts are loan commitment that generates within one fiscal year Thisaspect is fit to be incorporated in calculating leverage ratio for it appears to be able

to effectively notice when there is incompatibility of funds occurs by a firm Thismay be one main reason why researchers choose to implement a variety ofmeasurements for leverage ratio instead of narrowing them down Titman andWessels (1988) argue that theories have different pragmatic allegations regarding

to a wide range of loan types Therefore, mismatching funds happens when shortterm debt actually funds long-term investments instead of long term debt.Seemingly, this result in nonpayment due to interest toll and principal repaymentmay collapse due when the earnings (cash inflow) from the venture are not yetsufficiently generated The firm may face legal charges due to its inability to fulfillprincipal payment Short term debt ratio, nonetheless, suggests the scale of existingdebts (duties) to alter in a firm’s total assets value Schinasi (2000) claims leverage

is the intensification of either positive or negative return rate on a situation orinvestment beyond the rate which is attained by an uninterrupted venture of privatecapitals in the marketplace Theories on financial structures have debated thatshort-range debt ratio is a suitable formula to evaluate leverage ratio in shiftingeconomy with undersized debt market where the majority of most firms’ outwarddebt investment is commercial bank debt Lucey and Zhang (2011) advocate theview that state-level liberalization of marketplace deducts the practice of long-termdebt, and debt tendency turns to short-term one Case study by Khan (2012)disclosed that business in engineering subdivision of Pakistan is mainly reliant ontemporary debt but debts are bound with strong contracts which disturb company’soperation Quite a few researchers have engaged their case study with thismeasurement (Timan and Wessels, 1988; Zeitun and Tian, 2007; Long and Malitz,1995; Khan, 2012)

Short Term Debt Ratio= (Short Term Debt)/(Total Assets)

2.3 Firm Performance

The idea of execution in funding activities is a questionable issue to a great extentbecause of its multi-dimensional implications Santos and Brito (2012) sets that themeaning of firm execution and its estimation keeps on testing researchers because

of its many-sided quality This hypothetical writing has generated the spirits ofvarious body of work Performance assessment are either financial or hierarchical(Zeitun and Tian, 2007) Refering to crafted by Chakravarthy (1986) and Hoffer andSandberg (1987) by Zeitun and Tian (2007) point that financial execution, forexample, value boost, amplifying profits on venture, and augmenting lingeringproprietors value are at the center of the company's viability, while, operationalmeasures, for example, development in trading and expanding within the industry,basically accentuates extensive variety of execution as they concentrate on theelements that particularly result in financial execution Sanctuary is required to givedata of execution to firm by administration authorities And furthermore dataasymmetries amongst administration and other contracting departments urges for

an inner-cycle measurements of firm execution to be accounted for over limitedinterims This in any case, gives wellspring of data to financial specialists and loan

bosses on the company's money creating capacity (Dechow, 1994) Financialarticulation is the instrument that passes on data to the clients of financial data.Market productivity depends on the hypothesis of rivalry in which costs areaggressively set and choices reflect accessible financial data (Dastgir and Velashani,2008) Backers of the "all-inclusive concept" contend that far reaching salaryexplanation give better measures of firm execution, than other outline paymeasures Then again, the individuals who advocate "current operatingperformance" perspective of salary contend that net wage without consideration ofuncommon and non-enrolling things show signs of improvement capacity to mirrorthe company's cash streams (Dastgir and Velashani, 2008).

According to Zeitun and Tian (2007), the value of a measure of execution might beinfluenced by the target of a firm and securities exchange advancement generally

to the decision of execution measures Agency cost hypothesis contends that target (interests) of the organization's chiefs and targets of the firm (investors'value optimization) are not splendidly adjusted (Jensen and Meckling, 1976) Theargument is that administrative offer possession may decrease administrativeincentive to devour perquisites, dispossess investors' wealth or to take part in otherdrawback exercises and in this manner helps in adjusting the premiums of directorsand investors and thusly cut down agency expenses and increment firm execution

self-In this manner, the merging of intrigue speculation predicts that biggeradministrative proprietorship stakes should prompt better firm execution

Contingent upon one's perspective of execution measures, one can take a gander at

a firm and discover it either productively composed or not and that can promptbetter execution Be that as it may, there are set up hypothetical written works onthe measures (markers) of firm execution, in spite of the fact that these have notbeen satisfactorily investigated contrast with different elements in funding Themost measure that intermediaries firm execution, according to Zeitun and Tian(2007) and Booth et al (2009) are to be named: Return on Assets (ROA), Return onEquity (ROE), Earnings per Share (EPS) as well as overall revenue, or such asReturn

on Investment (ROI), Tobin's Q, P/E, and so forth The initial four execution measuresfeatured above simply speak to bookkeeping measures of firm execution in view of

chronicled events of the firm to create financial ratios from financial record andincome statements A few remarkable analysts have utilized these measures in theirexperimental examinations (Booth et al., 1999; Zeitun and Tian, 2007; Kajola 2008;Zeitun, 2009; Onaolapo and Kajola, 2010; Tze-Sam and Heng, 2011; Azhagaiah andGavoury, 2011 Skopljak and Luo, 2012; Khan, 2012) Meanwhile, some assortment

of hypothetical written works has set up perspective on the measures of firmexecution They contended that instead of concentrating on bookkeepinginformation that is simply historical, a firm execution is better get with theutilization of market value The market measures of firm execution are Tobin's Q,value income proportion, and so forth Lang and Stulz (1994) fight that theutilization of Tobin's Q instead of execution after some time, dodge away the issues

of the prior work

Return on Assets (ROA) is a variable to evaluate a business performance, whichdiscloses if a company exploits its resources to generate revenue effectively,through financial statement High ROA signifies a high effectiveness level of thebusiness operation Take a growing ROA for example, it may seem promising at first,yet would be mediocre if compared with other businesses in the same field.Therefore, if a firm’s ROA is below average range of the industry, it is not operating

to its optimal potential Booth et al (1999) postulates that their case studies utilizethis feature for its being the only measure that can be estimated cross-countries.They come to term that it is hard to compare profitability country-wise Otherresearchers who also used this variable in their analysis are Zeitun and Tian (2007),Zeitun (2009), Tze-Sam and Heng (2011), Onaolapo and Kajola (2010) and Khan(2012) It is safe to say, ROA ratio may be handier in comparison with the risk-freereturn rate that to be compensated for the added risk convoluted If a firm’s ROA isequal or less than the risk-free rate, sponsors will be disinterested and would ratherjust obtain a bond with a secured yield

ROA= (Profit Before Interest and Tax)/(Total Asset)

2.4 Financial Structure and Firm Performance

There are a lot of researches analyzing the relationship between capital structureand corporate performance in developed countries Mwangi, Makau, & Kosimbei(2014) proved that there exist the positive relationship between capital structure

and firm performance Saeedi and Mahmoodi (2011) support the result above thatthe correlation of capital structure and corporate performance is positive in Tehranstock exchange They also add return on asset (ROA) has significantly positiverelationship with capital structure but return on equity (ROE) has no association.However, Maina and Kondongo (2013) indicated debt ratio – a part of capitalstructure having negative relationship with corporate performance Javed andAkhtar (2012) use the regression model to examine the correlation among them,which support the agency theory Ebaid (2009) shows the empirical study thatcapital structure have insignificant effect on the corporate performance.

In Vietnam, Tristan Nguyen and Huy-Cuong Nguyen (2015) demonstrate that term and long-term debts have the equally negative impact on firm performance The impractical postulations and unclear practical proof of the Modigliani and Millerworth- invariance schemes and inconsistency insignificance in budget of fundingproposals II funded to quite a few case study on capital organization and corporateoperation Adelegan (2007) discovered that values and leverage put undesirable butminor influence on each other in collective regression while debt and leveragecorrelate in considerably negative way in small-scale sample data The outcome issimilar to Miller (1977) work stating that individual income taxes on interestdistressing tax savings can cause debt to generate no net tax profit for thecorporate A case study observing capital system and financial implementation ofsome specific firm in Colombo Stock Exchange conducted by Paratheepkanth (2011)established data on trifling harmful association among capital system and financialfunctioning Another research grounded by previous case study on the effects ofcapital system modification to security expenses in America conducted by Masulis(1980) disclosed that stock price changes have the same qualitative relationship toannounced leverage changes regardless of the direction of the change

short-Majumdar and Chhibber (1999) examining Indian’s corporates’ structure and itsfinancial operation discovered substantial transposed liaison between debt equityratio and corporate performance Some control measures such as size, advertising,liquidity and diversity were uncovered as positive influence on performance.Whereas, some variables cause substantially undesirable effect on performance arenamely time, age, exercise and group Still, the inverse correlation between capital

system and corporate performance found may have been the result of Indianfinancial market’s high borrowing cost (interest rate) along with that firm with highleverage ratio is considered as less commercially effective than ones with a higherequity ratio The inverse correlations of capital organization and corporateperformance is confirmed through quite a few case study employing panel dataregression assessment (Schiantarelli and Sembenelli, 1997; Ebaid, 2009;Adelegan, 2007; Zeitun and Tian, 2007; Cheng and Tzeng, 2011; and Onaolapo andKajola, 2010; Uremadu and Efobi, 2012; Azhagaiah and Gavoury, 2011; Mubashar etal., 2012).

Schiantarelli and Sembenelli (1997) attempted to examine a pragmatic causes andeffects of the development system of debt by using panel data companies from the

UK and Italy In observing how financial system affect firm’s performance in general,leverage ratio was used as a regression assessment to control, data from Italian firmshows substantial adversity and noteworthy effect of leverage on a business’productivity In other word, being under financial difficulty does necessarily result inbetterment in efficiency The outcome does not agree with previous academicagenda that managers are urged to take better decision during financial adversity.Correspondingly, they claimed that great leverage ratio may also reduce chance toimprove efficiency, since pledgers, comparative stake is minor in the business.Nevertheless, capital organization’s influence on business’s productivity acquiredfrom a case study of non-commercial Egyptian quoted companies during eight years(1997-2005) which employed OLS multiple regression analysis by Ebaid (2009),exposed that capital organization which evaluated by total debt and short-term debtconsecutively to total assets affects deleteriously on productivity evaluated byreturn on asset of a business Instead, the study showed no noteworthy sign ofcapital system’s determining control over productivity evaluated by return on equityand gross revenue periphery, through the use of short and long term debt and totaldebt to total assets Ebaid (2009) thus comes to the assumptions that overallcapital system in Egypt has very feeble impact financial productivity of quotedfirms

In another case study on Vietnamese firms by Onaolapo and Kajola (2010), capitalstructure measured by debt ratio was uncovered as a substantially undesirableelement to both ROA and ROE - productivity measurement Researching on the

impact of capital organize and cash of business returns in Vietnam by Uremadu andEfobi (2012), the paper examined 10 manufacturing companies for the period offour years between 2002 and 2006, employing OLS regression estimate Theoutcome is that high income tax systems along with excessive inflation inVietnamese make business unable to optimally generate profit using long termdebts The researcher postulate that for Vietnamese business, the more long-termdebts ratio grows in comparison to capital equity, the better it will get to generaterevenue

Also it was claimed that higher ratio short-term debts over total debt as long aslong-term debts over total debt results in the corporate’s inefficiency in generatingprofit The research, yet, assumed that the value of long term debts examined bylog linear analysis can indicates adversity for the firm but the final outcome did notmatch with the prediction made prior to that Therefore, according to the scholar, it

is either Vietnamese corporates assemble insufficient long term debts or there mayhave been severe falsifications in the fiscal structure of the economy during theperiod of time that was examined

CHAPTER THREE: METHODOLOGIES

3.1 Design of the Research

Research configuration concerns the detail of systems, which associate hypotheticalforecasts to the request methodologies and exact data accumulation strategies toaddress the issue In fact, explore configuration includes an arrangement onefficient technique for information collection, process and strategy for breakingdown vital information (Onwumere, 2005 and Ibe, 2003) Accordingly, it is the all-inclusive strategy whereupon the announcement of issues is tended to The idea ofthe issue under scrutiny and the comparing goals as it may decide the approachand strategy to be utilized

The examination is an observational investigation of the effect of financial structure

on firm operation and with the employment of secondary information Ex-post factoconfiguration was utilized in acquiring, examining and decoding the significantinformation for theories testing The justification for the assortment is that ex-postfacto research configuration permits the analyst the chance to watch at least onefactors over some stretch of time (Uzoagulu, 1998) In particular, panel informationwas conducted in information investigation

3.2 Data Resources and Characteristics

The auxiliary information adapted in this investigation have been embraced in priorresearches regarding financial structure and firms' execution, and other relatedwork There are a few investigations performed in the zone and the researcher hasaccumulated data from these examinations to upgrade this exploration work and toproffer answer for the examination issue The dataset utilized in this examinationwere produced from Vietnam Stock Exchange fact book and yearly reports and

account statements of Vietnam’s cited firms Firm’s yearly proclamations andreports are considered solid since they are statutorily required to be evaluated by aperceived inspecting firm before distribution in Onwumere et al (2011) Theelements of focus for the financial statement are resources, liabilities, investors'assets, and revenue for each financial cycle.

3.3 Characteristic groups and size of samples

Information for measurable investigation in this examination was assembled fromfinancial explanation of inspected firms Owen and Jones (1977) state that mostmeasurable data is acquired by choosing the most common pattern that representthe whole group These financial articulations obviously from the cited firms arearranged and distributed in consistence with the accounting practice, whichincorporate balance record and income statement of chosen firms during 2001 to

2012 The dataset contains point-by-point financial data about each company foreach fiscal year Examined firms were chosen in light of accessibility of informationfor the required period and furthermore financial related firms are excluded fromthis investigation The researcher put many elements into thought in the choice ofthe specimen firms Such factors as mentioned by the researcher namely: firms thatwere recorded in Vietnamese stock exchange before the initiation phase of theinvestigation, firms that shift their fiscal accounting year-end during the time of theinvestigation were also rejected As sample, firms that stopped operation anytimeamid the time of the investigation were likewise be prohibited, and additionallyfirms that had issues with Vietnamese stock exchange during the period underaudit These criteria were adjusted so as to direct against information exclusion andguarantee consistency in the introduction Clearly, the determination of 51 firmswas haphazardly tested in this manner guaranteeing that most parts of theindustrial arrangement as per Vietnamese stock exchange are very much spoken to

3.4 Research Variables

The factors utilized in this analysis are generally received from existing writing, inaccordance with the topic issue and research goals The distinction and similitudesfor the estimation of financial structure and performance proportions were put intocomparison among the frameworks Along these lines, dependent and explanatory

factors of the case study have been resolved by the approach utilized by the priorinvestigations and how far information will be accessible for assessment purposes.Chen (2004) places that book value is utilized for the estimation of factors atwhatever point material because of the way that lone around 30% of the offersissued are tradable and there are unprecedented capital additions coming aboutbecause of auxiliary offer exchanging Miller (1977) argue that book value measuresmay offer better understanding to corporate capital structure targets than marketvalue assessment of leverage, which is profoundly delicate to changes in the level

of stock costs Thus, the investigation adopts just book value measures of financialstructure and firm execution They are clarified as below:

3.4.1 Dependent Variable

Firm operation as the dependent factor of the research has distinctive measures Asindicated by Ujunwa (2012) impartial execution estimation is important for bothvital and demonstrative purposes This investigation utilized ROA as firm executionassessment Wahla et al (2012) uncovered that company's market worth is built notwith respect to its venture extends just but rather different factors, for example,profit allocation, its administration/control and proprietorship structure whichadditionally increase the value of the organizations However, Tobin's Q as a marketexecution measure was not considered The market estimation of obligation, which

is required in the estimation of Tobin's Q is not promptly given in the yearly reportsand account statement of the chose firms Keeping in mind the ultimate goal tofacilitate this issue numerous researchers utilized changed type of Tobin's Q, whichare thought to be subjective and thusly may impact the result of the investigation(Kajola, 2008) As agreed by numerous specialists; Tobin's Q as a market operationmeasure is a boisterous flag and not a decent method because of its restrictions.Execution is either financial or authoritative In Zeitun and Tian (2007), financialexecution as refereeing to Chakravarthy (1986) and Hoffer and Sandberg (1987)includes augmenting benefit on resources and boosting investors' wealthdemonstrates the association's viability While operational execution measures, forexample, development in sales and market allocation gives a wide meaning ofexecution as they concentrate on the components that at last prompt financial

execution ROA and ROE are the most generally measures of firm execution(Onaolapo and Kajola, 2010 and Zeitun and Tian, 2007).

The formula of ROA, ROE is as below:

Return on Asset (ROA) = (Profit Before Interest and Tax)/(Total Asset)

Return on Equity (ROE) = (Profit Before Interest and Tax)/(Total Equity Capital)

This intermediary variable has been utilized by numerous scholars such as Zeitunand Tian (2007); Zeitun, (2009); Onaolapo and Kajola (2010); Tze-Sam and Heng(2011); Azhagaiah and Gavoury (2011); Khan (2012); Ujunwa (2012) asperformance marker Ujunwa (2012) and Onaolapo and Kajola (2010) sets that ROAcan be seen as a measure of administration proficiency in using every one of theresources under its control, which eventually have a place with investorsindependent of its capital resources This is a broadly acknowledged measure offinancial execution We anticipate that ROA is emphatically and fundamentallycorrelates to financial structure

3.4.2 Independent Variables

Illustrative factors of the examination are financial structure This is a segment ofcompany's resources funded by a fixed fee, for example, facility loan or overdraft,rent, and so on The administration of financial structure measures how much firmsare utilizing financial use and, in that capacity are important to leasers andproprietors alike, as contended by numerous researchers to perpetually impactcompany worth (Brealey and Myers, 1996) Credits, regardless of due range areconcerned in term of the leverage allocation the firm adapt, in light of the fact that

it shows the association's hazard introduction in debt extra fees (interest andprincipal reimbursement) A firm that is excessively financed by debt offers leasersless assurance in case of bankruptcy And furthermore the expenses from witherlinear bankruptcy or not would offset other leverage benefits This view has beenaffirmed by bankruptcy cost hypothesis There are a few types of financial structure,however we received three indicators of financial structure namely Total Debt Ratio(TDR), Short Term Debt Ratio (STDR) and the contrary Long Term Debt Ratio (LTDR)

As featured above, these measures depended on the firm’s book value Thesemeasures are adopted by two reasons which are: the installment of debt relying onthe book value of the credits rather than the debt’s market value Additionally shortdue loan ratio is employed since the financial structure of firm in Vietnamfundamentally grounded by short term debt more than the long one (Booth et al.,

1999 and Awan et al., 2011)

3.4.2.1 Total Debt Ratio (TDR)

Numerous scholars already put this variables in their work such as Gaud et al.,2003; Baral, 2004; Bauer, 2004; Chen,2004; Zeitun and Tian, 2007; Kasozi andNgwenya, 2010; Onaolapo and Kajola, 2010; Khrawish and Khraiwesh, 2010;Azhagaiah and Gavoury, 2011, Tze-Sam and Heng, 2011; Awan et al., 2011; Khan,

2012 The variable is calculated by having total debt divided to total assets asfollowing

Total Debt Ratio (TDR) = (Total Debt)/(Total Asset)

This constitutes general (total) settled charge outside capital utilized by the firm tofund its assets Khrawish and Khraiwesh (2010) stated that TDR reflects theconnection between total liabilities and total resources It gauges the extent of anassociation's aggregate resources that is financed with creditors’ resources Asutilized here, the term obligation incorporates all temporary liabilities also, long haulliabilities A few researchers rather utilize a smaller definition of debt consideringjust interest-counting liabilities such a long due loan or bonds, accounts payable,and credit extensions

3.4.2.2 Long Term Debt Ratio (LTDR)

This type of obligation has maturity period more than twelve months from issuedate and measure as following:

Long Term Debt Ratio (LTDR) = (Long Term Debt)/(Total Asset)

It appears to be useful markers for leverage ratio for countries with emergingeconomics like Vietnam since miss-match restricted funding Many researchers also

adopt LTDR in theri researches (Long and Malitz, 1985, Timan and Wessels, 1988;Chen, 2004; Zeitun and Tian, 2007, Tze-Sam and Heng, 2011).

3.4.2.3 Short Term Debt Ratio (STDR)

This kind of obligation has due less than one year period and is measures as below:Short Term Debt Ratio (STDR) = (Short Term Debt)/(Total Asset)

This indicator has been adopted by many researchers before and apparently is also

a helpful measure of financial structure in emerging market as Vietnam, in whichthe majority of a firm’s asset is based on loan This phenomenon is explained by thefact that firms engaging in market eagerly and accepts debt as solution for theirweek financial capacity (Liceyand Zhang, 2011) Another reason is the authoritycoerces business into short term debt to better supervise on them

3.4.3 Control Variables

Control factors will be factors that affect firms' execution in one way or other.Majumdar and Chhibber (1999), Zeitun and Tian (2007), Onaolapo and Kajola(2010), and Cheng and Tzeng (2011) fight that there are various elements whichaffect firm execution Majumdar and Chhibber (1999) focused on encouraging thatthese elements might be firm related, industry related or identified with parts ofinstitutional condition and must be controlled Because of the extent of thisinvestigation, the interest of the researcher is limited to firm related elements, asthe endogenous components, most policy maker can manage as characteristicelements which effect on execution Barney (2001) argues that accomplishment of afirm fundamentally relies upon the key assets under its control

3.4.3.1 Firm Size

A few creators have recommended that execution of a firm is identified with firmsize Majumdar and Chhibber (1999), Zeitun and Tian (2007), Pratomo and Ismail(2007), Zeitun (2009) , Onaolapo and Kajola (2010), Cheng and Tzeng (2011) andKhan (2012) give exact confirmation that the extent of a firm seem to decide abigger extent of firms' execution Titman and Wessels (1988) states that moderatelyextensive firms have a tendency to be more expanded and less inclined to

bankruptcy This supports the contentions that substantial firms ought to be all themore profoundly utilized The extent of a firm decides economies of scale aredelighting for the firm Bigger firms that have a more noteworthy assortment ofabilities and can use the high use proportion productively with relative positivereturns Then again, bigger size, if not effectively used might prompt negativereturns Titman and Wessels (1988) preaches that the issuing obligation’s expensesand value securities are identified with firm size Evidently, little firms pay high cost

to back their speculation needs than extensive firms The span of a firm is measured

by common logarithm of aggregate resources (Zeitun and Tian, 2007, Onaolapo andKajola, 2010) and elective measures of company's size are the characteristiclogarithm of offers (Titman and Wessels, 1988; Majumdar and Chhibber, 1999;Zeitun and Tian, 2007 and Zeitun, 2009 ) and quit rates (Titman and Wessels,1988) Zeitun (2009) places that logarithm of aggregate deals has bring downinformative power than add up to resources This examination will utilizecharacteristic logarithm of aggregate resources as an assessment of firm size Thepresentation of the intermediary variable SIZE as a marker of firm size is required to

be emphatically identified with firm execution

3.4.3.2 Firm Age

Various researchers have considered the age of a firm as an imperative determinant

of company's execution Consequently, the presentation of the control variable AGE

is measured as the log of number of years since beginning to the date ofperception Majumdar and Chhibber (1999), and Onaolapo and Kajola (2010)referring to create by Stinchcombe (1965) argues that more established firms cansecure experience based economies and relieve the liabilities of inexperience.Durand and Coeurderoy (2001) examining age, request of section, key introduction,and authoritative execution found that a first-mover advantage as far ashierarchical execution In a similar path, Hajipour and Gholamzadeh (2010)considering the impacts of market passage technique measurements on theexecution with a specimen of 118 assembling firms found that request of sectionand item situating influence execution They focused on encourage that pioneerspick up preferences as far as more grounded aggressive position and higherconsumer loyalty, thus do expand productivity Noticeable creators in their

experimental examination have utilized this measure as control variable in theinvestigation of this nature and comparable investigations (for instance, Majumdarand Chhibber, 1999; Zeitun, 2009 and Onaolapo and Kajola, 2010) The researcherpredicts company's age to be affirmatively identified with the company's execution.

3.4.4 Random Variables (Stochastic)

As featured before, other control factors effect on the execution of the firm.Stochastic factors are those factors that can likewise influence on company'sexecution Koutsoyiannis (1977) states that arbitrary variable in an effectivelyindicated system, retains essentially stochastic varieties in the dependent variablecreated by discarded factors in the formula and conceivably errors of assessment.These factors might be association's connected components (endogenous) andinstitutional condition related variables The last factors are exogenous componentsthat can't be managed by the business Koutsoyiannis (1977) called attention tothat the estimations of the aggravation variable are autonomous of the estimations

of the repressors The irregular factors in this paper are company’s Variation,Financial Directness, good interest, inflation rate, Oversea Ownership, Firm'sCoverage and Excise as well as obligation of Imports

3.5 Technique for Analysis

To acquire the pragmatic values on the anticipation of the power of fiscal system onfirm performance The report utilized panel data, which was observed for over tenyears Panel data system allows us to consider the unobservable and constantheterogeneity of each quoted company The investigator retained pooled OrdinaryLeast Square (OLS), Random Effects recession prototypes, Fixed Effects to assessthe mentioned above hypothesis

Pooled OLS regression system is the mainstream in financial examinations inferablefrom its simplicity of utilization and exactness in forecast (Alma, 2011).Furthermore, OLS strategy has been utilized in an extensive variety of financialassociations with genuinely tasteful outcomes (Koutsoyiannis, 1977) Refering towork by Gaur and Gaur (2006), Ujunwa (2012) focused on that settled impacts and

irregular impacts models will help watching varieties among cross-sectional units atthe same time with varieties inside individual units after some time It accepts thatfactors are entirely time dissimilarity or invariant The investigation of the impact ofmoderate changing inside individual firms' elements, hence, was undermined.Subsequently, the sane for receiving Fixed Effects and Random Effects modelsestimator as extra test is to empower the analyst control time differentiation andtime invariant factors, and in this manner control for the impact of the in secretheterogeneity in the dataset Ujunwa (2012) opines that coefficient of estimationsare dependable when regression parameters do not change after some time and donot vary between different cross-sectional units In this manner, the regressionestimation varies broadly between the two models (Fixed and Random Effectsmodels), the appropriation of Hausman test will be basic Panel information during2007-2016 is utilized and in accordance with outstanding writing, for example,researched by Majumdar and Chhibber (1999), Zeitun and Tian (2007), andOnaolapo and Kajola (2010), company's execution measure was regressiond oneach of the deviations of financial structure and other control factors holdingdifferent elements that may influence association's execution excluded in thecondition consistent These systematic procedures will empower the specialistaccomplish reasonable and substantial outcomes.

y = b0 + b1xit + b2zit + µ

Where: y = dependent factor

b0 = Constant (intercept) of y

xit = Independent factors

zit = Control factors

b1 and b2 = Coefficient of Independent and Control Factors

µ = Random (stochastic) variables

3.6 Model Specification

The empirical simulations anticipated in the report were proxies as follows: ROA = Return on Asset