MINISTRY OF EDUCATION & TRAINING STATE BANK OF VIETNAM BANKING UNIVERSITY HO CHI MINH CITY PHAM THI VAN TRINH CAPITAL STRUCTURE AND DEBT MATURITY STRUCTURE OF REAL ESTATE CONSTRUCTION INVESTMENT AND TRADING ENTERPRISES IN VIETNAM SUMMARY OF PHD THESIS HO CHI MINH CITY – 2/2020 MINISTRY OF EDUCATION & TRAINING STATE BANK OF VIETNAM BANKING UNIVERSITY HO CHI MINH CITY PHAM THI VAN TRINH CAPITAL STRUCTURE AND DEBT MATURITY STRUCTURE OF REAL ESTATE CONSTRUCTION INVESTMENT AND TRADING ENTERPRISES IN VIETNAM SUMMARY OF PHD THESIS Major: Finance - Banking Code: 34 02 01 Scientific instructor: Assoc Prof., PhD Tran Hoang Ngan PhD Vu Van Thuc HO CHI MINH CITY – 2/2020 INTRODUCTION RATIONALE 1.1 Research issues Corporate capital structure and debt maturity have certain influences on its sustainable development as well as business performances It is noted that the improper choice of capital structure and debt maturity structure that not match characteristics of the business sector or individual enterprise features can generally lead to the firm’s long-term disadvantages As a typical feature of the business sector, real estate products are special goods with high value and fixed location, all real estate related activities are governed by the legal system of the country In Vietnam, the Land Law that marked the birth of its real estate market was just officially launched in 1993 The fact shows that Vietnam has just got initial steps in the real estate industry It has suffered unstable periods of development; sometime, it may achieve "overheating" growth then fall into a state of "freezing" At each of the above development stage, real estate businesses commonly face certain obstacles and difficulties As another feature of real estate industry, real estate businesses require long-term funding to finance real estate projects However, most real estate businesses use short-term liabilities, later resulting in several risks and obstacles for businesses’ performances regarding the pressure of liquidity and other financial difficulties In the period from 2008 to 2017, real estate businesses had faced various difficulties under objective impacting factors stemming from the global financial crisis in 2008, as well as subjective ones regarding the decision of capital structure and structure of debt maturity It is noted that the majority of real estate businesses heavily depends on funding - mostly are short-term debts to invest in priority areas Real estate projects require capital in the long run; therefore, many real estate businesses are currently facing large inventories, high financial costs resulting in financial imbalance, reduced profitability and low liquidity For this reason, it is critical that real estate businesses select an effective capital structure and structure of debt maturity so that they can achieve goals in terms of saving capital costs, taking advantage of financial leverage, improving financial capacity, ensuring liquidity and gaining high profitability when getting unstable signals of the real estate market This research, therefore, mainly addresses the following issues: (i) factors affecting capital structure and structure of debt maturity of real estate enterprises including performances of construction, investment and trading in Vietnam; (ii) the speed adjustment of capital structure and structure of debt maturity of real estate enterprises including performances of construction, investment and trading in Vietnam in order to achieve the target capital structure and target debt maturity structure; (iii) determining the target capital structure threshold and target structure of debt maturity of construction, investment and trading real estate businesses in Vietnam; (iv) the correlation between capital structure and debt maturity structure of construction investment and trading real estate enterprises in Vietnam, and proposes implications that construction, investment and trading real estate businesses in Vietnam can use to decide proper capital structure and structure of debt maturity reasonably, contributing to improve the efficiency of the financial management and enhance the market value 1.2 Overview of related studies and scientific gaps Practically, there have been several published studies related to capital structure and structure of debt maturity carried out in different approaches and methods worldwide generally and in Vietnam particularly; therefore, research results differ as the follow: Firstly, researches on capital structure of enterprises mainly focus on large-scale enterprises that have been listed on stock exchanges in developed countries such as France, the USA, Germany, Japan, the UK and Switzerland including studies carried out by Rajan & Zingales (1995), Booth & et al (2001), Graham & Harvey (2001), etc while others conducted in some emerging markets: China and India by Chen (2003), Deesomsak & et al (2004), Li (2010), and Ramzi & Tarazi (2013) In Vietnam, amongst studies on factors affecting the capital structure are those of Doan Ngoc Phi Anh (2010), Duong Thi Hong Van (2014) and Vo Thi Quy (2014) Secondly, it is noted that studies on adjustment speed of capital structure towards the target capital structure threshold mainly analyze the impact of macro factors on adjustment speed of capital structure towards the target capital structure threshold such as worldwide studies conducted by Drobert & Wanzenried (2006), Cook & Tang (2010), Mukkherjee & Mahakid (2012), Ahmad & Abdullah (2012) In Vietnam, Tran Hung Son (2013) and Le Dat Chi (2013) mainly studies the adjustment speed of dynamic capital structure; whereas Dang Thi Thuy Anh & et al (2014) focuses on adjustment speed of static capital structure Furthermore, Pham Tien Minh & et al (2015) researches on comparing the adjustment speed of static capital structure versus dynamic one, Tran Thi Kim Oanh (2018) carries out a study on the adjustment speed of enterprise capital structure during the global financial crisis in 2008 Thirdly, researches on debt maturity structure of enterprises focus on verifying and explaining factors affecting the decision to choose debt maturity structure of enterprises, as of Barnea & et al (1980), Brick & Ravid (1985), Flannery (1986), Lewis (1990), Barclay & Smith (1990), Diamond (1991), Stohs & Mauer (1996), and Ooi (1999) Most of these studies have focused on the structure of corporate debt maturities in developed countries Focusing on businesses listed on the stock exchange in Vietnam, thesis of Nguyen Thanh Nha (2018) is the only research that has been found Fourthly, studying on the speed of adjustment of debt maturity structure towards the target debt maturity structure threshold include research of Leland (1994), Leland & Toft (1996) and Leland (1998), Ozkan (2000), and Antoniou & et al (2006) Field researches show the existence of research gaps as the followings: (i) Research gaps on capital structure Previous studies have not considered all factors, especially institutional ones-in emerging economies due to the fact that institutional factors can influence business capital structure, not to mention that measurement criteria if have not been wisely chosen might lead incorrect research results that not truly reflect the business performances In addition, there are a number of works approaching in the direction of determining the target capital structure adjustment speed, namely Antoniou & et al, 2008; Sbeiti, 2010; Nor & et al, 2011; Tongkong & et al, 2013; Jindrichovska & et al, 2013; Öztekin, 2015; Khanna & et al, 2015 Nevertheless, not many researches with the above approach have been conducted in Vietnam up to now Specially, none of official study is carried out to determine the target capital structure of the real estate industry This is the research gaps of the thesis (ii) Research gaps on debt maturity structure Domestic and abroad empirical studies on debt maturity structure still have some shortcomings as those on capital structure According to the author's statistics, none published paper conducted abroad on the determination of the target debt maturity structure while in Vietnam, only study of Nguyen Thanh Nha (2018) focusing on factors affecting the structure of debt maturity is found As a matter of fact, there have not been many studies on determining the target debt maturity structure, specially the structure of debt maturity of the real estate industry, implying that debt maturity structure of enterprises is actually quite a new topic, which is still another research gap to be exploited and supplemented for previous studies (iii) Research gaps on the correlation between capital structure and debt maturity structure It is recognized that a few studies on the correlation between capital structure and debt maturity structure have been done worldwide such as Antoniou & et al, 2006; Teruel & Solano, 2007; Cai & et al, 2008; Deesomsak et al, 2009; Correia and et al, 2014; Lemma & Negash, 2012; Mateurs & Terra, 2013; Costa & et al, 2014, but none has been found in Vietnam Therefore, it is critically important to study the correlation between capital structure and debt maturity structure in Vietnam in order to carry out tests based on the signaling theory and to provide empirical evidences on whether negative or positive direction of the correlation between capital structure and debt maturity structure in real estate businesses in Vietnam are revealed The above research gaps should be certainly fulfilled in further research on capital structure and structure of debt maturity of enterprises in real estate industry Acknowledging that the research issue is not only theoretically but also practically important, the author has conducted a thesis entitled “Capital structure and debt maturity structure of construction investment and trading enterprises in Vietnam” RESEARCH OBJECTIVES AND QUESTIONNAIRES 2.1 Objectives of the thesis The thesis sets out following specific objectives: (i) To analyze factors affecting capital structure and structure of debt maturity of real estate constructioninvestment and trading enterprises listed on Vietnam's stock market (ii) To determine the adjusting speed to achieve the target capital structure and debt maturity structure of real estate investment and construction enterprises listed on Vietnam's stock market (iii) To study the correlation between capital structure and debt maturity structure of real estate investment construction and trading enterprises listed on Vietnam's stock market (iv) To identify the target capital structure and debt maturity structure of real estate construction investment enterprises listed on Vietnam's stock market 2.2 Research questionnaires (1) What are factors influencing capital structure and debt maturity structure of real estate construction investment and trading enterprises listed on Vietnam's stock market? (2) What is the exact figure of adjusting speed of target capital structure and structure of debt maturityof real estate investment construction and trading enterprises listed on Vietnam's stock market? (3) Does the correlation between capital structure and debt maturity structure exist? (4) Do the target capital structure and debt maturity structure thresholdsexist in listed construction investment and trading enterprises in Vietnam? What is the figures of the target capital structure and debt maturity structurethresholds? RESEARCH SUBJECTIVE AND SCOPE OF THE THESIS 3.1 Research subjective The thesis identifies capital structure and structure of debt maturity of real estate construction investment and trading enterprises in Vietnam In particular, capital structure is determined by long-term debts to total assets of the enterprise; structure of debt maturity can be identified based on the ratio of long-term debts to total debts There has been no differentiation between appropriated debts and loan among real estate investment construction and trading enterprises in Vietnam, so long-term debts mentioned earlier can be understood as debts with incurred interest expenses Beside that, the thesis studies the correlation between capital structure and debt maturity structure 46 is in line with the capital structurehypothesis of Trade-Off Theory and researchesof Barclay & Smith (1995), Ozkan (2000), Antoniou & et al (2006), Cai & et al (2008), Deesomsak & et al (2009), Wang & et al (2010), Lemma & Negash (2012) and Mateurs & Terra (2013) However, from the author’s viewpoint, the nature of this relation cannot be explained by Trade-off theory - the larger firm size means the higher posibility the business uses debts It is because businesses with larger size take the advantage of their divertifying activitiesto reduce the risk of bankruptcy As mentioned earlier, bankruptcy costs have not been considered as a big problem in developing countries, typically in Vietnam According to the author, it should be interpreted that large enterprises aregreater in transparency and reputation in the capital market, soit is easier for them to access bank loans with low interest rates In addition, the government's credit priority policies for large-scale enterprises in key industries and infrastructure development such as real estate in which a certain percentage of sharesare often held by the state As the results, these policies significantly impact on capital mobilizationfor real estate construction investment and trading businesses in Vietnam Return of Equity (ROE) has an opposite direction of impact with capital structure, implying that highly profitable businesses often limit debts Interpretationsof Pecking Order Theory and research of Booth & et al (2001), Chen (2003), Deesomask & et al (2004), and Lemma & Negash (2012) suggest that enterprises with 47 more profitable are likely to use retained earnings for reinvestment;therefore, these businesses tend to use low leverage In another aspect, the author believes that the priority order for capital fundings of the majority of enterprises, especially real estate construction investment and trading enterprises in Vietnam is not exactly similar to the Pecking OrderTheory This is explained by the underdeveloped financial intermediation index (0