Volume 2, Number 11, November 2024

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Examining the Impact of Firm Characteristics on Capital Structure Decisions: A Structural Equation Modeling Approach

Vu Hung Tang
Business School, National Economics University, Ha Noi, Vietnam

ABSTRACT:

This study examines the impact of firm characteristics on capital structure decisions, using data from a sample of 200 publicly listed companies in Vietnam and applying Structural Equation Modeling (SEM) with SPSS and Amos. Grounded in capital structure theories, including trade-off theory and pecking order theory, this research identifies key determinants such as firm size, profitability, asset structure, and growth opportunities. Data were collected from financial reports and publicly available databases, covering the period from 2018 to 2022. The findings indicate that firm size (β = 0.42, p < 0.01) and profitability (β = -0.36, p < 0.05) significantly influence leverage levels, with larger firms tending to have higher leverage, while more profitable firms demonstrate lower leverage ratios. Additionally, asset structure (β = 0.25, p < 0.05) and growth opportunities (β = 0.18, p < 0.1) show moderate effects on leverage. These results provide valuable insights for financial managers and policymakers seeking to understand the dynamics of capital structure in Vietnam. The study also contributes to the literature by demonstrating the application of SEM in analyzing complex relationships within corporate finance. Future research is encouraged to expand the sample size and consider additional variables, such as market conditions and industry-specific factors.

Published in: International Journal of Research in Interdisciplinary Studies (Volume 2, Issue 11, November 2024)
Page(s): 16-22
Date of Publication: 16/11/2024
Publisher: IJRIS

Cite as: Vu Hung Tang, “Examining the Impact of Firm Characteristics on Capital Structure Decisions: A Structural Equation Modeling Approach,” in International Journal of Research in Interdisciplinary Studies, vol. 2, no. 11, pp. 16-22, November 2024.

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