THE DETERMINANTS OF CAPITAL STRUCTURE FOR VIETNAM’S SEAFOOD PROCESSING ENTERPRISES

Abstract

The goal in this paper is to assess the determinants of capital structure for Vietnam’s seafood processing enterprises (SEAs) in comparison with enterprises of other processing industries (DIFs). The result of this study was based on applying Shumi Akhtar’s model (2005) [22] and Shumi Akhtar, Barry Oliver’s (2005) [23] and using data of 302 enterprises, including 63 in fisheries industry, across 5 years from 2004 to 2008. Total observations were 772, including 284 and 488 for models applied to seafood processing enterprises and others respectively. The results show that capital structure differs between SEAs and DIFs. Accordingly, size and collateral value of assets were found to be significant determinants of capital structure for both SEAs and DIFs. For SEAs, profitability, growth, agency costs and interest expense affect the capital structure and play a crucial role. Meanwhile, bankruptcy risks and age of enterprises are essential determinants for DIFs. In relation to interaction effects, size and collateral value of assets are significant in explaining the differences in the capital structure of SEAs relative to that of DIFs. Finally, determinants of capital structure rarely varied over the sample period for both SEAs and DIFs. The findings suggest implications for Vietnam’s seafood processing enterprises (SEAs) on flexible usage of financial leverage. Specifically, to increase or decrease the level of financial leverage, SEAs need to take into account size, collateral assets, profitability and growth rate of enterprises as well as recommend measures to cope with shocks in variations of bank interest rates.