The Influence of Capital Structure Strategies on Vietnamese SMEs' Business Performance

Bui, Nhung Thi Hong

You are here : University of Gloucestershire > Research > Research Repository

The Influence of Capital Structure Strategies on Vietnamese SMEs' Business Performance

Tools

Bui, Nhung Thi Hong (2021) The Influence of Capital Structure Strategies on Vietnamese SMEs' Business Performance. DBA thesis, University of Gloucestershire. doi:10.46289/VVAF4269

Preview

Text (© Nhung Bui (2021))
16579 Bui, Nhung (2021) The Influence of Capital Structure Strategies.pdf - Accepted Version
Available under License All Rights Reserved.
Download (3MB) | Preview

Official URL: https://eprints.glos.ac.uk/16579/

Abstract

Vietnamese small and medium-sized enterprises (SMEs) account for approximately 97% of all businesses in the country. As a business type, SMEs provide significant employment opportunities through job creation, while playing a critical role in the country’s socioeconomic growth, by reducing poverty and contributing to the nation’s gross domestic product. However, despite these important economic contributions, Vietnamese SMEs face significant challenges, including difficulty in determining effective financing strategies for their operations, which involve sourcing both internal and external capital. To address these challenges, obtaining adequate funding and then deciding whether to rely on debt financing or equity funding have become fundamental decisions for these enterprises to take. Reflecting this, this study explored the financing strategies utilised by Vietnamese SMEs before assessing the effects of capital structure on the business performance. However, to date there has been relatively little research conducted from a Vietnamese perspective and even less which has been focused on determining the most optimal debt or equity capital strategy for a SME to follow. Informed by the existing empirical studies into capital structure and borrowing strategies across the world, the deductive study undertook a series of expert panel interviews using a Delphi technique. This approach involved 12 financial experts, to gain a consensus as to which capital borrowing strategies and forecasting techniques are the most effective for Vietnamese SMEs. Based on the outcome of this consensus, the study then drew on publicly available Vietnamese stock exchange data from 2015 to 2023, to analyse 362 companies, to generate 3,258 financial data points, which were then tested using a regression analysis. The outcome of the regression analysis validated the financial experts’ perspectives as to how capital structure can affect the business performance in a Vietnamese SME. The findings revealed significant adverse impacts of the capital structure measured by short-term, long–term and total debt on Vietnamese SME business performance. The results indicated that SMEs need to carefully assess their use of borrowing, including short-term, long-term, and total debt, as having a significant influence on this type of business. Based on the regression results, the study contends that it is advisable for Vietnamese SMEs to reduce their debt ratio to enhance their business performance. The outcome of the study also suggests that there is no optimal level of debt for these Vietnamese SMEs to follow. The limitations of the study include the acknowledgement of the involvement of 12 Vietnamese financial experts; however, the usage of the Delphi method enabled the generation of a consensus which was then supported by a regression analysis of existing SME financial data. Future research should consider extending this study to include conducting a mixed method strategy and extending the project beyond Vietnam.

Item Type:

Thesis (DBA)

Thesis Advisors: