Does National Governance Affect the Capital Structure of Listed Firms during the COVID-19 Pandemic?

Kim Quoc Trung Nguyen


This study estimates the macro-economic factors affecting the listed small and medium enterprises' capital structures in Vietnam from 2010 to 2020. The author conducts the quantitative method (generalized method of moments—GMM) with valid instrument variables to solve the endogeneity in regression models, which refers to the determinants of capital structures. Based on the trade-off theory and the pecking order theory, the author provides evidence of macro-economic factors and firm-specific factors in explanations for the capital choices of the Vietnamese firms, including national governance, inflation, COVID-19, firm age, and asset structure. In particular, this study highlights how national governance and COVID-19 influence the capital structure of small and medium enterprises in Vietnam.


Doi: 10.28991/ESJ-2023-SPER-04

Full Text: PDF


Capital Structure; COVID-19; National Governance; Vietnam. Pecking Order Theory; Trade-off Theory.


Booth, L., Aivazian, V., Demirguc-Kunt, A., & Maksimovic, V. (2001). Capital Structures in Developing Countries. The Journal of Finance, 56(1), 87–130. doi:10.1111/0022-1082.00320.

Korajczyk, R. A., & Levy, A. (2003). Capital structure choice: Macroeconomic conditions and financial constraints. Journal of Financial Economics, 68(1), 75–109. doi:10.1016/S0304-405X(02)00249-0.

Alves, P. F. P., & Ferreira, M. A. (2011). Capital structure and law around the world. Journal of Multinational Financial Management, 21(3), 119–150. doi:10.1016/j.mulfin.2011.02.001.

Awartani, B., Belkhir, M., Boubaker, S., & Maghyereh, A. (2016). Corporate debt maturity in the MENA region: Does institutional quality matter? International Review of Financial Analysis, 46, 309–325. doi:10.1016/j.irfa.2015.10.002.

Ahmad, R., & Etudaiye-Muhtar, O. F. (2017). Dynamic Model of Optimal Capital Structure: Evidence from Nigerian Listed Firms. Global Business Review, 18(3), 590–604. doi:10.1177/0972150917692068.

Fan, J. P. H., Titman, S., & Twite, G. (2012). An international comparison of capital structure and debt maturity choices. Journal of Financial and Quantitative Analysis, 47(1), 23–56. doi:10.1017/S0022109011000597.

Matemilola, B. T., Bany-Ariffin, A. N., Azman-Saini, W. N. W., & Nassir, A. M. (2019). Impact of institutional quality on the capital structure of firms in developing countries. Emerging Markets Review, 39, 175–209. doi:10.1016/j.ememar.2019.04.003.

Çam, İ., & Özer, G. (2022). The influence of country governance on the capital structure and investment financing decisions of firms: An international investigation. Borsa Istanbul Review, 22(2), 257–271. doi:10.1016/j.bir.2021.04.008.

Demirgüç-Kunt, A., Martinez Peria, M. S., & Tressel, T. (2020). The global financial crisis and the capital structure of firms: Was the impact more severe among SMEs and non-listed firms? Journal of Corporate Finance, 60, 101514. doi:10.1016/j.jcorpfin.2019.101514.

Hotchkiss, E. S., Nini, G., & Smith, D. C. (2020). Corporate Capital Raising During the COVID Crisis. SSRN Electronic Journal. doi:10.2139/ssrn.3723001.

Turkki, T. (2021). The effects of COVID-19 on the capital structure of European companies. Bachelor Thesis, Aalto University of Business, Espoo, Finland.

Martinez, L. B., Scherger, V., & Guercio, M. B. (2019). SMEs capital structure: trade-off or pecking order theory: a systematic review. Journal of Small Business and Enterprise Development, 26(1), 105–132. doi:10.1108/JSBED-12-2017-0387.

Haque, S. M., & Varghese, M. R. (2021). The COVID-19 Impact on Corporate Leverage and Financial Fragility. Working Paper, International Monetary Fund, Washington, United States.

Munro, D. (2013). A Guide to SME Financing. Springer, New York, united States. doi:10.1057/9781137373786.

Vandenberg, P., Chantapacdepong, P., & Yoshino, N. (2016). SMEs in developing Asia: new approaches to overcoming market failures. Asian Development Bank Institute, Tokyo, Japan.

Daskalakis, N., & Thanou, E. (2012). Capital Structure of SMEs: To What Extent Does Size Matter? SSRN Electronic Journal. doi:10.2139/ssrn.1683161.

Nguyen, T. D. K., & Ramachandran, N. (2006). Capital Structure in Small and Medium sized Enterprises: The Case of Vietnam. Asean Economic Bulletin, 23(2), 192–211. doi:10.1355/ae23-2d.

Biger, N., Nguyen, N. V., & Hoang, Q. X. (2007). Chapter 15 The determinants of capital structure: Evidence from Vietnam. Asia-Pacific Financial Markets: Integration, Innovation and Challenges, 307–326, Emerald Group Publishing Limited, Bingley, United Kingdom. doi:10.1016/s1569-3767(07)00015-5.

Tien, N. H., Anh, D. B. H., & Ngoc, N. M. (2020). Corporate financial performance due to sustainable development in Vietnam. Corporate Social Responsibility and Environmental Management, 27(2), 694-705. doi:10.1002/csr.1836.

Dang, H. N., Vu, V. T. T., Ngo, X. T., & Hoang, H. T. V. (2019). Study the impact of growth, firm size, capital structure, and profitability on enterprise value: Evidence of enterprises in Vietnam. Journal of Corporate Accounting & Finance, 30(1), 144-160. doi:10.1002/jcaf.22371.

Pham, C. D. (2020). The effect of capital structure on financial performance of Vietnamese listing pharmaceutical enterprises. The Journal of Asian Finance, Economics and Business, 7(9), 329-340. doi:10.13106/jafeb.2020.vol7.no9.329.

Suu, N. D., Tien, H. T., & Wong, W. K. (2021). The impact of capital structure and ownership on the performance of state enterprises after equitization: Evidence from Vietnam. Annals of Financial Economics, 16(02), 2150007. doi:10.1142/S201049522150007X.

Tran, Q. T., & Nguyen, T. T. H. (2014). Dividend policy behavior in emerging stock markets: Evidence from Vietnamese stock market. International Journal of Financial Research, 5(4), 85. doi:10.5430/ijfr.v5n4p85.

Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221. doi:10.1016/0304-405X(84)90023-0.

Frank, M. Z., Goyal, V. K., & Shen, T. (2020). The Pecking Order Theory of Capital Structure: Where Do We Stand? SSRN Electronic Journal. doi:10.2139/ssrn.3540610.

Ain, Q. ul, Jan, S. U., & Rafiq, M. (2011). Effect of Macroeconomic Factors on Capital Structure Decisions of Firm: Evidence from a Developing Country. Business & Economic Review, 3(1), 64–90. doi:10.22547/ber/3.1.5.

Frank, M. Z., & Goyal, V. K. (2009). Capital Structure Decisions: Which Factors Are Reliably Important? Financial Management, 38(1), 1–37. doi:10.1111/j.1755-053x.2009.01026.x.

Köksal, B., & Orman, C. (2015). Determinants of capital structure: evidence from a major developing economy. Small Business Economics, 44(2), 255–282. doi:10.1007/s11187-014-9597-x.

Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5(2), 147–175. doi:10.1016/0304-405X(77)90015-0.

Kraus, A., & Litzenberger, R. H. (1973). a State‐Preference Model of Optimal Financial Leverage. The Journal of Finance, 28(4), 911–922. doi:10.1111/j.1540-6261.1973.tb01415.x.

Hackbarth, D., Miao, J., & Morellec, E. (2006). Capital structure, credit risk, and macroeconomic conditions. Journal of Financial Economics, 82(3), 519–550. doi:10.1016/j.jfineco.2005.10.003.

Chen, J. J. (2004). Determinants of capital structure of Chinese-listed companies. Journal of Business Research, 57(12), 1341–1351. doi:10.1016/s0148-2963(03)00070-5.

Chen, J., & Strange, R. (2005). The Determinants of Capital Structure: Evidence from Chinese Listed Companies. Economic Change and Restructuring, 38(1), 11–35. doi:10.1007/s10644-005-4521-7.

Tongkong, S. (2012). Key factors influencing capital structure decision and its speed of adjustment of Thai listed real estate companies. Procedia - Social and Behavioral Sciences, 40, 716–720. doi:10.1016/j.sbspro.2012.03.254.

Šarlija, N., & Harc, M. (2016). Capital structure determinants of small and medium enterprises in Croatia. Managing Global Transitions, 14(3), 251-266.

Khaki, A. R., & Akin, A. (2020). Factors affecting the capital structure: New evidence from GCC countries. Journal of International Studies, 13(1), 9–27. doi:10.14254/2071-8330.2020/13-1/1.

Czerwonka, L., & Jaworski, J. (2021). Capital structure determinants of small and medium-sized enterprises: evidence from Central and Eastern Europe. Journal of Small Business and Enterprise Development, 28(2), 277–297. doi:10.1108/JSBED-09-2020-0326.

Delikanlı, İ., & Kılıç, S. (2021). Factors influencing SMEs’ capital structure: a comparative analysis from Turkey. Small Enterprise Research, 28(1), 57–74. doi:10.1080/13215906.2021.1889651.

Hanousek, J., & Shamshur, A. (2011). A stubborn persistence: Is the stability of leverage ratios determined by the stability of the economy? Journal of Corporate Finance, 17(5), 1360–1376. doi:10.1016/j.jcorpfin.2011.07.004.

Duan, H., Chik, A. R. bin, & Liu, C. (2012). Institutional Environment and Capital Structure: Evidence from Private Listed Enterprises in China. International Journal of Financial Research, 3(1), 15–21. doi:10.5430/ijfr.v3n1p15.

Mokhova, N., & Zinecker, M. (2013). The determinants of capital structure: The evidence from the European Union. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 61(7), 2533–2546. doi:10.11118/actaun201361072533.

Krahmann, E. (2003). National, Regional, and Global Governance: One Phenomenon or Many? Global Governance, 9(3), 323–346. doi:10.1163/19426720-00903006.

Kaufmann, D., Kraay, A., & Mastruzzi, M. (2011). The Worldwide Governance Indicators: Methodology and Analytical Issues. Hague Journal on the Rule of Law, 3(02), 220–246. doi:10.1017/s1876404511200046.

Dias Basto, D., Nakamura, W. T., & Basso, L. C. (2009). Determinants of Capital Structure of Publicly-Traded Companies in Latin America: The Role of Institutional and Macroeconomics Factors. SSRN Electronic Journal. doi:10.2139/ssrn.1365987.

Alufar Bokpin, G. (2009). Macroeconomic development and capital structure decisions of firms. Studies in Economics and Finance, 26(2), 129–142. doi:10.1108/10867370910963055.

Camara, O. (2012). Capital structure adjustment speed and macroeconomic conditions: U.S MNCs and DCs. International Research Journal of Finance and Economics, 84, 106–120.

Gajurel, D. P. (2006). Macroeconomic Influences on Corporate Capital Structure. SSRN Electronic Journal. doi:10.2139/ssrn.899049.

Stulz, R. M. (1990). Managerial discretion and optimal financing policies. Journal of Financial Economics, 26(1), 3–27. doi:10.1016/0304-405X(90)90011-N.

Toader, D. A., Vintila, G., & Gherghina, S. C. (2022). Firm- and Country-Level Drivers of Capital Structure: Quantitative Evidence from Central and Eastern European Listed Companies. Journal of Financial Studies and Research, 1–12. doi:10.5171/2022.572694.

Sett, K., & Sarkhel, J. (2010). Macroeconomic Variables, Financial Sector Development and Capital Structure of Indian Private Corporate Sector During the Period 1981-2007. IUP Journal of applied finance, 16(1), 40-56.

Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2008). Financing patterns around the world: Are small firms different? Journal of Financial Economics, 89(3), 467–487. doi:10.1016/j.jfineco.2007.10.005.

Muthama, C., Mbaluka, P., & Kalunda, E. (2013). An empirical analysis of macro-economic influences on corporate capital structure of listed companies in Kenya. Journal of Finance and Investment Analysis, 2(2), 41-62.

Chipeta, C., & Mbululu, D. (2013). Firm heterogeneity, macroeconomic conditions and capital structure adjustment speeds: Evidence from the JSE. Investment Analysts Journal, 42(77), 69–80. doi:10.1080/10293523.2013.11082557.

Mohammad, K. U., Muhammad, A., & Muhammad, K. U. (2021). Post-Crisis Behavior of Banks in Asia: A Case of Chronic Over-Capitalization. Journal of Asian Finance, Economics and Business, 8(3), 517–525. doi:10.13106/jafeb.2021.vol8.no3.0517.

Ghosh, S., & Chatterjee, G. (2018). Capital structure, ownership and crisis: how different are banks? Journal of Financial Regulation and Compliance, 26(2), 300–330. doi:10.1108/JFRC-09-2016-0085.

D’Amato, A. (2020). Capital structure, debt maturity, and financial crisis: empirical evidence from SMEs. Small Business Economics, 55(4), 919–941. doi:10.1007/s11187-019-00165-6.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. doi:10.1016/0304-405X(76)90026-X.

Badawy, H. (2020). Effect of Coronavirus Crisis on the Liquidity and Capital Structure of the Banking Sector in Egypt: A Professional Accounting Perspective. SSRN Electronic Journal. doi:10.2139/ssrn.3835698.

Ding, W., Levine, R., Lin, C., & Xie, W. (2021). Corporate immunity to the COVID-19 pandemic. Journal of Financial Economics, 141(2), 802–830. doi:10.1016/j.jfineco.2021.03.005.

Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect information. The American economic review, 71(3), 393-410.

Forte, D., Barros, L. A., & Nakamura, W. T. (2013). Determinants of the capital structure of small and medium sized Brazilian enterprises. BAR - Brazilian Administration Review, 10(3), 347–369. doi:10.1590/S1807-76922013000300007.

Kurshev, A., & Strebulaev, I. A. (2015). Firm Size and Capital Structure. Quarterly Journal of Finance, 5(3), 1550008. doi:10.1142/S2010139215500081.

Phan T. H. (2016). Factors affecting the capital structure of industrial enterprises seen from the GMM model. Tapchitaichinh website. Available online: (accessed on May 2022).

Petersen, M. A., & Rajan, R. G. (1995). The Effect of Credit Market Competition on Lending Relationships. The Quarterly Journal of Economics, 110(2), 407–443. doi:10.2307/2118445.

Pfaffermayr, M., Stöckl, M., & Winner, H. (2013). Capital structure, corporate taxation and firm age. Fiscal Studies, 34(1), 109–135. doi:10.1111/j.1475-5890.2013.00179.x.

Huynh, K. P., & Petrunia, R. J. (2010). Age effects, leverage and firm growth. Journal of Economic Dynamics and Control, 34(5), 1003–1013. doi:10.1016/j.jedc.2010.01.007.

Afza, T., & Hussain, A. (2011). Determinants of capital structure across selected manufacturing sectors of Pakistan. International Journal of Humanities and Social Science, 1(12), 254-262, Centre for Promoting Ideas, New york, united States

Ahmed Sheikh, N., & Wang, Z. (2011). Determinants of capital structure. Managerial Finance, 37(2), 117–133. doi:10.1108/03074351111103668.

Palliam, R., Sbeiti, W., & Ghosh, D. K. (2013). Corporate Debt and Equity: Another Look at their Determinants. Frontiers in Finance and Economics, 10(2), 31–62.

Ngoc Nguyen, K. (2019). Revenue diversification, risk and bank performance of Vietnamese commercial banks. Journal of Risk and Financial Management, 12(3), 138. doi:10.3390/jrfm12030138.

Camisón, C., Clemente, J. A., & Camisón-Haba, S. (2022). Asset tangibility, information asymmetries and intangibles as determinants of family firms leverage. Review f Managerial Science, 1–36. doi:10.1007/s11846-022-00522-y.

Barakat, M. H., & Rao, R. P. (2012). The Role of Taxes in Capital Structure: Evidence from Taxed and Non-Taxed Arab Economies. SSRN Electronic Journal. doi:10.2139/ssrn.2026751.

Heider, F., & Ljungqvist, A. (2015). As certain as debt and taxes: Estimating the tax sensitivity of leverage from state tax changes. Journal of Financial Economics, 118(3), 684–712. doi:10.1016/j.jfineco.2015.01.004.

Faccio, M., & Xu, J. (2015). Taxes and Capital Structure. Journal of Financial and Quantitative Analysis, 50(3), 277–300. doi:10.1017/S0022109015000174.

Ali, S., Rangone, A., & Farooq, M. (2022). Corporate Taxation and Firm-Specific Determinants of Capital Structure: Evidence from the UK and US Multinational Firms. Journal of Risk and Financial Management, 15(2), 55. doi:10.3390/jrfm15020055.

Campello, M., & Giambona, E. (2010). Capital Structure and the Redeployability of Tangible Assets. SSRN Electronic Journal. doi:10.2139/ssrn.1562523.

Quoc Trung, N. K. (2021). Determinants of small and medium-sized enterprises performance: The evidence from Vietnam. Cogent Business and Management, 8(1), 1984626. doi:10.1080/23311975.2021.1984626.

Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies, 58(2), 277. doi:10.2307/2297968.

Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143. doi:10.1016/S0304-4076(98)00009-8.

Roodman, D. (2009). How to do Xtabond2: An Introduction to Difference and System GMM in Stata. The Stata Journal: Promoting Communications on Statistics and Stata, 9(1), 86–136. doi:10.1177/1536867x0900900106.

Quoc Trung, N. K. (2022). Board of directors characteristics affect commercial banks’ performance–evidence in Vietnam. Cogent Business & Management, 9(1), 2060164. doi:10.1080/23311975.2022.2060164.

Hair, J. F., Black W. C., Babin, B. J., & Anderson, R. E. (2009). Multivariate data analysis (7th Ed.). Pearson, London, United Kingdom.

Montgomery, D. C., Peck, E. A., & Vining, G. G. (2021). Introduction to linear regression analysis. John Wiley & Sons, New York, United States.

Jermakowicz, E. K., Prather-Kinsey, J., & Wulf, I. (2007). The value relevance of accounting income reported by DAX-30 German companies. Journal of International Financial Management and Accounting, 18(3), 151–191. doi:10.1111/j.1467-646X.2007.01011.x.

Tauringana, V., & Adjapong Afrifa, G. (2013). The relative importance of working capital management and its components to SMEs’ profitability. Journal of Small Business and Enterprise Development, 20(3), 453–469. doi:10.1108/JSBED-12-2011-0029.

Almarzoqi, R., Ben Naceur, S., & Kotak, A. (2015). What Matters for Financial Development and Stability? IMF Working Papers, 15(173), 1. doi:10.5089/9781513501178.001.

Full Text: PDF

DOI: 10.28991/ESJ-2023-SPER-04


  • There are currently no refbacks.

Copyright (c) 2022 Trung Kim Quoc NGUYEN