Capital structure; Debt ratio threshold; SEASCRs; Regional characteristics
Purpose: The aim of this study is to investigate the firm characteristics that affect capital structure of seafoodprocessing companies in South Central Coast of Vietnam. In addition, this study also explores the differences incapital structure among companies with different types of ownership in various regions as well as those withdebt ratio greater than and less than the optimal debt threshold (57.39 per cent, see Nguyen Thanh Cuong (2014)for details). Design/methodology/approach: The investigation has been performed using panel data procedurefor a sample of 90 unlisted seafood processing enterprises in the South Central region (SEASCRs) and 22 listedseafood processing enterprises in the other region of Vietnam (SEALISTs) during 2005–2011. The firmcharacteristics are analyzed as determinants of capital structure according to different explanatory theories. Thehypothesis that is tested in this paper is that the debt ratio at time t depends on the size of the firm at time t,tangible fixed assets of the firm at time t, the growth opportunities of the firm at time t, the profitability of thefirm at time t, the business risk of the firm at time t, its liquidity ratio at time t, its interest expense ratio at time tand its income tax ratio at time t. The SEASCRs that maintain a debt ratio above 57.39 per cent using a dummyvariable are also distinguished. We also using a dummy variable to evaluate the differences about the capitalstructure of SEASCRs with regard to firm ownership. In addition, with regard to evaluate the differences aboutthe capital structure of seafood processing enterprises in different regions, we also using a dummyvariable. Findings: The findings of this study justify the hypothesis that there is a negative relation between thedebt ratio of the firms and their tangible fixed assets, their growth opportunities, their profitability, their liquidityratio and their business risks. Size and interest expense ratio appears to maintain a positive relation. According tothe dummy variable there is a differentiation in the capital structure among the SEASCRs with a debt ratiogreater than 57.39 per cent and those with a debt ratio lower than 57.39 per cent. In addition, this study alsofindings the differences in capital structure among SEASCRs with different types of ownership and thedifferences about the capital structure of seafood processing enterprises in various regions. Our findings areconsistent with the Trade off theory and Pecking order theory. Originality/value: The findings suggestimplications for SEASCRs on flexible usage of financial leverage to increasing firm value and lowering cost of capital.