Geography, capital structure and firm performance an empirical study of construction industry
Abstract
Arousing intense debate in the financial management areas for a long time, relationship
between capital structure and performance is still a question without identified answer.
Leary and Roberts research (2005) shows the fact that the balancing for the optimal
capital structure is very important and it is happening in all industries for all companies
with different speed. Many researches having been taken each year go deeply on this area
for reaching the best answer; however, there is still no unified relationship and direction
pointed between capital structure and firm performance. In a deeper view, although there
are a lot of researches but a gap in construction researches exist still.
With 119 companies in construction industry through 5 year from 2009-2013, the
research aim to evaluate, analyze the relationship between Leverage and Firm
performance. Via analyzing the capital structure of 119 listed firms on HOSE and HXN
combined with analysis the trend of construction companies in 2013 only, some
conclusions are presented by following: (1) firm performance in construction companies
have negative relationship with capital structure, (2) inefficient in raising and using
long term debt for a better showing , (3) Companies being far away from central have
much beneficial advantages than the others. After analyzing, some recommendation have
discussed such as applying the pecking order theory in planning capital structure
in order to solving these problems to assist construction sector firms plan an optimal
capital structure for a better performance.