Capital structure and the impact of corporate Tax: An analysis of listed firms in HOSE

Abstract

Capital structure has aroused intense debate in the financial management areas

for a long time. Since the seminal work of Modigliani and Miller (1958), the basic question of whether a unique combination of debt and equity capital maximizes the firm value has been the subject of frequent debate in the capital structure literature. Observations in the Vietnamese stock market recently raise the concern of whether firms listed have obtained suitable capital structure and whether they have planned a suitable capital structure in concerning of corporate tax or not. Via analyzing the capital structure of 286 listed firms on HOSE from 2008 to 2010 combined with analysis on some typical firms in each sector, some conclusions are presented by following: (1) listed firms has not applied successfully modern corporate finance theory in planning capital structure to maximize the firm value, (2) inefficient in raising and using capital as well as using retained earnings, (3) forming an efficient and fair tax system, especially the impact of corporate taxes to orient the firms‟ development should be a great concern of government. On purpose of solving these problems to assist listed firms plan an optimal capital structure in relationship with corporate tax policy, some recommendations have discussed such as applying the pecking order theory in planning capital structure, mergers, adjusting the corporate tax rate and establishing credit rating agencies.