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.