Capital Structure in Small and Medium-sized Enterprises: The Case of Vietnam

The objective of this article is to identify the determinants influencing the capital structure of small and medium-sized enterprises (SMEs) in Vietnam. Empirical results show that SMEs employ mostly short-term liabilities to finance their operations. A firm's ownership also affects the way a SME finances its operations. The capital structure of SMEs in Vietnam is positively related to growth, business risk, firm size, networking, and relationships with banks; but negatively related to tangibility. Profitability seems to have no significant impact on the capital structure of Vietnamese SMEs. The strong impact of such determinants as firm ownership, firm size, relationships with banks, and networking reflects the asymmetric features of the fund mobilization process in a transitional economy like that of Vietnam.