Impact of Capital Structure and Debt Characteristics on Default Risk of Listed Real Estate Firms in Vietnam

DOI

10.2991/978-94-6463-348-1_25How to use a DOI?

Keywords

Capital structure; debt characteristics; default risk; listed real-estate firms; Vietnam

Abstract

Research purpose: This study aims to examine the impact of capital structure and debt characteristics on the default risk of listed real estate firms in Vietnam stock market.

Research motivation: The real estate industry in Vietnam has experienced significant growth and transformation over the past decade, contributing to the country’s economic development and attracting both domestic and international investors. However, various challenges and risks appear, especially since the Covid-19 outbreak, lead to the risk of default of real estate firms. Besides, research on the impact of capital structure and debt characteristics on default risk of listed real estate firms are still limited and not up to date, in particular for the Vietnamese context.

Research methodology:

The assessment of default risk is conducted in using KMV model to measure the distance to default (DD) and the probability of default (PD). The research focuses on various dimensions of capital structure and debt characteristics, including debt maturity, source of debt, and cost of debt. The study sample includes 42 listed firms in the real estate industry in the period from 2018–2022.

Main findings:

Regression model shows that a firm’s capital structure, including long-term debt to assets (LTDA) and short-term debt to assets (STDA), significantly influences its likelihood of default. Balancing LTDA and STDA is crucial for mitigating default risk. Larger firms (SIZE) have a reduced probability of default due to their financial resources. Volatility (Vol) also impacts financial stability, emphasizing the need for robust market risk management.

Practical/managerial implications: This research contributes valuable insights for businesses, investors, financial decision-makers, financial institutions, and other stakeholders. It emphasizes the critical importance of debt management, financial stability, and risk mitigation strategies in reducing the probability of default among real estate companies.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Giang Nguyen Thuc Huong
AU  - Lan Anh Nguyen Thi
AU  - Ngan Nguyen Thu
PY  - 2024
DA  - 2024/02/05
TI  - Impact of Capital Structure and Debt Characteristics on Default Risk of Listed Real Estate Firms in Vietnam
BT  - Proceedings of the 11th International Conference on Emerging Challenges: Smart Business and Digital Economy 2023 (ICECH 2023)
PB  - Atlantis Press
SP  - 327
EP  - 344
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-348-1_25
DO  - 10.2991/978-94-6463-348-1_25
ID  - Huong2024
ER  -