Optimal capital structure of Vietnamese listed firms - finance industry and consumer discretionary industry

Figures & data

Table

Risk-free rate, r	2.00% (2020)	3.20% (2019)	4.00% (2018)
Tax rate, $\tau$	20%
Bankruptcy cost, $\alpha$	50%
Payout rate, $\delta$	2%
Maturity, T	5 years

Figure 1. Finance firms by total assets (in billion VND, exc. BID, CTG, VCB, PV2 & VIG).

Figure 2. Consumer Discretionary firms by total assets (in billion VND, exc. MWG & SVT).

Table 1. Estimated stock volatility and drift

	2020				2019					2018
		Stock volatility	Drift				Stock volatility	Drift				Stock volatility		Drift
Finance firms	High-volatility (σ ≥ 50%)
	HCM	84.37%	79.02%		VIG		89.16%	13.51%		PTI		71.45%		19.75%
	SHS	59.38%	93.27%		PTI		57.29%	3.50%		VND		53.56%		−3.87%
	VIG	58.37%	70.64%		PV2		55.34%	15.31%		BID		53.10%		44.28%
	Medium-volatility
	VCI	49.19%	87.67%		EIB		29.11%	27.89%		PV2		49.17%		31.21%
	SSI	44.08%	90.72%		BID		25.06%	34.20%		BVH		48.83%		44.44%
	VND	36.04%	83.12%		VCB		22.11%	55.57%		VNR		39.66%		13.71%
	Low-volatility (σ ≤ 20%)
					MBB		19.32%	18.96%
					TPB		18.55%	7.09%
Consumer Discretionary firms	High-volatility (σ ≥ 50%)
	SVT	74.67%	0.25%		RIC		92.22%	−0.09%		SVT		81.35%		0,10%
	TTF	56.64%	0.34%		SVT		76.76%	0.06%		GIL		67.43%		0,11%
	SVC	53.36%	0.21%		TTF		50.27%	−0.08%		TMT		57.87%		0,01%
	Medium-volatility
	TCM	47.80%	0.26%		PAC		22.48%	−0.15%		GMC		35.29%		0,17%
	GIL	47.19%	0.25%		PNJ		20.82%	0.09%		FTM		24.72%		0,11%
	STK	39.77%	0.10%		MWG		20.80%	0.11%		VNG		27.37%		0,11%
	Low-volatility (σ ≤ 20%)
	IBC	19.69%	0.04%		VNG		17.10%	−0.01%		IBC		17.08%		−0,01%
					IBC		16.42%	−0.02%

Table 2. Implied asset volatility by Merton-KMV Model

		2020		2019		2018
Finance firms	High-volatility
		VIG	46,45%	VIG	64,93%	PV2	42,71%
		SHS	36,68%	PV2	40,54%	BVH	21,59%
	Medium-volatility
		SSI	19,53%	VNR	19,92%	VNR	18,25%
		VCI	10,30%	PTI	13,90%	PVI	12,19%
	Low-volatility
		TCB	8,43%	VCB	4,96%	BID	6,27%
		VPB	8,04%	BID	3,15%	EIB	3,75%
Consumer Discretionary firms	High-volatility
		SVT	74,11%	SVT	76,40%	SVT	80,59%
		TCM	34,29%	STK	23,45%	CTF	21,81%
	Medium-volatility
		TTF	25,24%	PNJ	17,32%	GMC	14,67%
		GIL	24,70%	MWG	13,46%	FTM	11,85%
	Low-volatility
		IBC	9,62%	SVC	7,04%	SVC	9,34%
		KMR	9,16%	ADS	5,39%	ADS	4,38%

Table 3. Leland (1994) optimal capital structure of finance firms

2020						2019
	${\mathit{\sigma }}_{\mathit{A}}$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	${\mathit{L}}_{\mathit{M}\mathit{V}}^{\mathit{a}}$			${\sigma }_A$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	${\mathit{L}}_{\mathit{M}\mathit{V}}^{\mathit{a}}$
VPB	8.04%	79.48%	88.89%	81.92%		BID	3.15%	94.77%	90.85%	88.12%
TCB	8.43%	78.31%	88.86%	77.96%		VCB	4.96%	89.89%	93.38%	77.48%
VCI	10.30%	72.98%	45.30%	79.76%		PTI	13.90%	66.01%	75.39%	79.41%
SSI	19.53%	53.01%	72.30%	56.44%		VNR	19.92%	54.50%	55.55%	59.83%
SHS	36.68%	35.61%	47.96%	39.07%		PV2	40.54%	34.90%	16.38%	28.50%
VIG	46.45%	31.09%	10.18%	20.90%		VIG	64.93%	27.37%	8.36%	34.19%
			2018
				${\sigma }_A$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	${\mathit{L}}_{\mathit{M}\mathit{V}}^{\mathit{a}}$
			EIB	3.75%	94.26%	96.21%	89.43%
			BID	6.27%	88.02%	95.14%	91.66%
			PVI	12.19%	73.24%	64.04%	65.17%
			VNR	18.25%	60.92%	55.23%	58.01%
			BVH	21.59%	55.51%	86.05%	61.62%
			PV2	42.71%	36.18%	8.21%	14.68%

Table 4. Leland (1994) optimal capital structure of consumer discretionary firms

2020						2019
	${\mathit{\sigma }}_{\mathit{A}}$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	${\mathit{L}}_{\mathit{M}\mathit{V}}^{\mathit{a}}$			${\mathit{\sigma }}_{\mathit{A}}$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	${\mathit{L}}_{\mathit{M}\mathit{V}}^{\mathit{a}}$
KMR	9.16%	76.19%	45.36%	74.96%		ADS	5.39%	89.36%	73.48%	81.58%
IBC	9.62%	74.87%	59.63%	51.87%		SVC	7.04%	85.20%	60.07%	78.12%
GIL	24.70%	45.79%	52.37%	48.41%		MWG	13.46%	68.02%	69.54%	36.77%
TTF	25.24%	45.16%	63.76%	42.74%		PNJ	17.32%	58.36%	46.75%	17.75%
TCM	34.29%	37.12%	43.59%	28.85%		STK	23.45%	49.78%	43.74%	44.31%
SVT	74.11%	25.43%	0.69%	0.77%		SVT	76.40%	30.87%	0.27%	0.50%
			2018
				${\sigma }_A$	L*	$LBVa$	$LMVa$
			ADS	4.38%	92.77%	69.46%	80.41%
			SVC	9.34%	80.15%	58.39%	76.82%
			FTM	11.85%	74.04%	56.88%	55.09%
			GMC	14.67%	67.81%	61.32%	61.95%
			CTF	21.81%	55.18%	72.22%	70.01%
			SVT	80.59%	26.27%	0.57%	1.05%

Table 5. Leland and Toft (1996) optimal capital structure of finance firms

2020						2019
	${\sigma }_A$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	${\mathit{L}}_{\mathit{M}\mathit{V}}^{\mathit{a}}$			${\sigma }_A$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	${\mathit{L}}_{\mathit{M}\mathit{V}}^{\mathit{a}}$
VPB	8.04%	94.31%	88.89%	81.92%		BID	3.15%	48.36%	90.85%	88.12%
TCB	8.43%	92.38%	88.86%	77.96%		VCB	4.96%	42.13%	93.38%	77.48%
VCI	10.30%	99.05%	45.30%	79.76%		PTI	13.90%	99.95%	75.39%	79.41%
SSI	19.53%	70.09%	72.30%	56.44%		VNR	19.92%	72.36%	55.55%	59.83%
SHS	36.68%	54.12%	47.96%	39.07%		PV2	40.54%	47.44%	16.38%	28.50%
VIG	46.45%	43.04%	10.18%	20.90%		VIG	64.93%	46.42%	8.36%	34.19%
			2018
				${\mathit{\sigma }}_{\mathit{A}}$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	${\mathit{L}}_{\mathit{M}\mathit{V}}^{\mathit{a}}$
			EIB	3.75%	56.21%	96.21%	89.43%
			BID	6.27%	50.32%	95.14%	91.66%
			PVI	12.19%	76.73%	64.04%	65.17%
			VNR	18.25%	72.05%	55.23%	58.01%
			BVH	21.59%	72.43%	86.05%	61.62%
			PV2	42.71%	39.45%	8.21%	14.68%

Table 6. Leland and Toft (1996) optimal capital structure of consumer discretionary firms

2020						2019
	${\sigma }_A$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	${\mathit{L}}_{\mathit{M}\mathit{V}}^{\mathit{a}}$			${\mathit{\sigma }}_{\mathit{A}}$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	${\mathit{L}}_{\mathit{M}\mathit{V}}^{\mathit{a}}$
KMR	9.16%	92.18%	45.36%	74.96%		ADS	5.39%	41.27%	73.48%	81.58%
IBC	9.62%	64.79%	59.63%	51.87%		SVC	7.04%	52.95%	60.07%	78.12%
GIL	24.70%	62.21%	52.37%	48.41%		MWG	13.46%	55.82%	69.54%	36.77%
TTF	25.24%	67.50%	63.76%	42.74%		PNJ	17.32%	43.31%	46.75%	17.75%
TCM	34.29%	48.59%	43.59%	28.85%		STK	23.45%	59.43%	43.74%	44.31%
SVT	74.11%	29.43%	0.69%	0.77%		SVT	76.40%	29.05%	0.27%	0.50%
			2018
				${\mathit{\sigma }}_{\mathit{A}}$	L*	${\mathit{L}}_{\mathit{B}\mathit{V}}^{\mathit{a}}$	$L_{MV}^a$
			ADS	4.38%	53.41%	69.46%	80.41%
			SVC	9.34%	66.79%	58.39%	76.82%
			FTM	11.85%	68.44%	56.88%	55.09%
			GMC	14.67%	77.27%	61.32%	61.95%
			CTF	21.81%	86.66%	72.22%	70.01%
			SVT	80.59%	28.93%	0.57%	1.05%

Table 7. Comparison of optimal leverage between Leland (1994) model and Leland and Toft (1996) model

		2020		2019		2018
		Leland (1994)	Leland and Toft (1996)	Leland (1994)	Leland and Toft (1996)	Leland (1994)	Leland and Toft (1996)
Finance	BVH	39.97%	49.51%	79.39%	65.94%	55.51%	72.43%
	HCM	30.49%	55.04%	49.67%	52.47%	46.70%	58.16%
	MBS	61.93%	83.50%	75.87%	75.13%	53.06%	68.79%
	PTI	61.05%	99.34%	66.01%	99.95%	46.64%	89.45%
	PV2	40.51%	59.02%	34.90%	47.44%	36.18%	39.45%
	SHS	35.61%	54.12%	77.86%	73.14%	61.40%	83.98%
	VIG	31.09%	43.04%	27.37%	46.42%	30.87%	42.76%
	VNR	49.96%	71.28%	75.87%	75.13%	60.92%	72.05%
Consumer Discretionary	MWG	41.25%	53.26%	68.02%	55.82%	45.86%	50.96%
	PNJ	38.62%	40.40%	58.36%	43.31%	42.66%	43.02%
	SVC	43.07%	62.57%	85.20%	52.95%	80.15%	66.79%
	TCM	45.16%	67.50%	69.19%	74.52%	56.30%	75.99%
	TTF	45.16%	67.50%	68.38%	97.93%	57.02%	97.51%
	STK	41.69%	48.82%	49.78%	59.43%	58.09%	71.02%
	GIL	45.79%	62.21%	77.62%	77.73%	47.37%	84.45%
	KMR	76.19%	92.18%	74.70%	86.06%	59.59%	75.08%

Table 8. Default probability of finance firms

No	Stock	KMV			Leland (1994)			Leland and Toft (1996)
		DP_2018	DP_2019	DP_2020	DP_2018	DP_2019	DP_2020	DP_2018	DP_2019	DP_2020
1	BAB	0.09%	0.01%	8.38%	0.01%	0.01%	0.66%	0.01%	0.09%	1.74%
2	BID	9.50%	5.99%	8.62%	5.80%	0.08%	2.02%	3.91%	0.53%	4.86%
3	BVH	5.64%	0.01%	1.88%	1.50%	0.16%	0.01%	1.85%	0.10%	0.01%
4	CTG	0.33%	2.17%	7.78%	0.01%	3.31%	0.19%	0.01%	0.01%	0.80%
5	EIB	0.01%	5.94%	1.70%	0.01%	0.01%	0.01%	0.01%	3.08%	0.12%
6	HCM	1.93%	0.76%	9.93%	1.44%	0.02%	3.46%	1.71%	0.05%	3.76%
7	HDB	2.45%	0.04%	7.95%	9.00%	8.90%	1.80%	9.10%	8.90%	4.43%
8	MBB	8.90%	7.90%	8.24%	1.86%	0.11%	0.10%	2.03%	1.54%	0.39%
9	MBS	4.51%	3.40%	9.07%	1.78%	0.01%	0.02%	1.58%	0.02%	0.03%
10	NVB	7.00%	1.76%	0.02%	0.03%	7.58%	0.01%	0.03%	7.73%	0.10%
11	PTI	9.70%	9.80%	9.00%	9.36%	6.19%	3.77%	8.33%	6.07%	4.88%
12	PV2	6.68%	6.83%	1.70%	0.01%	0.19%	2.14%	0.03%	0.22%	2.49%
13	PVI	1.98%	0.24%	4.88%	0.19%	0.91%	0.02%	0.32%	0.01%	0.20%
14	SHB	0.27%	0.30%	9.97%	0.02%	9.60%	4.03%	0.05%	9.10%	8.58%
15	SHS	0.76%	0.03%	8.12%	6.80%	0.20%	0.02%	7.90%	0.38%	0.02%
16	SSI	8.60%	0.02%	9.37%	0.94%	0.01%	0.01%	0.93%	0.01%	0.20%
17	STB	9.00%	0.01%	8.33%	0.01%	6.15%	0.54%	0.02%	8.40%	2.27%
18	TCB	0.09%	0.02%	7.53%	9.43%	0.05%	0.05%	6.70%	0.24%	0.10%
19	TPB	0.47%	0.50%	8.53%	7.80%	1.71%	0.04%	8.90%	1.88%	0.13%
20	VCB	9.00%	5.75%	7.41%	7.57%	0.02%	0.02%	7.20%	0.01%	0.07%
21	VCI	5.21%	0.03%	9.88%	8.50%	4.50%	0.06%	9.20%	9.70%	0.12%
22	VIG	0.01%	8.66%	7.67%	0.01%	0.01%	0.01%	3.17%	3.93%	0.01%
23	VND	9.49%	0.02%	9.40%	7.00%	0.01%	0.01%	7.80%	0.04%	0.10%
24	VNR	8.31%	7.66%	9.56%	0.51%	1.51%	1.29%	0.69%	1.30%	1.62%
25	VPB	5.87%	0.65%	9.57%	6.00%	0.43%	0.10%	5.60%	0.99%	0.21%

Table 9. Default probability of consumer discretionary firms

No	Stock	DP_2018	DP_2019	DP_2020	DP_2018	DP_2019	DP_2020	DP_2018	DP_2019	DP_2020
1	ADS	.23%	1.31%	3.93%	.27%	.39%	3.12%	.27%	1.07%	5.37%
2	CSM	.22%	.02%	.71%	.30%	.01%	.01%	.32%	.02%	.01%
3	CTF	8.74%	5.38%	1.25%	2.84%	.28%	.01%	5.92%	.37%	.01%
4	DRC	1.40%	1.00%	1.82%	.12%	.00%	.01%	.15%	.01%	.01%
5	EVE	.06%	3.48%	6.73%	.02%	3.09%	.01%	.03%	2.85%	.50%
6	FRT	.03%	.07%	9.67%	.01%	1.52%	.37%	.01%	.06%	.47%
7	FTM	6.18%	.02%	9.06%	.01%	8.29%	9.66%	.01%	3.22%	7.60%
8	GIL	2.99%	.55%	9.17%	5.88%	.33%	.05%	6.49%	.20%	.45%
9	GMC	9.82%	.04%	5.56%	.01%	.06%	.02%	.02%	1.09%	.02%
10	HAX	.36%	9.35%	6.68%	3.01%	.11%	.01%	.58%	.19%	.01%
11	IBC	.01%	.09%	.43%	.01%	.01%	.02%	.01%	.01%	.01%
12	KMR	1.85%	1.21%	7.61%	1.15%	.44%	.17%	1.75%	1.00%	.34%
13	MSH	.39%	5.20%	1.24%	.45%	.01%	.08%	.18%	.02%	.10%
14	MWG	.99%	7.30%	6.83%	.06%	.10%	.02%	.07%	.05%	.03%
15	PAC	.87%	.02%	5.49%	.07%	.03%	.01%	.10%	.10%	.01%
16	PNJ	1.05%	2.71%	.08%	.01%	.20%	.01%	.01%	.01%	.01%
17	RIC	8.50%	9.08%	9.31%	2.78%	2.35%	2.37%	2.75%	2.97%	2.55%
18	STK	5.57%	6.25%	3.99%	1.00%	.01%	.01%	.88%	.01%	.08%
19	SVC	4.09%	6.48%	9.38%	2.15%	.27%	.05%	2.47%	.60%	.06%
20	SVT	1.15%	.09%	4.67%	.01%	.01%	.01%	.00%	.02%	.01%
21	TCM	9.31%	.94%	7.09%	2.96%	.08%	.01%	3.07%	.13%	.01%
22	TMT	6.41%	6.10%	9.96%	6.10%	5.01%	9.97%	7.13%	5.95%	6.82%
23	TTF	1.99%	5.08%	11.00%	4.90%	3.43%	.03%	5.47%	3.40%	.04%
24	TVT	9.80%	9.99%	7.29%	.31%	.03%	.07%	.47%	.07%	.11%
25	VNG	7.99%	.26%	1.41%	.01%	.01%	.01%	.01%	.26%	.01%

Leland, H. E. (1994). Corporate debt value, bond covenants, and optimal capital structure. The Journal of Finance, 49(4), 1213–1252. https://doi.org/10.1111/j.1540-6261.1994.tb02452.x

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Leland, H. E., & Toft, K. B. (1996). Optimal capital structure, endogenous bankruptcy, and the term structure of credit spreads. The Journal of Finance, 51(3), 987–1019. https://doi.org/10.1111/j.1540-6261.1996.tb02714.x

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