The Impact of Capital Structure on the Corporate Governance

Abstract

The purpose of this paper is to analyze the general characteristics of capital structure and measures to optimize the capital structure of each enterprise under heavy-asset and light-asset industries, the characteristics, differences, and connections of capital structure of each enterprise underdeveloped and developing countries, as well as the similarities and differences between the capital structure of Chinese and Vietnamese enterprises. Meanwhile, it discusses the assumptions and limitations of the classical capital structure theory, the Modigliani-Miller theorem. It concludes that it is difficult for firms to have an optimal debt-to-debt ratio in the actual business environment. Therefore, no matter in different industries or markets, each enterprise should choose the capital structure that best suits its own operating characteristics, objectives, and business conditions according to the macroeconomic environment and relevant national policies, financial market environment, market demand, industry competition, and development trends, as well as its business planning, etc. This will help the enterprise improve its operating ability and ability to cope with economic risks and market changes, realize the enterprise's progress in various aspects, and ultimately benefit the long-term development and sustainable operation of the enterprise.