The Impact of Capital Structure on Firm Performance: Case of Listed Firms in Processing and Manufacturing Industry in Vietnam

Abstract

The authors aim to examine the impact of capital structure on the performance of manufacturing and processing companies listed on the stock exchange in Vietnam during the period of 2015 - 2020. Through the FGLS model, the study found that the ratio of short-term debt to total assets (STDA) and the ratio of long-term debt to total assets (LTDA) have a negative impact on the performance expressed through ROA. In contrast, in terms of Tobin's Q, STDA has no significant relationship with firm performance but it is negatively impacted by LTDA. The two control variables GROWTH and SIZE both have a positive impact on ROA and Tobin's Q. Based on findings, some recommendations for manufacturing and processing companies to enhance their profitability in the future.