Capital structure and firm performance: Evidence from the retail industry of Vietnam

Abstract

This study examines the impact of capital structure on firm performance in the Vietnamese retail industry using panel data from listed firms from 2018 to 2024. By employing fixed-effects (FE), random-effects (RE), and feasible generalized least squares (FGLS) models, the analysis investigates the relationship between total debt (TTD), short-term debt ratio (SD), long-term debt ratio (LTD), asset turnover (TURN), firm size (SIZE), and growth rate (GROWTH) with profitability, measured by Return on Equity (ROE). The findings indicate that while total debt exhibits a positive but insignificant effect on profitability, both short-term and long-term debt negatively impact ROE, highlighting the challenges of debt financing in the retail sector. Additionally, growth rate positively influences firm performance, suggesting that expansion strategies contribute to profitability. The study contributes to the literature on capital structure in emerging markets and provides practical implications for managers, policymakers, and investors. Retail firms should adopt conservative debt policies, focus on operational efficiency, and leverage growth opportunities to enhance financial performance.