The impact of capital structure on performance - Evidence of listed companies in food and beverage industry in Vietnam

Abstract

The expectation of this study is to investigate the influence of debt on financial performance on both Return on assets (ROA) and Earnings per share (EPS) of 28 listed companies in Vietnam food and beverage industry from 2009 to 2013. Three proxies, such as: short-term debt to total assets (STDTA), total debt to total assets (TDTA) and total debt to total equity (TDTE) adopted to the represent the capital structure and four most popular factors like: size, liquidity, growing opportunities and tangibility of asset are selected to surrogate the controlled variables. The evidence found in this paper countering the Trade-off theory, because the panel data analysis depicts a negative connection between leverage and firms’ value for all models. Through the data researched, it implies that capital structure relates significantly to profitability except one case of TDTA, which has statistical insignificance on ROA. Besides that, there is a passive insignificance between firm size and performance while growth factor illustrates a contrary result. In addition, the implication of liquidity is varied among the models whereas the tangibility of asset does not contribute a link to performance.