Capital Structure, Equity Ownership Impacts On Firm’s Performance: Evidence On Vietnamese Listed Firms

Abstract

The study explores the influence of capital structure and equity ownership on the performance of publicly traded companies in Vietnam. By investigating these important aspects within Vietnam's distinct institutional, regulatory, and cultural environment, the research seeks to offer valuable insights and enhance the comprehension of corporate finance dynamics in developing economies. The study utilizes a comprehensive dataset of non-financial companies listed on the Ho Chi Minh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) between 2015 and 2022. Using panel data regression models, the research examines the connection between leverage, ownership structure (state ownership and foreign ownership), and firm performance, as measured by Tobin's Q ratio. The results indicate that the effect of capital structure on firm performance differs across sectors, with some industries exhibiting a U-shaped or inverted U-shaped relationship, while others show a more linear correlation. Furthermore, the study reveals a negative association between state ownership and firm performance in the Construction and Materials industry, emphasizing the potential difficulties linked to state-owned enterprises (SOEs). In contrast, foreign ownership is discovered to have a positive effect on firm performance across multiple industries, highlighting the potential advantages of foreign direct investment (FDI) and knowledge spillovers. The study's findings have crucial implications for managers, policymakers, and investors operating in the Vietnamese market, providing guidance on optimal financing strategies, ownership composition, and the potential risks and benefits related to different ownership structures. From a theoretical standpoint, the research contributes to the ongoing discussion on the applicability of traditional corporate finance theories in emerging markets and the role of ownership composition in reducing agency costs.