The Impact Of Financial Leverage On Firm Performance On Stock Market In Vietnam

Abstract

In recent years, the Vietnamese and global economies have undergone significant transformations, particularly in sectors like construction and real estate, amidst increasing international integration. With capital accessibility posing a significant challenge for construction enterprises and real estate businesses requiring substantial investments and facing prolonged payback periods, the use of financial leverage becomes imperative to ensure liquidity, operational efficiency, and expansion. However, this reliance on financial leverage, particularly through traditional channels like credit institutions and short-term credit via supply chain financing, introduces complexities in decision-making processes for financial managers. While prior studies suggest a positive correlation between financial leverage and company performance, the concurrent impact of financial leverage and supply chain financing on company profitability remains underexplored in empirical research. Motivated by the need to understand how financial policies influence profitability indicators in high-capital and long-payback period sectors like real estate, this study aims to provide empirical evidence on the impact of financial leverage on the profitability of listed real estate companies in Vietnam. Utilizing financial data from the State Securities Commission of Vietnam, the research investigates the effect of financial leverage on return on equity (ROE) and return on assets (ROA) of real estate companies, shedding light on the intricate dynamics between financial leverage, operational efficiency, and profitability. Furthermore, the study underscores the significance of effective debt management and capital planning in mitigating financial risks and ensuring long-term viability for real estate companies. By implementing robust financial analysis, diversifying capital sources, and strategically negotiating loan terms, companies can navigate challenges associated with financial leverage, ultimately fostering sustainable growth and shareholder value creation in the Vietnamese real estate mark