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The Effect of Capital Structure on Firm Value: A Study of Companies Listed on the Vietnamese Stock Market

Author

Listed:
  • Thi Ngoc Bui

    (Faculty of Economic and Management, Thuyloi University, No. 175, Tay Son, Dong Da, Hanoi 100000, Vietnam)

  • Xuan Hung Nguyen

    (National Economics University, 207 Giải phong, Hai Ba Trung, Hanoi 100000, Vietnam)

  • Kieu Trang Pham

    (National Economics University, 207 Giải phong, Hai Ba Trung, Hanoi 100000, Vietnam)

Abstract

This research investigates the relationship between capital structure and firm value for companies listed on the Vietnamese stock market. The study utilizes data from audited financial statements of 769 companies spanning from 2012 to 2022, amounting to 8459 observations. Employing various estimation methods, such as ordinary least squares (OLS), fixed effects model (FEM), random effects model (REM), and generalized least squares (GLS), the impact of capital structure on key financial indicators, namely, return on assets (ROA), return on equity (ROE), and Tobin’s Q, is assessed. The findings indicate that the debt ratio exhibits a positive influence on ROA, ROE, and Tobin’s Q, with Tobin’s Q displaying the most pronounced impact (0.450) and ROA showing the weakest impact (0.011). However, the long-term debt ratio does not significantly affect firm value. Interestingly, both short-term and long-term debt ratios have negative effects on ROA, ROE, and Tobin’s Q, with the most substantial impact on Tobin’s Q reduction (0.562). Based on these research outcomes, the authors offer valuable recommendations to companies, investors, business leaders, and policymakers to make informed decisions in selecting an optimal and sensible capital structure.

Suggested Citation

  • Thi Ngoc Bui & Xuan Hung Nguyen & Kieu Trang Pham, 2023. "The Effect of Capital Structure on Firm Value: A Study of Companies Listed on the Vietnamese Stock Market," IJFS, MDPI, vol. 11(3), pages 1-20, August.
    • Handle: RePEc:gam:jijfss:v:11:y:2023:i:3:p:100-:d:1210864
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    References listed on IDEAS

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    3. Cheng - Wen Lee & Aan Digita Malik, 2026. "Exploring the Financial Performance on Audit Quality: Insights from Automotive Companies on the Indonesia Stock Exchange," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 16(3), pages 1-3.
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    6. Yu, Lingling & Duan, Dongshan, 2025. "The effects of executive team stability on the dynamic adjustment of corporate capital structure—Analysis based on the perspective of human capital heterogeneity," Finance Research Letters, Elsevier, vol. 86(PG).
    7. Afolabi, Chukwudi Segun & Ogunleye, Joshua Kehinde & Akinleye, Bilikis Olayem & Odetayo, Tajudeen Adewale & Oladeji, Felicia Oluremi, 2025. "Exploring the Effect of Capital Structure on Firm Value in Information and Communication Technology Listed on the Nigeria Exchange Group (Ngx)," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(3), pages 4188-4201, March.

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