Capital structure and firm performance of non-financial listed companies: Cross-sector empirical evidences from Vietnam

debt to total assets and profitability, which is 
T. H. Nguyen and H.A. Nguyen /Accounting 6 (2020) 147
represented by ROE and ROA. Chang et al. (2014) having ROE as a measure of business results, the research reported that the 
ratios of short-term debt and total debt to total assets were negatively related to ROE. This result is also partly shared with the 
results of Rehman et al. (2012). The results of Rehman et al. (2012), indicated a significant positive correlation between the 
ratio of short-term debt to total assets and ROE, but the ratio of long-term debt to total assets and ROE are not significant 
correlated. Particularly, there are differences in the sectors about effects of capital structure to ROE as shown in Table 13. 
Specifically: Information technology, oil and gas and materials industries have lower ROE than industrial products industry 
(negative beta such as -0.0195, -0.0306 and -0.00839). In particular, oil and gas industry have lower ROE than information 
technology and materials industry (beta value: -0.0306; -0.0214; -0.00839 equivalent); IT industry has a lower ROE than 
materials. Utilities and consumer goods have a higher ROE than industrial products industry (beta value = 0.0163) ; public 
utility sector has a higher ROE than consumer goods (beta value: 0.0163; 0.00906 equivalent). 
Table 13 
Comparison of correlation coefficient between capital structure and ROE (industrial products sectors as standard) 
Industry STD LTD TD 
Information technology industry -0.0195*** -0.0137* -0.0214*** 
Pharmaceutical and medical industry 0.0177*** 0.0229*** 0.00599* 
Oil & gas industry -0.0182 -0.0142 -0.0306** 
Consumer service industry 0.00419 0.0186*** -0.00109 
Consumer goods industry 0.0214*** 0.0171*** 0.00906** 
Materials industry -0.00413 -0.00140 -0.00839** 
Public utility industry 0.0207*** 0.0360*** 0.0163*** 
Note: (*), (**), (***) represent for the significant level at 1%, 5% và 10%, respectively 
5.2 Discussion of the research results of ROA models 
The research results show that the relationship between capital structure and ROA for all non-financial enterprises listed on 
Vietnam's stock market is opposite. The regression coefficient obtained from the GLS regression is negative, statistically 
significant (p-value = 1%). This result supports the results of Ebaid (2009), Doan and Dinh (2014), Chang et al. (2014), 
Logavathani and Lingesiya (2018). Chang et al. (2014) indicated a negative correlation between debt (including short-term debt, 
long-term debt and total debt) and ROA. According to Logavathani and Lingesiya (2018), the results of FEM regression from 
ROA model and REM regression from ROE model highlighted that the ratio of total debt to total assets is closely and negatively 
related to ROA and ROE of commercial banks in Sri Lanka. In particular, the industry comparison of effects of capital structure 
to ROA among sectors in Table 14 shows that information technology has a lower ROA than industrial products industry 
(negative beta = -0.0300, industrial products sector is referenced with the rest of industries). Consumer goods, medical 
pharmaceuticals and public utilities have a higher ROA than industrial products industry (beta value = 0.0234, 0.0234 and 
0.0351 equivalent). In particular, because the public utility beta is larger than the consumer goods beta, the public utility ROA 
tends to be higher than the consumer goods industry. The pharmaceutical industry has a lower ROA than consumer goods. 
Table 14 
Comparison of correlation coefficient between capital structure and ROA (industrial products sectors as standard) 
Industry STD LTD TD 
Information technology industry -0.0282* -0.0231 -0.0300** 
Pharmaceutical and medical industry 0.0242* 0.0278* 0.0132* 
Oil & gas industry -0.0147 -0.0121 -0.0263 
Consumer service industry 0.00296 0.0154 -0.00231 
Consumer goods industry 0.0348*** 0.0299*** 0.0234*** 
Materials industry -0.00325 -0.00116 -0.00727 
Public utility industry 0.0396*** 0.0530*** 0.0351*** 
Note: (*), (**), (***) represent for the significant level at 1%, 5% và 10%, respectively 
 (Source: Data processing results of authors) 
5.3 Discussion of the research results of EPS models 
The research results show that the relationship between capital structure and EPS for all non-financial enterprises listed on 
Vietnam's stock market is the opposite. The regression coefficient obtained from the GLS regression is negative, statistically 
significant (p-value = 1%). This research is in agreement with the results of Mahfuzah and Raj (2012), Doan and Dinh (2014). 
EPS (earnings per share) are indicators of profitability in study of Doan and Dinh (2014). The study pointed out a negative 
 148
relationship between the selected leverage ratios and business performance. The study of Mahfuzah and Raj (2012) indicated 
that firm performance, which is measured by return on asset (ROA), return on Equity (ROE) and earning per share (EPS) have 
negative relationship with short term debt (STD), long term debt (LTD), total debt (TD) as independent variable. In particular, 
about effects of capital structure to EPS among sectors as illustrated in Table 15, the information technology industry has lower 
EPS than the material industry and these two industries have lower EPS than the industrial products industry (beta value = -
717.8 and -536.6 equivalent). The medical pharmaceutical industry has higher EPS than consumer goods industry and industrial 
products industry (beta value = 608.8 and 442.1 equivalent for pharmaceutical and medical industry and consumer goods 
industry). 
Table 15 
Comparison of correlation coefficient between capital structure and EPS (industrial products sectors as standard) 
Industry STD LTD TD 
Information technology industry -667.0** -558.9** -717.8*** 
Pharmaceutical and medical industry 873.5*** 915.8*** 608.8** 
Oil & gas industry -705.9 -691.3 -982.4 
Consumer service industry -182.2 65.47 -317.7 
Consumer goods industry 713.9*** 561.6*** 442.1*** 
Materials industry -441.8*** -410.5** -536.6*** 
Public utility industry -178.4 98.39 -297.9 
Note: (*), (**), (***) represent for the significant level at 1%, 5% và 10%, respectively 
 Source: Data processing results of authors 
6. Conclusion and recommendations 
6.1 Conclusion 
This article has provided evidence that the capital structure of an enterprise has an impact on the business performance of non-
financial enterprises listed on Vietnam's stock market. The research results complement previous studies with detailed 
information for each economic sector. Based on the results of this research, the author has proposed some recommendations to 
business managers, investors and state management agencies in making decisions. 
6.2 Recommendations 
Firstly, for investors 
The research results show that the capital structure, in particular, the ratio of debt to total assets is closely related and statistically 
significant with the profitability of the companies (via ROA, ROE, EPS rates). In general, businesses with high debt-to-assets 
ratio will have an opposite effect on their profitability. Considering each economic sector, the effect of capital structure on ROE, 
ROA and EPS is different. Consumer goods, health care, and utilities have a higher relationship between capital structure and 
ROE than industrial product sectors; The information technology industry has a lower relation between capital structure and 
ROE than industrial product sectors. Moreover, the Pharmaceutical and medical industry, the consumer goods industry, and the 
public utility industry have a higher relationship between capital structure and ROE than industrial product sectors; The 
Information Technology industry has a lower relationship between capital structure and ROE than industrial product sectors. In 
addition, Pharmaceutical and medical industry, Consumer goods industry have a higher relationship between capital structure 
and EPS than industrial product sectors; Information technology industry has lower relationship between capital structure and 
EPS than industrial product sectors and raw material industry has lower capital structure and EPS than industrial product sectors. 
Therefore, this is useful information to help investors make appropriate investment decisions. 
Secondly, for business managers 
The experimental results of this article show that increasing the ratio of liabilities to total assets will make the business 
performance of the company (via ROE, ROA, EPS) decrease. At the same time, the revenue growth rate (SG) has a good effect 
on business performance. Therefore, business managers need to take appropriate measures to use debt, help increase sales but 
still ensure increased business performance. 
Thirdly, for the state management agencies 
The empirical results of this article show that company size (SIZE) is positively related to the company's business performance. 
The more companies scale up, the higher their performance (via ROE, ROA, EPS) will be. When companies need to borrow 
T. H. Nguyen and H.A. Nguyen /Accounting 6 (2020) 149
capital to expand the size of the company, the state management agencies need to create favorable conditions for businesses to 
access capital. The State should consider policies on interest rates at a reasonable level so that businesses can both receive capital 
and bring business efficiency. 
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