Capital structure and corporate performance: evidence in Vietnam

Abstract

This article aims to examine the influence of capital structure on corporate performance and the reverse causality from corporate performance to capital structure, using data from 150 Vietnamese listed manufacturing firms from 2008 to 2012. Comparing the results of random effects model (REM) and fixed effects model (FEM), the more appropriate model will be discussed some empirical results. The study found that the capital structure has significant and positive relationship with corporate performance in associated with debt to assets (TDTA) and short-term debt to assets (STDTA). In contrast, corporate performance is insignificantly influenced by debt to assets (TDTA). The results also state that there is no existence of optimal capital structure decision. The reverse causality from corporate performance to capital structure, corporate performance has a significant and positive influence on capital structure in related with debt to assets (TDTA) and short-term debt to assets (STDTA) but corporate performance has no meaning with long-term debt to assets (LTDTA).