The impact of capital structure on the performance of state-invested enterprises in Vietnam

This study examines the impact of capital structure on performance of state-invested enterprises (SIEs). Capital structure is measured by total debt ratio (TDR), long-term debt ratio (LTD), and short-term debt ratio (STD), and performance is measured by return on assets (ROA) and Tobin’s Q ratio. The panel data regression method is used to process data collected from 350 state-owned joint stock companies (non-financial companies) listed on the Vietnam stock market from 2015-2022. The research results confirm that TDR, LTD, and STD negatively impact ROA and positively impact Tobin’s Q (except LTD does not affect Tobin’s Q). In addition, several factors that belong to the characteristics of enterprises, such as firm size, liquidity, tangibility, revenue growth rate, and state ownership ratio, impact the performance of SIEs by following different directions in each capital structure. These results imply that capital structure significantly influences ROA and Tobin’s Q of SIEs in Vietnam. The SIEs in the research sample used assets and loans inefficiently according to their bookkeeping value, so they did not attract much attention from investors. However, increasing the debt ratio is considered a positive signal in expanding scale and stabilizing future income streams, creating confidence for investors about the development prospects of the enterprise. Finally, the study offers several important policy implications for policymakers and business managers in developing countries in establishing and disseminating impact mechanisms to help SIEs achieve optimal capital structure, thereby enhancing performance. It also aids lenders and investors in making informed financial or investment decisions.This article aims to examine the impact of capital structure on the performance of SIEs. The study’s findings provide insight into the impacts of capital structure on performance, especially in SIEs in developing countries. The results of the study are a useful reference source for policymakers in developing countries like Vietnam in the process of completing the legal framework for capital market development, managing macroeconomic policies, stabilizing interest rates, etc., creating conditions for SIEs to operate stably and develop sustainably, contributing to supporting the quick and effective divestment of state capital and the highest recovery of state investment capital in these enterprises. Moreover, the research findings play a crucial role in helping business managers develop solutions to restructure or adjust capital structure in a reasonable direction, using loans effectively at each stage of enterprise development to improve performance and enhance the enterprise’s competitive advantage in the context of integration. They also assist lenders in identifying the influence of factors on enterprise performance as a basis when making debt contracts and provide investors with a deeper insight into the enterprise’s operating situation before making investment decisions.