Impact of debt structure on profitability of non-financial listed joint stock firms

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Abstract

The relationship between debt structure and profitability has drawn the attention by many researchers. One of the earliest papers which can be mentioned is the study by Modigliani and Miller (1958). In order to contribute to the literature and practical evidence to this topic, our paper investigates the impact of debt structure on the profitability of Vietnam non-financial listed joint stock companies (JSCs). By using the panel data of an eight year period for 976 JSCs, from 2013 to 2020, we get a sample of 7,808 observations. Return on assets (ROA) and return on equity (ROE) are dependent variables and are considered as profitability measures. Stata 16 software is used to test the link between profitability and the other six independent variables. The result shows that short-term debt (STDA) and growth opportunities (GRTH) have their positive and significant statistical impact on both ROA and ROE. Meanwhile, total debt (TDA) and long-term debt (LTDA) have their opposite influences. Firm size (SIZ) has different significant statistical effects on these dependent variables and net sales growth (SG) has an insignificant statistical link on profitability. Based on the findings, some recommendations are proposed to increase their profitability by optimizing debt structure in the listed firms in an emerging country and Vietnam as the case study.

Keywords: Debt Structure, Long-Term Debt, Profitability, Short-Term Debt, Total Debt

Authors’ individual contribution: Conceptualization — Q.N.N. and K.X.P.; Methodology — Q.N.N. and K.X.P.; Software — K.X.P. and L.P.N.; Validation — Q.N.N. and L.P.N.; Formal Analysis — Q.N.N. and K.X.P.; Writing — Review & Editing — Q.N.N., K.X.P., and L.P.N.; Visualization — Q.N.N., K.X.P., and L.P.N.; Supervision — Q.N.N.; Funding Acquisition — Q.N.N., K.X.P., and L.P.N.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: C33, G23, G32, G33

Received: 31.07.2023
Accepted: 05.03.2024
Published online: 07.03.2024

How to cite this paper: Nguyen, Q. N., Pham, K. X., & Nguyen, L. P. (2024). Impact of debt structure on profitability of non-financial listed joint stock firms [Special issue]. Journal of Governance & Regulation, 13(1), 377–387. https://doi.org/10.22495/jgrv13i1siart11