The threshold effect of capital structure on firm value: Evidence from listed real estate companies
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Thi Thu Hang Nguyen 
, Thi Thanh Huyen Dam , Le Ngoc Cuong
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
This study examines the non-linear relationship between capital structure and firm value for listed real estate companies in Vietnam. Using a threshold regression model on a panel dataset of 60 companies from 2017 to 2024 (480 firm-year observations), and employing the debt-to-asset (DA) ratio as the threshold variable, the results reveal two significant thresholds in the impact of capital structure on firm value (measured by Tobin’s Q). Specifically, when the DA ratio is below 45.14 percent, capital structure has a positive impact on firm value; when the DA ratio exceeds 45.14 percent but remains below 56.18 percent, the positive effect diminishes; and when debt usage surpasses 56.18 percent, capital structure exerts a distinct negative impact on firm value. These findings suggest an optimal debt threshold of 56.18 percent, implying that listed real estate firms should exercise caution when exceeding this level of leverage. The findings of this study are consonant with the trade-off theory. Overall, the results provide strong empirical evidence supporting a non-linear capital structure-firm value relationship in an emerging real estate market. The findings offer important managerial implications for corporate financial decision-making, particularly in identifying an optimal leverage range, and contribute to the existing literature by highlighting the relevance of threshold effects in capital structure analysis.
Keywords: Capital Structure, Threshold Model, Firm Value, Real Estate
Authors’ individual contribution: Conceptualization—T.T.H.N; Methodology—T.T.H.D.; Validation—T.T.H.D.; Investigation—T.T.H.N. and L.N.C.; Resources—T.T.H.N.; Data Curation—T.T.H.N. and L.N.C.; Writing—Original Draft—T.T.H.N. and T.T.H.D.; Writing—Review & Editing—L.N.C.; Visualization—T.T.H.D.; Supervision—T.T.H.D.
Declaration of conflicting interests: The Authors declare that there is no conflict of interest.
JEL Classification: C23, G32, L85
Received: 07.08.2025
Revised: 03.12.2025; 14.12.2025; 01.04.2026
Accepted: 27.04.2026
Published online: 30.04.2026
How to cite this paper: Nguyen, T. T. H., Dam, T. T. H., & Cuong, L. N. (2026). The threshold effect of capital structure on firm value: Evidence from listed real estate companies [Special issue]. Journal of Governance and Regulation, 15(2), 322–333. https://doi.org/10.22495/jgrv15i2siart1
