The Impact of Financial Performance on Market Capitalization in Vietnamese Non-Financial Firms

Abstract

Purpose: This study examines the relationship between earnings management and market capitalization (MC), while also exploring the moderating role of financial performance (FP) and macroeconomic factors in the unique context of Vietnam’s emerging economy.
Design/methodology/approach: Using a panel dataset of 3,589 firm-year observations from 513 companies during 2016–2023, the analysis employs the System Generalized Method of Moments (SGMM) with robust errors, alongside Hansen, Sargan, AR(1), and AR(2) tests to address endogeneity, dynamic effects, and heteroskedasticity.
Findings: The results indicate that earnings per share (EPS) and Tobin’s Q positively influence market capitalization, reflecting inertia in market valuation. Interaction terms with the COVID-19 pandemic reveal significant moderating effects, underscoring the role of macroeconomic stability in sustaining firm value.
Originality/value: By incorporating the pandemic context into the analysis, this study extends existing theory on the determinants of market capitalization and provides practical implications for policymakers and investors as Vietnam’s capital market evolves toward greater transparency and efficiency.