Influences of Capital Structure and Ownership Structure on Profitability: Evidence from Vietnam

Abstract

This research investigates both the linear and nonlinear influences of capital structure and ownership structure on the profitability of firms listed on the Vietnamese stock exchanges during the period 2010–2019. The study utilizes three regression analysis models, including Pooled OLS, Fixed Effect, Random Effect, and GMM based on panel data collected from 587 listed companies. The results indicate that debt ratios have negative influences on firm profitability. Besides, this research illustrates the existence of a causal relationship between capital structure and profitability. In addition, the study also demonstrates the U-shaped relationship between capital structure and profitability. Finally, this study also discovers the positive influence of ownership structure on profitability. Based on that, managing boards can make appropriate decisions in the capital structure to bring benefits to the firms.