Does Financial Leverage Constrain Investment? Evidence from Listed Companies in Vietnam

Abstract

Purpose: The study aims to analyze the relationship between financial leverage and investment expenditure of listed enterprises in Vietnam.
Design/methodology/approach: Based on dynamic table data from 400 listed non-financial enterprises in the period 2010–2023, with a total of 4604 observations. The estimation method applied is GMM, a two-step system that addresses the endogenous problem and dynamic characteristics of investment behavior.
Findings: Experimental results show that financial leverage ratios, especially long-term debt, have a negative and statistically significant impact on capital investment expenditure. The size of the business plays a regulatory role, weakening this negative impact, suggesting that large enterprises are better able to control financial risks.
Originality/value: The study provides up-to-date empirical evidence on the differentiated impact of debt types (gross and long-term debt) on capital investment, and clarifies the interactive role of enterprise scale in the context of Vietnam's limited capital market. The results of the study can support business managers in building a sound capital structure, especially debt maturity management to maintain sustainable investment capacity.