Investigate the effects of capital structure to profitability of the companies in the industry of construction equipment & materials listed on Vietnam Stock Market

Abstract

This study aimed to determine the effects of capital structure (D/A) to profitability (ROE) of the companies in the industry
of construction equipment & materials listed on Vietnam Stock Market. Based on data gathered from financial statements
audited the years 2011- 2014 of 54 companies in the industry of construction equipment & materials listed at HOSE and
HNX of 2011-2014, both regression analysis pooled OLS and fixed effects models confirmed the nonlinear relationship
(quadratic) between D/A and ROE of the companies. Results of analysis of fixed effects regression determined the
optimal capital structure of the respective companies with D/A is 34.10%. With ratios ≤ 34.10%, the D/A have a positive
impact on ROE. On the other hand, ratios > 34.10%, the D/A have a negative impact on ROE. Based on the analysis
results, the study recommend the companies in the industry of construction equipment & materials listed at HOSE and
HNX adjustment D/A current on the optimal level to maximize ROE and enhance company value.