Impact of debt structure on profitability of Vietnamese Listed Non-Financial Firms

Tóm tắt

A firm can use debt from various sources with different characteristics like interest rate, size, accessibility, and the variation in debt structure can affect its financial performance. This paper aims to explore the impact of debt structure, being represented by the proportion of short-term and long-term borrowings in total liabilities, on profitability of Vietnamese listed non-financial firms. Using data of 4,150 observations from 415 listed firms on the Hanoi and Ho Chi Minh Stock Exchanges over a 10-year period (2015-2024), the GLS estimation provides evidence that decreasing the proportion of borrowings in total liabilities enhances profitability of firms, and vice versa. This implies that firm managers should exploit more spontaneous debts than borrowings in financing operating cycle, pay more attention to interaction among payables, working capital and borrowings to improve their financial performance. In addition, firms need to strictly manage the effectiveness of interest-bearing debts with the expectation of creating a positive impact of debt structure on profitability.