Moderating effect of bank credit on the relationship between capital structure and firm performance of real estate firm

Abstract

The recent expansion of credit policies aimed at alleviating difficulties for real estate enterprises creates potential risks for the financial system. By employing both dynamic and static models on the unbalanced panel data of real estate firms in Vietnam from 2006 to 2022, this study provides empirical evidence regarding the relationship between bank credit, capital structure, and firm performance. The results indicate that the impact of capital structure on firm performance is contingent upon the bank credit. High financial leverage negatively affects the firm performance of real estate firms. Furthermore, credit tightening does not exacerbate the negative impact of capital structure on firm performance when companies maintain low levels of financial leverage. The government needs to guide real estate enterprises in increasing equity to mitigate the adverse effects of excessive financial leverage, especially in the context of future credit tightening policies.