The Relationship Between Capital Structure and Performance: The Case of Vietnam

Abstract

This study clarifies the causal relationship between capital structure and performance, and examines the moderating role of firm size in this relationship. In addition, the research also investigates whether there are differences in performance and capital structure between foreign-invested firms and domestic firms. Data were collected from financial statements and other statements of 116 feed producers in Vietnam for the period from 2010 to 2022. The GMM dynamic regression method is employed to test proposed hypotheses. The results reveal that there is a causal relationship existence between capital structure and performance. In details, capital structure has a negative impact on performance, and vice versa. Size of firm contributes to making this relationship stronger. Foreign-invested firm with a lower debt ratio than local firms, but doing business more efficiency than local firms.

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