BANKING ACADEMY ------ GRADUATION THESIS IMPACT OF CAPITAL STRUCTURE ON FIRM PERFORMANCE OF FOOD & BEVERAGE ENTERPRISES LISTED ON VIETNAM STOCK EXCHANGE Student: Nguyễn Thị Minh Phương Class: K23CLC – TCA Student ID: 23A4010903 Instructor: Assoc.D Trần Thị Xuân Anh Hanoi, 15th April 2024 1 BANKING ACADEMY ------ GRADUATION THESIS IMPACT OF CAPITAL STRUCTURE ON FIRM PERFORMANCE OF FOOD & BEVERAGE ENTERPRISES LISTED ON VIETNAM STOCK EXCHANGE Student: Nguyễn Thị Minh Phương Class: K23CLC – TCA Student ID: 23A4010903 Instructor: Assoc.D Trần Thị Xuân Anh Hanoi, 15th April 2024 2 DECLARATION I sincerely declare that my graduation thesis on the topic " Impacts of capital structure on firm profitability of Food & Beverage enterprises listed on Vietnam stock exchange" is an independent research project conducted by myself, based on my own research and synthesis under the supervisor of Assoc.D Tran Thi Xuan Anh. Moreover, the data and information utilized in the thesis are sourced accurately and referenced appropriately. I will take full responsibility for this declaration. Hanoi, 15th April 2024 Nguyen Thi Minh Phuong 3 ACKNOWLEDGEMENT First and foremost, I would like to express my profound thanks to each and every lecturers at Advanced Bachelor’s Program of Banking Academy particularly and Faculty of Finance generally for helping and motivating me studying materials and their hands-on experience.
Following that, I would like to extend my sincere gratitude to Ms. Tran Thi Xuan Anh who has dedicated her time, care, and invaluable support to me throughout the process of completing this thesis. Her patience and guidance have helped me expand my deeper understanding and successfully accomplish the task. Despite efforts and careful research, my thesis undoubtedly has some shortcomings.
I would appreciate, if I could get more contributing comments to fulfill my research to get the best results. Sincerely! 4 TABLE OF CONTENTS INTRODUCTION .Rationale of the research. Subject and scope of the research. 15 CHAPTER 1: LITERATURE REVIEW.
Impacts of structure on firm profitability. Modigliani and Miller Theory. Trade-Off Theory of Capital Structure. Theory of pecking order.
Theory of marketing timing. Proposed research framework. 30 5 CHAPTER 2: DATA AND METHODOLOGY. Research variables and hypotheses.
38 CHAPTER 3: RESEARCH RESULTS .1 Overview of F&B industry businesses in Vietnam from 2013 to 2023. Current situation of the F&B industry from 2013 to 2023. Industry growth forecast from 2024 to 2029. Descriptive research statistics.
Regression results of the influence of Capital structure on ROA. Regression results of the influence of Capital structure on ROE. Discussion of research result. 59 CHAPTER 4: CONCLUSION AND RECOMMENDATION .2 For the Government.
Limitation of Research. Recommend for further research. 76 7 ABBREVIATIONS CPTPP Comprehensive and Progressive Agreement for Trans-Pacific Partnership MM Modigliani & Miller SIZE Business size HOSE Ho Chi Minh City Stock Exchange OLS Ordinary Least Square FEM Fixed Effects Model REM Regression Estimation Model WTO World Trade Organization F&B Food and Beverage ASEAN Association of Southeast Asian Nations WACC Weighted Average Cost of Capital LIBOR London Interbank Offered Rate EPS Earnings per share ROA Return on Asset ROE Return on Equity ROS Return on Sales ROI Return on Investments ROCE Return on Capital Employed ROIC Return on Invested Capital LTD/E Long-term debt to equity ratio STD/E Short-term debt to equity ratio TD/E Debt to equity ratio HOSE Ho Chi Minh City Stock Exchange OLS Ordinary Least Square FEM Fixed-effects model 8 REM Random-effect model JSTOR Journal Storage SSRN The Social Science Research Network LTD Long-term debt STD Short-term debt HNX Hanoi Stock Exchange TDTE Ratio of total debt to total equity AT Asset turnover CR Current ratio TANG Tangible Asset ratio GROWTH Revenue growth rate Ln Logarithm VIF Variance Inflation factors GLS Generalized least squares GDP Gross domestic product IIP Index of industrial production CAGR Compound annual growth rate PAT Profit After Tax AGM Angimex DER Debt equity ratio JSC Joint Stock Company NAICS The North American Industry Classification System 9 TABLE OF GRAPHS Graph 1.1: Proposed research framework of capital structure’s impact on firm performance .1: Value of Foodservice Market by foodservice type 2017-2029 .2: Average annual ROA and ROE of F&B businesses in the period 2013 - 2023 .3: An Phu Irradiation JSC.4: Saigon - Mien Trung Beer JSC. Error! Bookmark not defined.5: Long An Food Processing Export JSC .6: Masan Group Corporation.
64 TABLE OF TABLES Table 2.1: Definition of the dependen varriable ROA and ROE .2: Summary table of research variables .1: Statistical results describe the variables .2: Pearson correlation test results between variables .3: Results of multicollinearity between variables .4: Regression model results with ROA variable .6: Hausman test results .7: Results of testing heteroskedasticity .8: Autocorrelation phenomenon result .9: Correcting FEM model defects of the representative variable ROA using GLS estimation .10: Regression results of the influence of Capital structure on ROE .12: Hausman test results of ROE .13: Results of testing heteroskedasticity of ROE .14: Results of autocorrelation test of ROE .15: Correcting FEM model defects of the representative variable ROE using GLS estimation .16: Results of regression analysis .Rationale of the research Globalization and international integration have intensified competition among economies, pushing businesses to focus on operating effectively and maximizing profits to survive and establish market position. Business performance is a crucial aspect for all enterprises, with profitability being a key indicator for evaluation. Vietnam's economy is progressing and adheres to market mechanisms, necessitating directors to devise strategies to boost their business value. Analyzing business performance serves as a vital tool for economic management, aiding managers in optimizing operations efficiently.
Capital structure signifies the utilization of capital and debt for asset financing, with managerial behavior impacting financial decisions and business outcomes, especially through debt usage. Therefore, considering the relationship between capital structure and business profitability is extremely necessary and important for each business. There are research articles on this topic in countries around the world such as Olusola et al (2022) with Hong Kong stock market, Siddik et al (2017), Rahman et al (2020) and Sadia Afronze and Sharlin Khan (2022) for the Bangladesh market or Akomeah, Bentil and Musah for the Ghana market. In Vietnam, there are typical studies that have shown the impact of capital structure on business performance such as Doan Ngoc Phuc (2014), Bui Dan Thanh and Nguyen Tran Thai Ha (2017).
The F&B industry is one of the most important industries in our country, and can be considered as a supporting industry, essential to have in any country. The number of Vietnamese food firms now stands at around 5,083, representing an 83. Although all important export items, including textiles, footwear, wooden furniture, and seafood, are down by double digits, the food industry is a lifeline for exports, reaching 37-38 billion USD (Nguyen Thao Hien, 2023). Over the preceding five years, F&B consumption in Vietnam rose on average by 9.
However, it is found that the operating efficiency of many companies is still quite low. Normally, most F&B firms have small and 12 inappropriate management and capital investment levels, seriously affecting the company's profits. As a matter of fact, despite its popularity in other countries, captial structure in F&B companies in Vietnam settings has still been an unclear issue with limited studies in terms of quality and quantity. Specific problems with those works might be a barrier to the firm’s performance calcution, reasearch method limitations, small research sample size,… Based on the above reasons, I chose the topic "Impact of capital structure on the firm performance of Food & Beverage enterprises listed on the Vietnamese stock market" to research based on on the theoretical basis of the capital structure of food & beverage industry enterprises listed on the Vietnam stock market and their impact on the profit margin of the enterprises.
General objectives This thesis will examine the connection between the capital structure and profitability of F&B firms listed on the Ho Chi Minh stock exchange during the timeframe of 2013-2023, particularly focusing on the influence of capital structure on the operational efficiency of these entities. Utilizing existing studies as a foundation, a research framework will be developed, outcomes will be assessed, and recommendations for listed companies to maximize their performances. Specific objectives First, the theoretical underpinning of capital structure, profitability, and the interplay between capital structure and enterprise profitability needs to be systematized. Second, it is imperative to assess and scrutinize the influence of capital structure on the profitability of F&B enterprises.
Third, through the utilization of linear regression methodology, appropriate models must be identified to depict the trajectory of capital structure's impact on profitability. Finally, recommendations and solutions should be put forth to aid enterprises in enhancing their profitability. Subject and scope of the research 3. Research subject The focus of this thesis lies in the examination of capital structure, operational efficiency, and the effects of capital structure on the performance of businesses within the F&B sector of the Vietnamese stock market from 2013 to 2023.
Research scope The study draws upon financial data from 22 F&B companies listed on the Vietnam stock market over a decade from 2013 to 2023 4. Research questions To achieve the aforementioned objectives, the thesis provides pertinent responses to key research inquiries such as: (1) Does capital structure exert a positive or negative influence on the profitability of F&B enterprises listed on the Vietnamese stock market? (2) Based on the results afterwards, what are the remedies that F&B enterprises should take into consideration to maximise their profitability? 5. Research method The article uses both quantitative and qualitative research. Qualitative analysis involves gathering theoretical foundations and previous studies on how capital structure impacts business profitability through qualitative methods to create an appropriate model.
Quantitative analysis involves examining the influence of capital structure on the profitability of electric industry companies listed on the Vietnam stock market using econometric regression models and statistical techniques through STATA 17 software. Data from 22 F&B firms are consolidated from audited financial statements like income statements, balance sheets, and financial statements of electric industry businesses listed on the Vietnam stock market across three exchanges: HNX, HOSE, and UpCom, totaling 242 observations spanning from 2013 to 2023. 14 Prior to adding the research variables to the regression model, I used the Pearson correlation coefficient to examine their relationship. To decide which model was appropriate for the inquiry, I examined the Hausman and F-tests for the Pooled OLS, REM, and FEM models.
Finally, the GLS approach maintains the reliability of all regression findings by resolving the model's autocorrelation and heteroskedasticity problems. Research structure Chapter 1: Literature review Chapter 2: Data and methodology Chapter 3: Results of experimental research Chapter 4: Conclusion and recommendations 15 CHAPTER 1: LITERATURE REVIEW 1. Capital structure Capital structure is defined differently by various global researchers. Capital structure decision plays an important role for maximizing profit.
Optimal capital structure minimizes weighted average cost of capital and maximizes shareholder value. Capital structure affects profitability and business risks. Modern theory claims a firm's value is independent of its capital structure. Van Horne and Wachowicz (1995) define capital structure as debt, preferred stock, and common stock equity.
Capital structure mainly consists of long-term debt and equity. Short-term debt is also considered in our analysis, despite not being common in capital structure. In order to measure capital structure, investors, shareholders or managers often classify based on these following financial indicators such as funding source, ownership, debt payable, bank loans, trade credit, firm bonds, capital flow, equity, Based on funding source Capital can be categorized into endogenous capital and exogenous capital. Endogenous capital is capital generated within an enterprise, which includes capital from the issuance of common shares, reserves, and profits on the income statement.
On the other hand, exogenous capital is mobilized capital from external sources, such as capital surplus, debt notes, liabilities, and proceeds from the sale of preferred shares. By categorizing collaborator groups according to their level of capital mobilization, enterprises can more readily assess the ability for self-financing and capital mobilization.