1 BANKING ACADEMY ------ GRADUATION THESIS IMPACT OF CAPITAL STRUCTURE ON FIRM PERFORMANCE OF FOOD & BEVERAGE ENTERPRISES LISTED ON VIETNAM STOCK EXCHANGE Student: Nguyễn Thị Mi
Objectives
General objectives
This thesis analyzes the relationship between capital structure and profitability of food and beverage firms on the Ho Chi Minh Stock Exchange from 2013 to 2023, with a specific emphasis on how capital structure impacts operational efficiency By building on existing research, a comprehensive framework will be established to evaluate the results and provide actionable recommendations for listed companies to enhance their performance.
Specific objectives
To understand the relationship between capital structure and profitability, it is essential to establish a theoretical framework Analyzing the impact of capital structure on the profitability of food and beverage (F&B) enterprises is crucial By employing linear regression methodology, suitable models can be developed to illustrate how capital structure affects profitability Ultimately, actionable recommendations should be provided to help these enterprises improve their profitability.
Subject and scope of the research
Research subject
This thesis investigates the relationship between capital structure and operational efficiency, as well as their impact on business performance in the Vietnamese food and beverage sector, covering the period 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
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?
Research method
This article employs both quantitative and qualitative research methods to explore the impact of capital structure on business profitability The qualitative analysis focuses on theoretical foundations and previous studies to develop an appropriate model, while the quantitative analysis utilizes econometric regression models and statistical techniques via STATA 17 software to assess the influence of capital structure on the profitability of electric industry companies listed on the Vietnam stock market Data from 22 food and beverage firms, sourced from audited financial statements—including income statements and balance sheets—are analyzed, encompassing a total of 242 observations from 2013 to 2023 across three exchanges: HNX, HOSE, and UpCom.
Before incorporating the research variables into the regression model, I assessed their relationships using the Pearson correlation coefficient To determine the most suitable model for the analysis, I conducted Hausman and F-tests on the Pooled OLS, Random Effects Model (REM), and Fixed Effects Model (FEM) Ultimately, the Generalized Least Squares (GLS) method ensures the reliability of all regression results by addressing issues of autocorrelation and heteroskedasticity within the model.
Research structure
Chapter 3: Results of experimental research
LITERATURE REVIEW
Theoretical background
Capital structure varies in definition among researchers worldwide, yet it is crucial for maximizing profits An optimal capital structure reduces the weighted average cost of capital while enhancing shareholder value It significantly influences both profitability and business risks According to modern theory, a firm's value remains unaffected by its capital structure, as noted by Van Horne and Wachowicz.
Capital structure, as defined in 1995, encompasses debt, preferred stock, and common stock equity, primarily focusing on long-term debt and equity While short-term debt is less common in capital structure discussions, it is also included in our analysis.
To effectively assess capital structure, investors, shareholders, and managers typically analyze key financial indicators, including funding sources, ownership distribution, outstanding debt, bank loans, trade credit, corporate bonds, capital flow, and equity levels.
Capital can be classified into two types: endogenous and exogenous Endogenous capital refers to the funds generated internally by a business, encompassing resources from common share issuance, retained earnings, and profits reflected on the income statement.
Exogenous capital refers to funds sourced from external avenues, including capital surplus, debt instruments, liabilities, and proceeds from preferred share sales By classifying collaborator groups based on their capital mobilization capabilities, businesses can effectively evaluate their self-financing potential and overall capital mobilization strength.
The capital structure of a business consists of Equity and Liabilities, where equity capital signifies ownership, with state ownership for state-owned enterprises and capital contributions for joint-stock firms Initially, equity is established through member contributions to form charter capital In addition to charter capital, equity sources encompass retained earnings, development investment funds, and financial reserves accumulated during business operations.
Equity in businesses comprises three key components: initial contributed capital, retained profits, and capital increases from issuing new shares At the start of a business, owners must contribute a designated amount of initial capital Retained profits are those reinvested to foster business growth Additionally, issuing shares involves documentation that affirms ownership and legal rights to a joint-stock company's assets or capital.
Loan capital is essential for an enterprise's production and business activities, addressing both short-term and long-term capital requirements It allows for the swift mobilization of substantial funds, which can be supplemented through various debt sources such as bank credit, commercial credit, and bond issuance loans.
Bank loans are a vital source of capital for business growth and the overall economy The success and advancement of businesses heavily depend on the financial services provided by commercial banks, particularly in terms of capital access Dependence on bank borrowing and trade credit is crucial for maintaining market stability While bank credit offers significant benefits, it also comes with challenges such as stringent credit conditions, bank oversight, and fluctuating interest rates.
Commercial credit capital enables businesses to secure vital resources such as raw materials and utilities, helping to reduce immediate expenses and preserve cash flow for other operational needs While this financial tool can enhance operational efficiency, excessive or long-term debt may harm a company's reputation with suppliers, resulting in increased costs or inferior quality of materials, especially in markets with limited availability.
Corporate bonds are debt securities issued by companies to raise capital from investors, offering fixed or variable interest payments Upon maturity, these bonds stop generating payments, and the principal investment is returned to the bondholder.
Understanding the different types of bonds is essential, as they influence interest payment costs, circulation capacity, and overall attractiveness The most common bond types include fixed-rate bonds, which are widely favored, and variable interest rate bonds, which fluctuate based on benchmarks like LIBOR or prime rates Callable bonds offer flexibility, allowing issuers to redeem them at specific times, thereby optimizing capital management Convertible bonds, frequently issued by American companies, present lucrative investment opportunities by enabling bondholders to convert their bonds into common shares, potentially yielding substantial profits.
Capital flows denote the movement of funds for investment, trade, or business operations, and are categorized into working capital and fixed capital Working capital is characterized by its continuous flow, whereas fixed capital represents the monetary value of fixed assets with a longer turnover cycle, utilized across multiple production cycles At the end of their useful life, fixed assets either depreciate to zero or align with their liquidation value.
Corporate capital is divided into short-term and long-term categories Short-term capital includes funds expected to be repaid within a year, such as accounts payable, short-term bank loans, and taxes, primarily used to finance current assets In contrast, long-term capital consists of equity and debt that mature beyond one year, including long-term bonds, retained earnings, and long-term bank loans, which are generally employed for acquiring fixed assets.
Capital can be classified into non-capital expenditure and cost structure, with fixed-cost capital comprising securities that offer stable interest rates, whereas variable-cost capital includes funds from short-term debt and common share issuances that provide fluctuating dividends.
Empirical research
A study by Olusola et al (2022) examined the relationship between capital structure and firm performance, analyzing data from 1,010 large enterprises in Hong Kong between 2014 and 2018 The findings indicated a positive correlation between capital structure and return on assets (ROA); however, the research could not conclusively demonstrate the impact of capital structure on the performance of large companies listed on the Hong Kong stock market.
Siddik et al (2017) emphasize the critical role of capital structure in a company's operations, revealing through their study of 22 Bangladeshi banks from 2005 to 2014 that capital structure negatively impacts profitability They highlight that the Bangladeshi market's capacity to mobilize capital remains underdeveloped, citing issues such as insufficient information and high debt costs.
Sadia Afroze and Sharlin Ahmed Khan (2022) investigated the influence of capital structure on the profitability of 22 companies in the Pharmaceutical and Chemical industries over an eight-year period from 2013 to 2020 Their analysis employed Return on Assets (ROA), Return on Equity (ROE), and Earnings Per Share (EPS) as dependent variables across three distinct models The study also considered additional factors such as liquidity, firm size, and firm age The findings revealed that greater business efficiency correlates with a reduced reliance on debt.
Rizal et al (2022) studied telecommunications companies in 62 countries in the period of 2010-2020 with the dependent variable representing operating profit as
Research indicates that long-term debt (LTD) adversely affects the business performance of telecommunications companies across both developed and developing nations, as well as in integrated and wireless sectors Conversely, short-term debt (STD) shows a positive influence in developed countries and integrated telecommunications, but a negative impact in developing countries and wireless telecommunications Additionally, the study introduces two control variables: SIZE and GROWTH SIZE positively influences return on assets (ROA) in developing countries, integrated telecommunications, and wireless sectors, while negatively affecting ROA in developed countries On the other hand, GROWTH demonstrates a positive correlation with ROA only in developed countries and integrated telecommunications.
A study by Rahman et al (2020) revealed a significant inverse relationship between profitability and leverage among 22 listed textile companies in the Dhaka Stock Exchange (DSE), measured by Return on Assets (ROA) and Return on Equity (ROE) The findings indicate that most textile companies in Bangladesh rely on external financing rather than internal sources due to insufficient internally generated funds.
A study by Hossain (2016) revealed a negative correlation between Return on Assets (ROA) and capital structure, while a positive relationship was observed for Return on Equity (ROE) in an analysis of 81 manufacturing companies listed on HOSE from 2002 to 2004 Additionally, Hossain found that short-term debt has a more significant impact on profits compared to long-term debt.
Zeitun and Tian (2007) conducted a study on 167 Jordanian firms from 1989 to 2003, revealing that capital structure significantly negatively affects firm performance, impacting both accounting and market measures.
A survey conducted by Akomeah, Bentil, and Musah (2018) in Ghana, focusing on commercial banks from 2010 to 2015, revealed that capital efficiency is influenced by both short-term and long-term debt.
28 debt Ratios are negatively related to firms but the results are opposite when they measured capital structure using the total debt ratio
Likewise, building upon the work of Doan Thuy Duong and Dinh The Hung
In a study conducted by Tran Thi Kim Anh (2017), the relationship between capital and the profitability of listed real estate companies in the Vietnam stock market from 2011 to 2015 was examined The research utilized Return on Assets (ROA), Return on Equity (ROE), and Earnings Per Share (EPS) as dependent variables, while independent variables included the long-term debt to equity ratio (LTD/E), short-term debt to total assets ratio (STD/TA), and debt to equity ratio (TD/E) The results indicated a negative correlation between both the debt-to-equity ratio and short-term debt-to-equity ratio with ROE and ROA, while no correlation was found with EPS Conversely, the long-term debt to equity ratio showed a positive association with ROE Overall, the findings suggest that long-term debt to equity positively influences business profitability, whereas short-term debt to total assets and the debt-to-equity ratio negatively affect it.
Tran Thi Bich Ngoc and Pham Hong Trang (2016) conducted a study on 68 processing and manufacturing industry enterprises listed on HOSE from 2009 to
In a 2013 study involving 340 observations, regression models utilizing Pooled OLS, FEM, and REM revealed that capital structure factors significantly and adversely impact business performance Specifically, the ratios of short-term debt to total assets and total debt to total assets were shown to negatively affect profitability In contrast, the long-term debt ratio demonstrated a positive and significant influence on business profitability.
In their 2020 study, Dao Thanh Thi Binh and Ta Ngoc Dieu Tram explored the relationship between capital structure and company profitability by analyzing data from 50 articles and 340 studies published between 2004 and 2019, with data collected from 1998 to 2017 Utilizing meta-analysis and meta-regression techniques, their findings reinforce the idea that corporate capital structure significantly influences profitability.
29 profitability has a negative impact on capital decisions, thereby endorsing the trade- off model along with agency costs and pecking order theory
Le Thi My Phuong (2017) investigated how capital structure impacts financial performance during integration, utilizing data from 207 publicly listed companies across eight manufacturing industry sectors from 2010 to 2017.
In 2015, a study involving 1,242 samples revealed that capital structure consistently impacts financial performance across all manufacturing sectors Capital structure theory suggests that increasing the debt ratio can enhance company profits through tax shield benefits Debt acts as a lever to increase revenue, thereby improving profits The findings indicate that manufacturing firms effectively leverage debt, as the advantages gained from it outweigh the associated costs.
Nguyen Thi Xuan Hong and her team (2019) investigated how capital structure and other influential factors affect the profitability of 248 publicly listed companies, focusing on 165 firms in the Construction-Industry sector and the Trade-Services sector.
From 2010 to 2015, a study involving 83 enterprises utilized a linear regression model to examine the relationship between profitability, indicated by ROA and ROE, and capital structure The findings revealed that capital structure negatively impacts business profitability.
Tran Thuy Minh Chau (2018) scrutinized the effect of capital structure on the profitability of companies listed on the Vietnamese stock market between 2005 and
Research gap
Numerous studies have assessed the influence of capital structure on businesses, yet there is a notable lack of research specifically targeting the food and beverage (F&B) industry Most existing studies are limited to a short timeframe of 3-5 years, whereas a comprehensive analysis of the effects of capital structure typically requires 8-10 years to yield clear results Recognizing these research gaps and the pressing relevance of the topic, the student has chosen to investigate "The impact of capital structure on the profitability of listed F&B enterprises on the Vietnam Stock Exchange from 2013."
Proposed research framework
This study investigates the impact of capital structure on the financial performance of firms in the food and beverage (F&B) industry Utilizing a sample of 22 F&B companies listed on the Vietnamese stock market, the research analyzes data collected over the past 11 years.
This research examines the influence of capital structure on business financial performance, focusing on the debt-to-equity ratio (TDTE) To evaluate financial performance, the study utilizes two key metrics: return on total assets (ROA) and return on equity (ROE).
Graph 1.1: Proposed research framework of capital structure’s impact on firm performance
This study is structured into four key sections: an overview, followed by Chapter 2 which details the database and research methods Chapter 3 presents the research findings by analyzing the experimental model, research data, and testing results The study concludes with recommendations aimed at assisting F&B businesses in Vietnam in optimizing their capital usage to enhance profitability.
DATA AND METHODOLOGY
Research data
The thesis utilizes data from audited financial statements and public platforms, such as vietstock.vn, focusing on 22 stock companies in the F&B industry as defined by NAICS 2007 standards The study analyzes balance sheets and business performance reports from these companies listed on the Vietnamese stock market (HNX and HOSE) over an 11-year period, from 2013 to 2023, resulting in a total of 242 data points Companies listed after 2013 or lacking financial reports during this timeframe are excluded, leading to the omission of 8 enterprises from the analysis The collected data will be employed to calculate relevant indices for dependent, independent, and control variables.
This dissertation analyzes financial metrics from company statements, including the tangible fixed assets ratio, business scale, short-term revenue growth rate, and asset turnover, focusing on the period from 2013 to 2023 This timeframe is significant due to the economic fluctuations experienced, such as the 2013 financial crisis, the recovery phase, and the COVID-19 pandemic, all of which have affected business operations, capital structure, and performance in the food and beverage (F&B) sector The choice of this period for examining the impact of capital structure on the F&B industry is influenced by economic variations, policy changes, technological progress, shifts in consumer behavior, and the availability of relevant data.
The F&B industry has experienced significant technological advancements, including innovations in food processing, preservation techniques, and online retail platforms These technological developments impact production costs, distribution networks, and the financial structure of businesses Additionally, this era has seen the introduction of various new regulations relevant to the F&B sector.
The enactment of the Food Safety Law in 2010 and the development of the Food Processing Industry Development Strategy, which extends to 2020, have introduced significant regulatory changes These changes present both new challenges and opportunities for businesses within the food and beverage sector.
Research variables and hypotheses
This research utilizes two established profitability metrics, Return on Assets (ROA) and Return on Equity (ROE), as dependent variables, consistent with studies by Hasan et al (2014), Singh (2013), Fareed et al (2014), and Kebewar (2013), as shown in Table 2.1.
Table 2.1: Definition of the dependen varriable ROA and ROE
No Variable indicators Full name Measurements
1 ROA Return on Assets Net Income
ROA: (net profit over total assets) is a measure I used to measure financial performance based on accounting methods
Return on Equity (ROE) is a key indicator of a company's profitability and its efficiency in generating profits (Fernando, 2021) In this study, ROE has been selected as the primary measure of profit efficiency and serves as the dependent variable in the analytical model.
Total Debt to Equity ratio
Total Debt to Equity ratio = Total Debt
The total debt to equity ratio provides insights for investors regarding the financial robustness and structure of a business, as well as its operational solvency
A debt-to-equity ratio (DER) greater than 1 indicates that a business primarily funds its assets through debt, while a ratio below 1 suggests a reliance on equity A lower ratio reflects a smaller proportion of liabilities compared to total assets, reducing financial risks for the business In contrast, a higher ratio increases the likelihood of challenges in debt repayment or insolvency However, a low DER may also signal underutilization of financial resources, as highlighted in research by Almeida et al (2016), which points to potential negative effects on business performance.
=> H1: Total debt to equity ratio has a negative impact on firm profitability of F&B enterprises listed on Vietnam stock market
The size of a firm, measured by the natural logarithm of total assets, significantly influences its profitability due to economies of scale Larger companies benefit from cost efficiencies in production, allowing them to outperform smaller firms Key indicators of company size include employee count, market capitalization, and total assets, with substantial assets indicating better prospects during stable market conditions Firms with larger asset bases are more likely to generate profits compared to those with smaller holdings, as they possess a competitive advantage through a broader market reach, ultimately enhancing their profit potential.
Large enterprises enjoy significant advantages in negotiating with sellers and suppliers, which creates barriers to entry for new competitors and strengthens their market power (Serrasqueiro & Nunes, 2008; Ramsay et al., 2005; Lee, 2009) Additionally, the size of a firm positively influences its capital structure (Sayeed, 2011, in Imtiaz et al., 2016) However, these large organizations also face various disadvantages that can impact their overall performance.
35 comparison to smaller counterparts These larger entities are often established firms, leading to a lack of agility in adapting to market dynamics and strategic shifts (Mankiw,
Small-scale enterprises enjoy increased flexibility in managing their processes, which enhances product innovation and market strategy development In contrast, large enterprises face higher costs associated with maintaining and expanding their market share, including expenses for advertising, marketing, and distribution channel establishment.
=> H2: Firm size has a negative impact on firm profitability of F&B enterprises listed on Vietnam stock market
Tangible assets = Total Assets – Intangible Assets – Total Liabilities
Tangible assets are essential physical resources, such as property, equipment, and machinery, that support a company's operations and enable the production of goods and services These assets form the backbone of business activities but are vulnerable to damage from natural events Investors often view tangible assets favorably within a company's asset mix, which can lead to increased debt levels (Nivorozhkin, 2005; Serghiescu et al., 2014) Research by Lima (2009) and Imtiaz et al (2016) indicates a positive relationship between asset tangibility and capital structure, while studies by Harris & Raviv (1990) and Williamson (1988) further confirm the strong link between tangibility and capital structure (Ullah et al., 2017).
=> H3: Tangible assets has a positive impact on firm profitability of F&B enterprises listed on Vietnam stock market
Growth rate = Value of total assets at the end of the period
Business growth is essential for enterprises to meet their objectives during production and operations It facilitates capital accumulation, enables investment in machinery and facilities for increased production, and enhances the company's reputation among customers, suppliers, and investors.
36 by Zeitun and Tian (2007) indicates that the growth rate positively influences the efficiency of production and business activities within enterprises
=> H4: Growth rate has a positive impact on firm profitability of F&B enterprises listed on Vietnam stock market
The Current Ratio is a key metric that indicates whether a company's short-term assets can adequately cover its short-term liabilities, allowing managers to assess their effectiveness in utilizing assets and make informed decisions about capital mobilization Research by Prihantini (2009), Ulupui (2005), and Astuti (2006) has shown a significant positive correlation between the Current Ratio and stock returns, further supported by studies from Subalno (2009) and Hermendiarso (2005), which also highlight the Current Ratio's positive impact on stock performance.
Ignoring leverage ratios can lead to decreased profitability for a company, as excessive debt results in fixed interest expenses High levels of debt can diminish excess cash flow, significantly impacting the firm's financial performance According to Aamir et al., leverage plays a crucial role in influencing a company's overall financial health.
(2021) and Ilker (2021), they reveal that Leverage give a negative and significant impact on ROA
=> H5: Current ratio has a negative impact on firm profitability of F&B enterprises listed on Vietnam stock market
According to Serghiescu et al (2014), asset turnover is a key efficiency metric that measures how effectively a company uses its total assets to generate revenue A higher asset turnover ratio typically indicates better utilization of capital, reflecting the company's ability to maximize revenue from its investments.
Company 37 is effectively leveraging its assets to boost sales, which may result in improved profitability and overall financial performance Research by Hoi Wan Chan and Keith C Brown (2012) supports the notion of a positive correlation between asset turnover and debt levels, emphasizing the link between asset efficiency and a company's financial success.
=> H6: Asset turnovers has a positive impact on firm profitability of F&B enterprises listed on Vietnam stock market.
Research Methodology
The author employs quantitative research methods to analyze the influence of capital structure on business profitability, synthesizing previous research from both domestic and international sources, along with data from economic websites like CafeF and VnExpress, and financial reports from 22 companies To facilitate data analysis and comparison,
Pooled Ordinary Least Squares (OLS) is a widely used regression model in quantitative research, as highlighted by Cameron and Trivedi (2008) This model assumes constant coefficients and normal distribution of the data, while also controlling for cross-sectional and temporal variations.
The Fixed Effects Model (FEM) is a widely used approach for analyzing panel data, aiming to uncover the relationship between dependent and independent variables while controlling for time-invariant factors One of the key benefits of FEM is its ability to eliminate the impact of fixed factors, which enhances the accuracy of parameter estimates However, a limitation of this model is its inability to assess the effects of variables that remain constant over time.
In the REM model, random effects are treated as constant factors that remain unchanged over time and among different subjects These effects are presumed to be randomly drawn from a distribution conditioned on the independent variable.
Next, use the Hausman test to select the most suitable model among the three models Finally, the author analyzes the current situation, combined with comparative
38 analysis to analyze the current situation of using capital structure and profitability of F&B enterprises listed on the Vietnamese stock market.
Research model
This study analyzes factors influencing the profitability of food and beverage enterprises in Vietnam, drawing on economic theories and existing research The proposed model includes two dependent variables, Return on Assets (ROA) and Return on Equity (ROE), alongside two independent variables: Total Debt to Total Equity (TDTE) and five control variables: Tangibility (TANG), Size (SIZE), Growth (GROWTH), Current Ratio (CR), and Asset Turnover (AT).
Table 2.2: Summary table of research variables
Variables Stands for Expected impact
ROA Return on assets ROE Return on equity
TDTE Total debt to equity ratio
Tang Tangible assets Positive (Lima (2009) in Imtiaz et.al (2016),
Williamson (1988) in Ullah et.al (2017)
Sayeed (2011) in Imtiaz et.al (2016)
Growth Growth Positive Zeitun and Tian (2007)
CR Current ratio Positive Prihantini (2009,
Ulupui (2005) and Astuti ( 2006)Aamir et al (2021) and Ilker
AT Asset turnover Positive Hoi Wan Chan and
In this study, the model used to evaluate the impact of Capital structure on Business performance are: GROWTH, CR, and AT
ROEit = β0 + β1 * TDTEit + β2* TANGit + β3 * SIZEit + β4 * GROWTHit + β5 * CRit + β6 * ATit + àit
ROAit = β0 + β1 * TDTEit + β2* TANGit + β3 * SIZEit + β4 * GROWTHit + β5 * CRit + β6
ROE: Return on equity of enterprise i in year t
ROA: Rate of return on total assets of enterprise i in year t
TDTE: Ratio of debt to total equity of enterprise i in time t
GROWTH: Revenue growth rate of business i in time t
SIZE: Scale of business i in time t
TANG: Tangible Asset Ratio of enterprise i in time t
40 CR: Short-term solvency of enterprise i in time t
AT: Asset turnover of enterprise i in time t
RESEARCH RESULTS
Overview of F&B industry businesses in Vietnam from 2013 to 2023
3.1.1 Current situation of the F&B industry from 2013 to 2023
Vietnam is a dynamic and fast-growing market, presenting significant opportunities for international trade and collaboration With a population close to 100 million, it represents a considerable potential market for global businesses, particularly in the food and beverage, restaurant, and hospitality industries.
Vietnam's food market is projected to reach 103.40 billion USD by 2024, with an average annual growth rate of approximately 7.46% from 2024 to 2028, according to Statista Online sales are expected to account for 1.4% of the total revenue in the food and beverage (F&B) industry in 2024 The F&B sector is crucial to the Vietnamese economy, leveraging the country's abundant raw materials and agricultural output to ensure high-quality production and supply, thus fostering a favorable environment for businesses and investors.
Businesses can secure capital through various means, such as equity, supplier financing, bank loans, and bond issuance It is crucial for managers to select the appropriate capital sources to achieve the most favorable cost of capital For example, leveraging partner capital can reduce interest expenses compared to traditional bank loans, while borrowing may offer tax benefits Consequently, effective management of the capital structure is essential for improving efficiency and minimizing costs, requiring a careful balance tailored to the specific needs of the business.
From 2013 to 2019, Vietnam's economy saw significant growth, with GDP increasing from 5.6% to 7.4%, according to World Bank data However, the Covid-19 pandemic in 2020 and 2021 caused unprecedented economic fluctuations, prompting Vietnam to implement social distancing measures.
The food and beverage (F&B) sector in Vietnam encountered 42 operational challenges, leading to a significant shift towards online sales channels Consumers' reluctance to go out resulted in increased inventory levels and a subsequent decline in revenue for many businesses However, despite these adversities, this period marked a pivotal evolution for the industry, highlighting its resilience in overcoming a challenging economic landscape.
In 2022, Vietnam's food and beverage sector is expected to experience a rapid recovery as the pandemic is brought under control The increase in domestic production and consumption will likely reduce dependence on imports, promoting sustainable growth in the industry Furthermore, Vietnam is uniquely positioned as the only Asian country projected by the IMF to achieve the highest GDP growth rate on the continent.
In 2023, the food and beverage (F&B) industry is grappling with significant challenges, including new regulations and rising operational costs, particularly in prime locations, leading to the exit of several large businesses The industrial production index (IIP) for food processing is projected to decline by 6.4%, while export turnover is expected to fall by 4.6%, totaling only 354 billion USD According to Mr Vu Dang Vinh, General Director of Vietnam Assessment Report Joint Stock Company, many industry leaders acknowledge that the F&B sector remains fragmented with limited financial strength.
Vietnamese enterprises are encouraged to develop strong brand identities to increase visibility with international clients and expand their market share both regionally and globally By adapting to the needs of target demographics, improving product offerings, and customizing marketing strategies, businesses can enhance their competitive advantage and achieve greater profitability in the future.
The Covid-19 epidemic has strongly affected many economic sectors of the world, but the F&B industry has still maintained thanks to timely changes in sales
43 methods and customer spending habits during this time In fact, users are interested in and used significantly more healthy foods after the pandemic
According to Vietnam Report, consumer interest in sustainably produced products is on the rise, with 42% of consumers now considering sustainability in their purchasing decisions, an 18% increase from the previous year Additionally, 54% of consumers believe that food manufacturers are crucial in providing sustainable options Alongside shifting consumer preferences, regulatory changes are also driving the need for more sustainable food manufacturing, which may lead to significant disruptions in industry practices and compliance.
F&B enterprises are expanding their product offerings to meet the diverse needs of modern consumers, while maintaining a strong focus on quality control and hygiene in production processes Achieving consistent quality in deliveries requires collaboration among all members of the supply chain To enhance Vietnam's F&B industry, stakeholders in the logistics network must work together towards common goals Additionally, new policies and free trade agreements are expected to drive the growth of Vietnam's F&B sector in the coming years.
3.1.2 Industry growth forecast from 2024 to 2029
The Covid-19 pandemic significantly affected the food and beverage industry, yet many resilient businesses quickly recognized emerging trends and opportunities By adapting their strategies, these companies were able to navigate the challenges, recover effectively, and thrive in the post-pandemic landscape.
Vietnam's F&B market is projected to grow by around 11% in 2024, exceeding 650 trillion VND, according to iPOS.vn The number of standalone F&B outlets is expected to remain stable, with revenue composition also consistent Additionally, the trend of modern payment practices among consumers is likely to continue, highlighting the growing adoption of technology in purchasing transactions amid ongoing digital transformation.
Mordor Intelligence Inc forecasts a promising future for the food service industry, predicting a compound annual growth rate (CAGR) of 9.81% from 2024 to 2029 By 2029, the market size is expected to reach an impressive 36.29 billion USD, highlighting substantial opportunities within this sector.
Graph 3.1: Value of Foodservice Market by foodservice type 2017-2029
From 2013 to 2023, Vietnam's economy experienced significant fluctuations, largely influenced by the global repercussions of the Covid-19 pandemic, which severely impacted various sectors, especially the food and beverage (F&B) industry Businesses faced numerous challenges in maintaining stable operations, leading to decreased revenues amidst rising costs due to global turmoil, including the Ukraine-Russia conflict and heightened logistics expenses However, with timely and effective policies, Vietnam's economy showed signs of a robust recovery in 2022, positioning itself as a beacon of hope in the global economic landscape To evaluate the profitability of F&B enterprises, students analyzed key financial metrics such as Return on Assets (ROA) and Return on Equity (ROE).
To obtain a comprehensive and precise understanding, it is imperative to integrate the actual operational context of businesses within the industry
Graph 3.2: Average annual ROA and ROE of F&B businesses in the period 2013
The data illustrates that ROA and ROE exhibited similar trends from 2013 to
In 2022, key profitability metrics such as Return on Assets (ROA) and Return on Equity (ROE) were closely aligned, with increases in ROA leading to corresponding increases in ROE However, in 2023, ANGIMEX (AGM) reported a staggering ROE of -737% due to losses exceeding 200 billion VND, while CDBECO (SCD) maintained a positive ROE despite experiencing negative Profit After Tax (PAT) and equity During this period, ROA showed a gradual decline as company assets grew rapidly without a proportional rise in PAT In contrast, many businesses focused on enhancing Net Profit After Tax (NPT) to optimize capital expenditures and maximize profits.
The average ROA and ROE of F&B enterprises demonstrated considerable fluctuations compared to other industries Over the 11-year span from 2013 to 2023, the
46 average ROA of 22 F&B companies listed on the stock market was approximately 10.09%, while the average ROE stood at 17.24%.
Descriptive research statistics
The author conducted descriptive statistics on 22 businesses in the food and beverage (F&B) industry listed on the Vietnam stock market from 2013 to 2023, analyzing a total of 242 observation samples Key metrics such as mean value, standard deviation, and individual variable values are summarized in the accompanying table.
Table 3.1: Statistical results describe the variables
Variable Obs Mean Std.dev Min Max
The data indicates that the average return on assets (ROA) in the food and beverage industry is 10.09%, with a notable range from -29.74% to 78.37% This variability, highlighted by a standard deviation of 9.71%, suggests significant differences in performance among companies within the sector.
In terms of return on equity (ROE), the average value is computed at 0.1723941 (equivalent to 17.23941%) with a standard deviation of 0.8222996 (82.2996%)
The recorded Return on Equity (ROE) values for the companies show a stark contrast, with the lowest at -7.37% and the highest at 10.16% This variation is primarily due to An Giang Import-Export Joint Stock Company (AGM) facing consecutive years of losses, which led to a substantial reduction in equity Similarly, Chuong Duong Beverage Joint Stock Company (SCD) experienced negative equity in a specific year, further skewing the accuracy of the ROE ratio.
The food and beverage industry has an average debt-to-equity ratio (TDTE) of 0.78, with a standard deviation of 4.79, and ranges from a minimum of -59.61 to a maximum of 42.44 This data reflects relatively small fluctuations in the TDTE, primarily influenced by An Giang Import-Export Joint Stock Company (AGM), which faced losses in 2023 leading to reduced equity, and Chuong Duong Beverage Joint Stock Company (SCD), which reported negative equity during the same year.
The variable TANG, which indicates the ratio of tangible fixed assets, has an average value of 0.2798, ranging from 0.0198 to 0.7244, with a standard deviation of 0.1401 This notable variation between the minimum and maximum values highlights the differing investment levels in tangible fixed assets among businesses, where some allocate more than 72% of their total assets to this category, while others invest very little.
In 2023, food and beverage companies demonstrate an average logarithmic scale (SIZE) of 6.123196, with a standard deviation of 0.850658 The largest firm in this sector is Masan Consumer Joint Stock Company (MSN), boasting a scale of 8,168,449 Conversely, the smallest company, Hanoi - Hai Duong Beer Joint Stock Company (HAD), reported a scale of 495,346 in 2021.
The average revenue growth rate is 9.75% (0.0975452), with a standard deviation of 0.3530026, indicating diverse growth performances among companies This metric ranges from -0.7702628 to 2.134002, highlighting significant variances, such as An Giang Import-Export Joint Stock Company reporting the lowest growth rate in 2023, while Kido Group Joint Stock Company experienced exceptional growth in 2012.
Short-term liquidity, indicated by the current ratio (CR), averages 2.10 with a standard deviation of 1.35, ranging from 0.28 to 14.73 Companies typically enjoy a healthy financial position when their CR is between 1 and 2, which allows for timely debt repayment.
Asset turnover (AT) has an average of 1.577215 and a standard deviation of 1.224983, with values ranging from 0.1285633 to 6.34548 In 2023, the Hanoi Beer Trading Joint Stock Company (HAT) achieved the highest asset turnover, while the An Phu Irradiation Joint Stock Company (APC) recorded the lowest value in 2021.
Research results
This research utilized the Pearson correlation coefficient matrix to analyze the linear relationships between dependent and independent variables The findings in Table 2.4 reveal that SIZE, GROWTH, CR, and AT positively impact ROA, while TDTE and TANG negatively affect this profitability measure For ROE, GROWTH and AT show a positive correlation, whereas the other pairs of variables exhibit negative correlations Additionally, the matrix results indicate a strong correlation between ROA and its independent variables, with ROE demonstrating a significant correlation with TDTE.
Table 3.2: Pearson correlation test results between variables
ROA ROE TDTE TANG SIZE GROW CR AT
After assessing autocorrelation, the researcher evaluated multicollinearity among the variables using the Variance Inflation Factor (VIF) coefficient A VIF coefficient of less than 2 indicates the absence of multicollinearity in the model, while a higher value suggests its presence.
Table 3.3: Results of multicollinearity between variables
Table 2.5 illustrates the coefficients and correlation levels of both independent and control variables within the model Notably, the highest Variance Inflation Factor (VIF) recorded is 1.64, which is below the threshold of 2, indicating that multicollinearity is unlikely to be an issue among the independent and control variables in the model.
3.3.3 Regression results of the influence of Capital structure on ROA
After checking multicollinearity between the independent variables and control variables and concluding that multicollinearity is unlikely to occur, the author conducted a regression of the model built using STATA17 software
Table 3.4: Regression model results with ROA variable
OLS Model FEM Model REM Model
Coefficient P-value Coefficient P-value Coefficient P-value TDTE -0.0004339 0.724 0.0000086 0.993 0.0000771 0.939 TANG 0.0615554 0.188 -0.0863109 0 078 -0.0506055 0.287 SIZE 0.0266345 0.001 -0.0930278 0 001 -0.0072963 0.638 GROWTH 0.0003767 0.982 0.0112638 0.412 0.0109978 0.427
The findings from the OLS model indicate a statistically significant relationship, with a Prob value > F of 0.0000, confirming the model's validity Key variables, including TANG, SIZE, CR, and AT, show significant correlations with the dependent variable ROA at a P-value of less than 5% Importantly, all five variables are positively associated with ROA However, the GROWTH variable, which represents revenue growth, does not show statistical significance with ROA, as its P-value exceeds 5%.
The FEM regression model displays a Prob value > F = 0.0000 < 5%, affirming the model's statistical significance Solely the variables CR exhibit P-values < 5%, denoting their statistical significance and positive correlation with ROA
The REM model records a Prob value > Chi2 = 0.0000 < 5%, thereby establishing the model's statistical significance Variables CR is statistically significant with ROA, mirroring the outcomes of the FEM model
3.3.3.2 Testing the selection of regression models
The author uses F-test to choose between the two models FEM and Pooled OLS with the following hypothesis:
H0: The selected model is the OLS model
H1: The selected model is the FEM model
The analysis in Table 3.5 indicates that the Prob > F value for both variables is below 0.05, leading to the rejection of H0 in favor of H1 This suggests that the Fixed Effects Model (FEM) is more suitable than the Ordinary Least Squares (OLS) model for the data.
Second, I use the Hausman Test to choose between the two models FEM and REM with the following two hypothesis:
H0: The selected model is the REM model
H1: The selected model is the FEM model
The analysis indicates that the Prob value of 0.056 exceeds the chi-squared threshold of 0.05, leading to the rejection of hypothesis H1 and the acceptance of hypothesis H0 Consequently, the Random Effects Model (REM) is deemed the most appropriate model for the representative variable Return on Assets (ROA).
The author tests the volatility of the model's residuals with two hypotheses as follows:
H0: The FEM model does not exhibit heteroskedascity
H1: The FEM model exhibits heteroskedascity
Table 3.7: Results of testing heteroskedasticity
From the above test results, the value Prob > Chi2 = 0.0000 < 0.05, so we can reject hypothesis H0 and accept hypothesis H1 Therefore, the phenomenon of heteroskedasticity appears in both the FEM model
The author tests the autocorrelation phenomenon of the FEM model with the following two hypotheses:
H0: There is no autocorrelation phenomenon;
H1: There is an autocorrelation phenomenon
The test results indicate that the REM model, utilizing the representative variable ROA, has a Prob > F value of 0.0061, which is below the 0.05 threshold This leads to the rejection of hypothesis H0 and the acceptance of hypothesis H1 Consequently, it can be concluded that an autocorrelation phenomenon exists in the REM model concerning the representative variable ROA.
Following an analysis of heteroskedasticity and autocorrelation, the author identified significant flaws in the research model To address these issues, the author employed the Generalized Least Squares (GLS) technique, enhancing the model's reliability and interpretability.
Table 3.9: Correcting FEM model defects of the representative variable ROA using GLS estimation
ROA Coefficient Std.err t P> lzl [95% conf interval] TDTE 0.0006301 0.0007543 0.84 0.137 -0.0008483 0.021085 TANG 0.0124849 0.0294194 0.42 0.671 -0.0451762 0.071459 SIZE 0.0059919 0.0090478 0.66 0.508 -0.0117415 0.076369
The results from the GLS regression method demonstrate that all variables in the FEM model are statistically significant, with a significance level of less than 5%.
From the results of running STATA17 software, the author obtained a regression equation with a significance level of 5% as follows:
ROA it = -0.0173473 + 0.0006301* TDTE +0.0124849 * TANGit+ 0.0059919* SIZE it + 0.0067706 * GROWTHit + 0.0149956* CR it + 0.0245211* AT it + à it
3.3.4 Regression results of the influence of Capital structure on ROE
Table 3.10: Regression results of the influence of Capital structure on ROE
OLS Model FEM Model REM Model
Coefficient P-value Coefficient P-value Coefficient P-value TDTE -0.1687771 0.000 -0.1694124 0.000 -0.169092 0.000 TANG -0.0195137 0.817 -0.2102994 0.030 -0.1732232 0.056 SIZE 0.0544838 0.000 0.0866577 0.129 0.0481953 0.074 GROWTH 0.0386895 0.202 0.053824 0.048 0.0453527 0.090
The findings depicted in the aforementioned table reveal that the OLS model exhibits a Prob value > F = 0.0000 < 5%, signifying that the control variables CR, and
The analysis reveals that asset turnover (AT) is statistically significant in relation to return on equity (ROE), while current ratio (CR) demonstrates a negative correlation with ROE In contrast, other variables do not significantly affect ROE, as indicated by their P-values exceeding 5%.
The FEM regression model indicates that the variables TDTE, TANG, and GROWTH are statistically significant with ROE, as they have a P-value less than 5% Specifically, the growth rate of a business's revenue positively influences ROE, while the debt to total assets ratio negatively affects the profitability of F&B industry enterprises Other variables with a P-value greater than 0.05 show no significant relationship with profitability as represented by ROE.
The REM model demonstrates statistical significance with a Prob value greater than Chi2 of 0.0000 Given a P-value of less than 5%, the variables TDTE and CR are identified as statistically significant predictors of ROE Notably, both TDTE and CR exhibit a negative correlation with the dependent variable ROE.
3.3.4.2 Testing the selection of regression models
The author uses F-test to choose between the two models FEM and Pooled OLS with the following hypothesis:
H0: The selected model is the OLS model
H1: The selected model is the FEM model
The analysis in Table 3.11 indicates that the Prob > F value for both variables is below 0.05 Consequently, the author rejects the null hypothesis (H0) and accepts the alternative hypothesis (H1), confirming that the Fixed Effects Model (FEM) is more suitable than the Ordinary Least Squares (OLS) model.
Second, I use the Hausman Test to choose between the two models FEM and REM with the following two hypothesis:
H0: The selected model is the REM model
H1: The selected model is the FEM model
Table 3.12: Hausman test results of ROE
The analysis revealed that the probability value (Prob > chi2) is 0.1041, which exceeds the 0.05 threshold Consequently, the null hypothesis (H0) is accepted while the alternative hypothesis (H1) is rejected This indicates that the Random Effects Model (REM) is the most appropriate framework for assessing the influence of capital structure on the profitability of businesses in the Food and Beverage (F&B) industry, as represented by the Return on Equity (ROE) variable.
The author tests the volatility of the model's residuals with two hypotheses as follows: H0: The REM model does not exhibit heteroskedasticity
H1: The REM model exhibits heteroskedasticity
Table 3.13: Results of testing heteroskedasticity of ROE
From the above test results, the value Prob > Chi2 = 0.0000 < 0.05, so we can reject hypothesis H0 and accept hypothesis H1 Therefore, the phenomenon of heteroskedasticity appears in the REM model
The author tests the autocorrelation phenomenon of the FEM model with the following two hypotheses:
H0: There is no autocorrelation phenomenon;
H1: There is an autocorrelation phenomenon
Table 3.14: Results of autocorrelation test of ROE
The test results indicate that the REM model, utilizing the representative variable ROE, has a Prob > F value of 0.0073, which is below the 0.05 threshold This leads to the rejection of hypothesis H0 and the acceptance of hypothesis H1 Consequently, it can be concluded that an autocorrelation phenomenon is present in the REM model for the representative variable ROE.
Discussion of research result
Table 3.16: Results of regression analysis
Variables Expected impact ROA ROE
TANG Positive Positive Non-impact
GROWTH Positive Positive Non-impact
The study reveals significant differences between the Generalized Least Squares (GLS) results and those obtained from fixed effects models (FEM) and random effects models (REM) for the key variables Return on Assets (ROA) and Return on Equity (ROE) After addressing defects, it becomes clear that business profitability is influenced not only by the variables Total Debt to Total Equity (TDTE) and Current Ratio (CR) but also by factors such as scale and asset turnover.
H1: Total debt to equity ratio has a negative impact on firm profitability of F&B enterprises listed on Vietnam stock market
The total debt to equity (TDTE) ratio negatively affects return on equity (ROE), with a statistically significant P-value of 0.000, aligning with findings from Doan Thuy Duong, Dinh The Hung (2014), Tran Thi Kim Anh (2017), and Rahman et al (2020) Specifically, a one-unit increase in TDTE results in a decrease of 0.1656 units in ROE, while return on assets (ROA) increases by 0.0006301 units This indicates that food and beverage (F&B) businesses often leverage short-term debt to enhance their production, business activities, and revenue growth.
Graph 3.3: An Phu Irradiation JSC
An Phu Irradiation JSC (APC) exemplifies how a high total debt-to-equity (TDTE) ratio negatively impacts return on equity (ROE) As a key player in the F&B industry, APC demonstrated a clear inverse relationship between TDTE and ROE during the research period Specifically, from 2013 to 2018, the TDTE ratio declined from 41.22% to 9.19%, while ROE rose significantly from 9.88% to 21.88% Although APC's TDTE fluctuated between 50-60% from 2013 to 2023, this level of debt usage remains relatively low compared to other companies in the study.
Only accept hypothesis H1 with ROE, reject H1 with ROA
H2: Firm size has a negative impact on firm profitability of F&B enterprises listed on Vietnam stock market
The analysis indicates a significant positive relationship between the scale variable (SIZE) and business profitability, with a p-value of less than 0.01 This finding suggests that, when other factors are held constant, an increase in the SIZE of a business is associated with enhanced profitability.
61 increases by 1%, ROE and ROA increase by 0.059919 and 0.0528725 units, respectively
Enterprise size positively influences solvency while negatively affecting financial balance As businesses grow, they can better mobilize capital to ensure solvency and reduce financial risks However, larger businesses may struggle to effectively utilize funding sources to align with asset lifespans Research indicates that increased business scale enhances profitability, aligning with findings from studies by Le Thi My Phuong (2017) and Rizal et al (2022) Many companies seek to expand their size to enhance their market position and share Larger enterprises benefit from various incentives, enabling them to attract resources, diversify business lines, and strengthen their brand recognition among new potential customers.
The study's conclusion is applicable to most businesses examined, including Dabaco JSC, which specializes in animal feed and food processing To establish market dominance and enhance brand positioning, Dabaco requires significant scale for its production and business activities From 2013 to 2023, Dabaco's total assets surged from 4 trillion to over 13 trillion, reflecting a substantial growth in the company's scale, as indicated by the SIZE variable, which is derived from the natural logarithm of total assets.
H3: Tangible assets has a positive impact on firm profitability of F&B enterprises listed on Vietnam stock market
Increased investment in tangible fixed assets (TANG) leads to greater volatility in a business's profitability, causing fluctuations in financial balance and a decrease in return on equity (ROE).
62 increasing financial risks for the business When TANG increase 1 unit, ROE will decrease 0.1113873 units, and ROA increase 0.0124849 units
=> Accept H3 with ROA, reject with ROE
H4: Growth rate has a positive impact on firm profitability of F&B enterprises listed on Vietnam stock market
A higher growth rate (GROWTH) typically correlates with increased business profitability GROWTH is determined by the annual revenue changes, while Return on Assets (ROA) is calculated using Net Profit after Tax relative to Total Assets However, the analysis indicates that GROWTH does not significantly influence ROA, as evidenced by a p-value exceeding 0.05 This suggests insufficient data to ascertain the impact of GROWTH on profitability in the F&B sector Nonetheless, a unit increase in the GROWTH rate results in a 0.0292182 unit increase in Return on Equity (ROE).
Can’t reject or accept hypothesis H4 with ROA
H5: Current ratio has a negative impact on firm profitability of F&B enterprises listed on Vietnam stock market
The short-term solvency of an enterprise is crucial for assessing its ability to meet short-term debt obligations, which in turn affects its capital structure and profitability Research indicates that the current ratio negatively influences return on equity (ROE) with a p-value of 0.004, while it positively impacts return on assets (ROA) with a p-value of 0.000 These findings align with the study by Sadia Afroze and Sharlin Ahmed Khan (2022) but contrast with the results of Olusola et al (2022).
Graph 3.4: Long An Food Processing Export JSC
Long An Food Processing Export JSC consistently maintains short-term assets that exceed short-term liabilities by at least 30% from 2013 to 2023, indicating a strong ability to meet short-term loan obligations Despite this financial stability, the company has untapped resources that could enhance business development and improve profit margins However, the company's return on assets (ROA) remains below 20%, with a notable decline to approximately -30% in 2018, suggesting that Long An Food Processing's capital structure adversely impacts its profitability.
Only accept hypothesis H5 with ROA, reject hypothesis H5 with ROE
H6: Asset turnovers has a positive impact on firm profitability of F&B enterprises listed on Vietnam stock market
The asset turnover ratio plays a crucial role in assessing performance, particularly in the F&B industry, where it typically exceeds that of sectors like real estate and information technology, which require substantial investments in fixed assets Statistically significant in both Return on Assets (ROA) and Return on Equity (ROE) models, the asset turnover variable has a p-value of 0.000, confirming findings similar to those of Tran Thuy Minh Chau (2018) and Akomeah, Bentil, and Musah (2018).
An increase of one unit in AT leads to corresponding rises of 0.0212 units in ROA and 0.0278 units in ROE, a trend consistently observed among various businesses in the F&B industry listed on the Vietnam stock exchange.
Masan Group Corporation is a big enterprise on the Vietnamese stock exchange, operating in retail and distribution, so its revenue is very large, nearly 78 trillion by
In 2023, the asset turnover (AT) of the enterprise serves as a key indicator for evaluating how effectively assets are utilized to generate revenue MSN consistently maintains a high AT, demonstrating efficient asset management, as evidenced by its financial reports Despite the significant impact of the Covid-19 pandemic, MSN has managed to sustain positive returns on assets (ROA) and equity (ROE), along with an acceptable total asset turnover Furthermore, an increase in the AT index correlates positively with the company’s profitability, indicating a strong relationship between asset utilization and financial performance.
CONCLUSION AND RECOMMENDATION
Conclusion
The researcher conducted an analysis of audited financial statements from 22 food and beverage companies listed on the Vietnamese stock exchange between 2013 and 2023 Utilizing regression models with 242 observations, the study examined 2 dependent variables, 2 independent variables, and 5 control variables to validate hypotheses and draw specific conclusions.
The analysis revealed no multicollinearity among the variables, with all VIF indices below 2 However, the Fixed Effects Model (FEM) for Return on Assets (ROA) and the Random Effects Model (REM) for Return on Equity (ROE) exhibited issues of heteroskedasticity and autocorrelation.
The analysis of Return on Assets (ROA) as the dependent variable revealed statistical significance across Pooled OLS, Random Effects Model (REM), and Fixed Effects Model (FEM) approaches The Pooled OLS model highlighted TANG, CR, and AT as significant variables positively correlated with ROA Additionally, the REM model confirmed CR as a statistically significant variable with a positive association with ROA, and the FEM model's results aligned with those of the REM, reinforcing the findings.
In analyzing Return on Equity (ROE) as the dependent variable, the statistical significance in the Pooled OLS, REM, and FEM models reflected similar findings to those observed with Return on Assets (ROA) The Pooled OLS model revealed that variables such as Total Debt to Total Equity (TDTE), Size (SIZE), Current Ratio (CR), and Asset Turnover (AT) were significant, with TDTE and CR negatively impacting ROE, while SIZE and AT had positive relationships The REM model also identified TDTE and CR as significant negative influencers on ROE In contrast, the FEM model recognized only TDTE and Growth (GROWTH) as significant variables, with GROWTH positively affecting ROE and TDTE exerting a negative influence.
To address the shortcomings identified in the FEM model using ROA as the dependent variable and the REM model with ROE as the dependent variable, I utilized GLS estimation to correct these deficiencies.
Recommendations
The capital structure of food enterprises plays a crucial role in determining their overall value This research provides key recommendations for food businesses on valuing their enterprises and establishing an optimal capital structure It highlights the importance of considering factors that affect the debt-to-total asset ratio when setting target capital structures Enhancing business efficiency is essential, as it can lead to improved performance and reduced financial leverage, allowing companies to rely less on debt and lower capital costs By utilizing internal capital from retained earnings, which is generally less expensive than debt or issuing new shares, food businesses can strengthen their financial position Furthermore, improved efficiency can enhance credibility with creditors and investors in the financial market.
Food businesses enhance operational efficiency, as research indicates an inverse relationship between business performance and financial leverage Efficiently operating companies in the food industry typically rely less on debt, leading to reduced capital costs By utilizing internal capital from retained profits, which is cheaper than debt or issuing new shares, these businesses can further optimize their financial standing Additionally, improved efficiency boosts credibility with creditors and instills greater trust among investors in the financial market.
The empirical research indicates a positive correlation between the growth rate of food enterprises and their debt-to-total-assets ratio, while highlighting an inverse relationship with the number of years in operation Consequently, financial administrators should devise a tailored development plan for food businesses, taking into account the various stages of the food industry's operations to assess annual growth potential and establish mechanisms for mobilizing suitable operational funding sources.
Leveraging asset scale is crucial for food enterprises when utilizing debt, as research indicates a positive correlation between the size of these businesses and their borrowing capacity Larger food businesses find it easier to secure loans from creditors compared to their small and medium-sized counterparts Consequently, food enterprises should capitalize on their asset scale to access debt at lower capital costs.
To maximize the benefits of debt, food businesses should leverage financial capital effectively, enhancing the efficiency of equity use Instead of relying solely on commercial banks, companies can diversify their debt sources by utilizing commercial paper or book debts for short-term assets and exploring options like lease financing, bonds, or convertible bonds for long-term assets This flexible approach to debt capital mobilization enables businesses to achieve a balanced cost structure while taking advantage of tax benefits.
To enhance the food and beverage industry, agencies and organizations must prioritize increased support for research and development This includes boosting investment in innovative projects, assisting local enterprises in advancing production technologies, and fostering the creation of value-added products while improving production processes Additionally, promoting collaboration between businesses and university research centers can lead to joint research initiatives that leverage specialized knowledge and resources.
To boost domestic consumption, it is essential to continuously innovate policies and models Implementing targeted advertising and marketing campaigns will enhance awareness of Vietnamese food and beverage products among local consumers This can include television commercials and social media promotions to effectively reach and engage the audience.
Promote creativity in product development tailored to the preferences of Vietnamese consumers, ranging from household items to luxury goods for affluent buyers, through engaging events and exhibitions.
Food quality and safety are essential components of any business model in the food and beverage industry, significantly influencing overall business performance It is crucial to enhance food safety and quality control by implementing and enforcing rigorous standards This can be achieved by offering support and training to businesses on hygiene and food safety compliance Additionally, promoting the use of technology for monitoring and managing product quality throughout the production, transportation, and storage processes is vital for maintaining high standards.
To enhance efficiency and productivity, it is essential for models, organizations, and companies to collaborate in developing sustainable supply chains, supported by government policies and benefits such as financial aid and training Establishing robust connections among supply chain partners—from farmers to manufacturers to consumers—can improve efficiency and minimize waste Favorable policies and regulations should be proposed to stimulate investment and growth in the food and beverage industry, such as lowering import tariffs on new raw materials and production technologies.
Limitation of Research
The research duration is limited and fails to capture the true economic changes caused by the pandemic and global financial crisis
To accurately assess a company's profitability, it is essential to utilize a variety of indicators that reflect its financial health from multiple angles As Vietnam's stock market continues to evolve, local investors are increasingly interested in understanding how internal business dynamics influence profitability, enabling them to make informed investment decisions.
Recommend for further research
Exploring the impact of capital structure on business profitability is crucial across all economic phases in every nation In the 21st century, research has mainly focused on enhancing stock markets, highlighting a significant gap in studies that assess the specific effects of capital structure on profitability, particularly within the food and beverage (F&B) sector.
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Appendix 1: List of F&B enterprises listed on the Vietnam stock market used for research analysis
No Stock code Company’s name Stock exchange
1 APC An Phu Irradiation JSC HOSE
2 AGM An Giang Import - Export Company HOSE
4 BCF Binh Dien Fertilizer JSC HOSE
5 BHN Hanoi Beer Alcohol And Beverage JSC HOSE
7 HAD Ha Noi - Hai Duong Beer JSC HNX
8 HAT Ha Noi Beer Trading JSC HNX
9 HHC Hai Ha Confectionery JSC HNX
10 KDC KIDO Group Corporation HOSE
11 KTS Kon Tum Sugar JSC HNX
12 LAF Long An Food Processing Export JSC HOSE
13 MSN Ma San Group Corporation HOSE
14 PAN The Pan Joint Stock Market HOSE
15 SAB Saigon Beer Alcohol Beverage Corp HOSE
16 SAF Safoco Foodstuff JSC HNX
17 SCD Chuong Duong Beverages JSC HOSE
18 SGC Sa Giang Import Export Corporation HNX
19 SMB Sai Gon - Mien Trung Beer JSC HOSE
20 THB Ha Noi - Thanh Hoa Beer JSC HNX
21 VCF Vinacafé Bienhoa JSC HOSE
22 VNM Viet Nam Dairy Products JSC HOSE
Appendix 2: Results of running data on STATA software
5 FEM Model with ROE variables
6 REM Model with ROE variables
8 FEM model with ROA variable
9 REM model with ROE variable
12 Testing the heteroskedasticity with ROE
13 Testing the heteroskedasticity with ROA
14 Fix REM model defects with ROE
15 Fix REM model defects with ROA
Appendix 3: Input data collection table
STT NAME YEAH ROA ROE TDTE TANG SIZE GROWTH CR AT