Truong Hanh Duyen

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business

------------------------------
TRUONG HANH DUYEN
DEBTS AND PROFITABILITY

AN EXAMINATION OF
MANUFACTURING FIRMS LISTED
ON VIETNAM STOCK EXCHANGE
MASTER OF BUSINESS (Honours)

SUPERVISOR: Dr. PHAM QUOC HUNG
Ho Chi Minh City Year 2012
Debts & Profitability: An examination of manufacturing firms listed in Vietnam
TABLE OF CONTENT
Acknowledgement ..................................................................................................................... 3
T
6
T
6
Abstract ...................................................................................................................................... 4
T
6
T
6
CHAPTER 1: INTRODUCTION ............................................................................... 5

T
6
T
6
1.1
1.2
1.3
1.4
Vietnam Context: ............................................................................................................................5

Manufacturing firms in Vietnam: .................................................................................................6
Research Objective: ........................................................................................................................7
Research structure: ....................................................................................................................... 10
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
CHAPTER 2: LITERATURE REVIEW ................................................................. 11

T
6
T
6
2.1 The concept of debts: ....................................................................................................................... 11

2.2 The concept of profitability: ............................................................................................................ 12
2.3 Relationship between debts and profitability: ............................................................................... 14
2.4 Theoretical Framework: .................................................................................................................. 17
2.5 Hypotheses Development: ................................................................................................................ 18
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
CHAPTER 3: RESEARCH METHODOLOGY ..................................................... 20

T
6
T
6
3.1 Research Design: .............................................................................................................................. 20

3.2 Variables Definition: ........................................................................................................................ 21
3.3. Samples Collection: ......................................................................................................................... 22
3.4. Methods of Data Analysis: .............................................................................................................. 24
T
6
T
6
T
6
T
6
T
6
T
6
T
6
T
6
CHAPTER 4: EMPIRICAL RESULTS & DISCUSSION ..................................... 26

T
6
T
6
CHAPTER 5: IMPLICATIONS & CONCLUSIONS ............................................ 30

T
6
T
6
5.1. Implication: ...................................................................................................................................... 30

5.2. Limitation: ....................................................................................................................................... 31
5.3. Conclusion: ...................................................................................................................................... 32
T
6
T
6
T
6
T
6
T
6
T
6
References ................................................................................................................................ 33
T
6
T
6
Appendix 1: Outliners............................................................................................................. 36
T
6
T
6
Appendix 2: Normality and Heteroskedasticity ................................................................... 37

T
6
T
6
Appendix 3: MLR between Net margin and independent variables .................................. 39

T
6
T
6
Appendix 4: MLR between ROE and independent variables ............................................. 42

T
6
By Truong Hanh Duyen Mbus 1
T
6
2 of 44
Acknowledgement
I would like to gratefully acknowledge the enthusiastic supervision of Dr. Pham Quoc
Hung during this work. I thank Prof. Nguyen Dinh Tho for the technical discussions on
the spectral response model, optical measurements and relevant discussions. Staff of
International School of Business (ISB) University of Economy Ho Chi Minh is thanked
for numerous supports. I am grateful to all my friends and classmates from Mbus 1 ISB
for sharing science materials and knowledge during the years I study there and for their
continued moral support there after. From the staff, Mr. Duong Minh Toan and Mr. Ho
Sze Ming are especially thanked for their care and attention. Finally, I am forever
indebted to my husband for his understanding, endless patience and encouragement when
it was most required.
3 of 44
Abstract
The ability of companies in determining suitable financial policies to make investment

opportunities is one of the most principal factors for the companies growth and
progression. Adopting a debt policy or a capital structure is considered as a momentous
decision that influences the companies value. The determination of a companys capital
structure constitutes a difficult decision, one that involves several and antagonistic
factors, such as risk and profitability. That decision becomes even more difficult, in times
when the economic environment in which the company operates presents a high degree of
instability. Therefore, the choice among the ideal proportion of debt and other resources
can affect the value of the company, as much as the return rates can. In this study, I tried
to examine the influence of debts from Vietnam manufacturing firms regarding the factor
profitability. The necessary data, which are used in this work are the 3 consecutive years
financial reports provided by the 200 respective firms. The Ordinary Least Squares
(OLS) method was employed in the estimation of a function relating the net margin and
return on the equity (ROE) with the indexes of long-term, short-term and total debts, and
also with the total of owners equity. The results indicate that short-term debt presents a
negative impact on net margin. The study recommends that managers should be careful
while using short term debts as a source of finance.
4 of 44
CHAPTER 1: INTRODUCTION
This chapter includes three sections. The first section introduces Vietnam Context in
recent years, which is also the background of the research. The second is some briefs of
manufacturing firms in Vietnam and its vital role in the whole economy, thus the research
is to focus on this sector. The third section goes straightly to research objective as a
conclusion for two sections above and an opening for following chapters.
1.1 Vietnam Context:
Vietnams transition, from a centrally planned economy to a market economy and from
an extremely poor country to a lower-middle-income country in less than 20 years, is
now a case study in many development textbooks. But Vietnams other transition, to
becoming an industrialized and modern economy by 2020, has barely begun. The latest
Socio-Economic Development Strategy (2011-2020) goes on to identify the countrys
key priorities to meet this ambitious target: stabilize the economy, build world-class
infrastructure, create a skilled labor force, and strengthen market-based institutions.
Meeting these aspirations will not be easy. The country has experienced bouts of
macroeconomic turbulence in recent years: double-digit inflation, depreciating currency,
capital flight, and loss of international reserves eroding investor confidence. Rapid
growth has revealed new structural problems. The quality and sustainability of growth
remain a source of concern, given the resource-intensive pattern of growth, high levels of
environmental degradation, lack of diversification and value addition in exports, and the
declining contribution of productivity to growth. Vietnams competitiveness is under
threat because power generation has not kept pace with demand, logistical costs and real
estate prices have climbed, and skill shortages are becoming more widespread.
Until a few years ago, Vietnam was one of the world's hottest emerging markets. Now it
faces an urgent task: fix a beleaguered banking system or watch its economy continue to
slip behind faster-growing neighbors. Piles of bad loans following the financial crisis
have dragged down growth in Vietnam and left banks weakened and reluctant to lend,
lending interest rate sometimes climbed up to exceedingly 21% per annually in crisis
period. Economists warn that Vietnam has entered a dangerous cycle where banks,
5 of 44
saddled with bad debts, are unwilling to lend, making it harder for businesses to invest.
That feeds into slower growth, which in turn makes it harder for companies to pay back
loans, again harming the banks. In a report of government in July 2012, from early 2012
Vietnam recorded about 30,000 of firms are in financials difficulties, temporarily
stopping business and declaring bankruptcy.
1.2 Manufacturing firms in Vietnam:
Vietnams manufacturing sector grew at a compound annual growth rate (CAGR) of
9.3 percent from 2005 to 2010, and labor productivity in the sector increased at
3.1 percent a year. Because this sector accounts for around 30 percent of overall GDP,
this rapid growth made a substantial contribution to Vietnams expansion during this
period. Within manufacturing, some subsectors performed especially well. Motor vehicle
production grew at an annual rate of 16 percent during these five years, ready-made
clothes by 12.9 percent, and electrical equipment by 12.0 percent.
The manufacturing industry plays a vital role in Vietnams economy by providing
employment opportunities and accelerating its growth. Simultaneously, liberalization,
removal of investment restrictions, and semi-privatization of the economy have greatly
boosted the country's industrial growth rate. The main manufacturing sectors in Vietnam
are textiles and garments, food and beverages and leather and wood. The Government has
implemented various programs to transform Vietnams economic structure from
agriculture-driven to industry-driven and reduce its import dependency. The development
of export processing and industrial zones is just one of the initiatives that bolstered the
country's industrial growth. The Government has also offered incentives to investors in
social sectors such as health and education. However, since liberalization, the
Governments share in the overall industrial investment has been declining, thereby
enabling higher participation of private and foreign companies.
Financial and R&D (research and development) support, as well as the allotment of land
in industrial zones, are likely to encourage stakeholders in the manufacturing industry to
increase their investments. While sectors such as textiles, leather, food and beverages,
automobiles, chemicals and energy were resilient even during the economic downturn, a
booming food processing sector, an unsaturated pharmaceuticals market and a dynamic
6 of 44
garments sector are expected to add value to the industrial production in Vietnam. The
Government has retained the majority of the stake in energy, finance, banking and
telecom and shielded the agriculture, food and automobiles sectors from international
competition. Higher private and foreign investment had enhanced the growth rate of
sectors such as transportation, real estate, communication and mining. However, the
country does not permit foreign investments in national defense, security, and health and
it places conditional restrictions on investments in telecommunications, postal network
and airports. The Vietnamese Governments initiatives and specific incentives for the
industrial sector are likely to increase exports and drive the economic growth.
Liberalization and the removal of various restrictions generating sector-specific
investment opportunities are expected to attract more private and foreign participants to
manufacturing industry.
Overall, with an aim to become industrialized country by 2020, Vietnams manufacturing
industry has been undergoing major changes as a result of government initiatives, WTO
commitments and industrial liberalization. Industrial development strategy for the period
2011-2020 to focus on the development of Textiles, Leather, Chemicals, Agro
processing, Electronics, Automotive, Information and Communications technologies are
expected benefit from the industrial development strategy. Due to improving business
climate, increased trade and investment cooperation, low labor cost and Vietnam is
expected to emerge as a major manufacturing hub in the ASEAN region. Hence, the
vitalization of firms in this industry is very important for the growth of country. During
crisis period, many firms in sector have been badly affected resulted from high leverage
in capital structure. The companies, well overcome such bad cycle of economy, generally
do not only well prepare for business operation to maintain profitability, but also less
involve in debts by optimal capital structure.
1.3 Research Objective:
Which the relationship between debts and profitability? Does the fiscal benefit makes
debt more attractive than other funding resource? Does the risk associated to the increase
of the debt can, or should, be taken by the firm? Should the financing decisions of the
firms follow a single pattern, irrespective of the country where it operates? Those are
7 of 44
frequently asked questions that are significantly present in the processes related to
decision of capital structure of any firms.
Decisions of that type tend to become even more difficult when the economic conditions
of the country where the firm operates already are typically more uncertain. In the
Vietnamese case, specifically, the presence of two aggravating factors is observed: first is
the high interest rates practiced in the financial market, and second is the instability of the
economy before the international conjuncture. Those two factors play distinct roles;
however, they produce similar effects under the scope of uncertainty.
Any firm finances its operation and investment by either debt or equity and mostly both.
The firms might like to raise finance from their internal resources, instead of the bank
loans and debt issues. Thus the external equity financing is their last option. Conversely,
many organizations use debt financing to reduce their cost of capital so that they can
lower the Weighted Average Cost of Capital (WACC) 1 as it will allow the firms to
F
0
P
have wider extent of acceptance for capital budgeting options.

Theres many argument on the relationship of leverage (ratios of debts in asset structure)
and business performance before. As a point of departure, the Modigliani and Miller
(M&M) (1958) stated: With perfect capital markets and no taxes or information
asymmetry, debt financing has no effect on value. However, in a subsequent paper,
M&M (1963) eased the conditions and showed that under capital market imperfection
where interest expenses are tax deductible, firm value will increase with higher financial
leverage. Later, Miller (1977), elaborated a new revision, analyzing the subject of the
taxes paid by the investors, concluding that the corporate tax benefits of debt are reduced
by the tax penalty due to personal taxation. Models based on impact of tax, suggest that
profitable companies should have more debts. However, increasing debt results in an
increased probability of bankruptcy. Hence, the optimal capital structure represents a
level of leverage that balances bankruptcy costs and benefits of debt finance.
A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock,
bonds and any other long-term debt - are included in a WACC calculation. All else equal, the WACC of a firm increases as the beta and rate of return on
equity increases, as an increase in WACC notes a decrease in valuation and a higher risk.
8 of 44
Since all firms managers try to get the optimal capital structure with least possible cost,
this led in 1984 for the pecking order theory to emerge. The theory began from Myers
(1984) states that there is no optimal capital structure for a firm, according to this theory,
since there is asymmetric information between managers and shareholders. Therefore to
minimize this asymmetric information, firms prioritize their sources of finance (from
internal financing to equity) according to the principle of least effort or of least
resistance, retained earnings are better than debt and debt is better than equity. But there
is another suggestion for case of asymmetric information; managers, directly involve in
daily operations of business, thus could master detailed positions of businesses and what
are actually being happened in the firms; whilst shareholders mainly rely on the reports
from managers, and could be disguised by the beautiful and vivid wordings of those
reports. Hence, to make manager be more responsible for their jobs, the firm owners
prefer to get more debts rather than equity; repayment obligation of debts and interest
occurred push managers work harder to get more profitability in the bottom line of
income reports.
Due to the importance of the issue and the impact of the financial structure or choice of
funding sources on the performance of companies, there are many previous studies and
various researches lead us to verify the relationship between capital structures or debts
and the performance of companies in different markets generally, but not many for
emerging markets and particularly for Vietnam financial market which is characterized as
small and unstable. Furthermore, management of capital structures in Vietnam is
typically different from others due to components such as high cost of debt, unstable
policy and political issues of a social republic country.
Unlike previous studies, this paper focuses deeply in the relationship between debts and
profitability of listed manufacturing firms on Vietnam Stock Exchange. Specifically, it is
aimed at: examining the relationship between Short-term debt, Long-term debt, Total
debts, and Net Profit Margin (NM) and Return on Equity (ROE). This study will be
significant to managers and shareholders in deciding proportion of debts and each debt
types to finance their operations and to maximize firm value which then contributes to the
economic development of Vietnam.
9 of 44
1.4 Research structure:

This thesis comprises five chapters.
Chapter 1: Introduction generally introduces the subject area interest with defined
problems, research questions, research objectives, and sources of information to be
collected for the research.
Chapter 2: Literature Review summarizes concepts and theories relating to debts,
profitability and the relationship between them. From such reviews, basic theories for
studying will be synthesized to develop an initial research model and hypotheses used for
the research.
Chapter 3: Research Methodology introduces the approach method of this research
through four sub-sessions including research design, variables definition, samples
collection and method of data analysis.
Chapter 4: Empirical Results & Discussion reports the analysis results and meaningful
figures.
Chapter 5: Implications & Conclusions discusses the implications of the results and
findings in session four, limitations are also drawn; based on which conclusions and
recommendations are provided.
Some appendix for detailed outputs from SPSS will be put at last papers for references.
10 of 44
CHAPTER 2: LITERATURE REVIEW

In this chapter, theoretical background and review on previous studies are presented,
including 5 sections. The first and second section is some popular definitions of debts and
profitability. The third presents the relationship of debts and profitability. The forth is
theoretical framework, whilst the last describes the hypotheses development for this
research.
2.1 The concept of debts:
There are various measures of debts, which can be classified as accounting based
measures, market-value measures and quasi-market value measures. Since market values
of leverage may be difficult to obtain, accounting based measures are often applied as
proxies. The use of debt, or a loan, in business operation is to increase sales and profit.
Companies have to be careful with their use of financial leverage as too much can lead to
serious financial problems and even bankruptcy.
Debt includes the firm's current liabilities which are the obligations the firm intends to
pay off in one year or less, generally seen as current liabilities in balance sheet like short
term bank loan, accounts payables and accruals. Debt also includes long-term debt which
has a maturity of more than one year such as mortgages, long-term loans for other
purposes or even long-term prepaid amounts etc, and recorded in non-current liabilities of
balance sheet.
The debt ratio compares a company's total debt to its total assets, which is used to gain a
general idea as to the amount of leverage being used by a company. Total debts might be
replaced by short term or long term debts in the ratio or total assets might be replaced by
current or non current assets to get different views of how debts fund the firms assets,
the portion of debts in constitution of assets. The lower the percentage, the less leverage a
company is using and the stronger its equity position. In general, the higher the ratio, the
more risk that company is considered to have taken on, but could be compensated by
higher return.
Another measure of a company's financial leverage is calculated by dividing its total
liabilities by stockholders' equity indicates what proportion of equity and debt the
11 of 44
company is using to finance its assets, called debt to equity ratio. Sometimes
only interest-bearing, short-term or long-term debt is used instead of total liabilities in the
calculation.
Rajan & Zingales (1995) suggest that the choice of measure should be based on the
objective of the analysis. In their view, the ratio of total debt to capital, where capital is
defined as total debt plus equity i.e. ratio of total debts to total assets can be seen as the
best accounting based proxy for leverage.
2.2 The concept of profitability:
Profitability ratios are a class of financial metrics that are used to assess a business's
ability to generate earnings as compared to its expenses and other relevant costs incurred
during a specific period of time. For most of these ratios, having a higher value relative to
a competitor's ratio e.g. comparison between company A and company B or the same
ratio from a previous period or comparison profit of year 2010 with year 2011 is
indicative that the company is doing well.
Every firm is most concerned with its profitability. One of the most frequently used tools
of financial ratio analysis is profitability ratios which are used to determine the
company's bottom line and return to its investors. Profitability measures are important to
company managers and owners alike. Any business has outside investors who have put
their own money into the company; the primary owner certainly has to show profitability
to those equity investors. Popularly, listed firms have to publicly announce the business
performance periodically.
Profitability ratios show a company's overall efficiency and performance. We can divide
profitability ratios into two types: margin ratios and return ratios. Ratios that show
margins represent the firm's ability to translate sales dollars into profits at various stages
of measurement. Ratios that show returns represent the firm's ability to measure the
overall efficiency of the firm in generating returns for its shareholders.
12 of 44
Margin Ratios:
Gross Profit Margin looks at how well a company controls the cost of
its inventory and the manufacturing of its products and subsequently passes on the
costs to its customers.
Operating Profit Margin is a measure of overall operating efficiency, incorporating all

of the expenses of ordinary, daily business activity.
Net Profit Margin shows how much of each sales dollar shows up as net income after
all expenses are paid. For shareholders and investors, this ratio might be the most
important, as it give them a tough view of how well their businesses are at the last.
Cash Flow Margin is an important ratio as it expresses the relationship between cash
generated from operations and sales; measures the ability of a firm to translate sales
into cash.
Returns Ratios:
Return on Assets (also called Return on Investment) measures the efficiency with
which the company is managing its investment in assets and using them to generate
profit.
Return on Equity is perhaps the most important of all the financial ratios to investors
in the company. It measures the return on the money the investors have put into the
company.
Cash Return on Assets ratio is generally used only in more advanced profitability
ratio analysis. It is used as a comparison to return on assets since it is a cash
comparison to this ratio as return on assets is stated on an accrual basis.
Grout and Zalewska (2006) indicated some other measures of profitability including NPV
(net present value), IRR (internal rate of return), ARR (accounting rate of return), ROS
(return on sales), and concluded that IRR and ARR can be used to identify whether a
company is earning an excess return. Although in the context of the ARR the necessary
adjustments to asset values are not usually made, at least in principle, the ARR is able to
13 of 44
identify excess returns and will be exactly equal to the IRR in some cases. However these
measures are more suitable to measure returns of project rather than normal business
operations, thus they will not be focused in this study.
2.3 Relationship between debts and profitability:
Studies showed contradictory results about the relationship between debts in capital
structure and firms performance (profitability).
In a study of listed firms in Ghana Stock Exchange (GSE) during a five-year period, Abor
(2005) examined the relationship between capital structure and profitability, and found
that Short-term and Total Debt are positively related with firm's ROE, whereas Longterm Debt is negatively related with firm's ROE. Then in 2007, Abors research on small
and medium-sized enterprises in Ghana and South Africa again indicated that long-term
and total debt level is negatively related with performance.
Similarly, Arbabiyan and Safari (2009) investigated the effects of capital structure on
profitability by using 100 Iranian listed firms from 2001 to 2007 and found that Short
term debts and Total debts are positively related to profitability proxy by ROE which
indicate a negative relation between Long term debts and ROE.
While examining the relationship between capital structure and performance of 167
Jordan firms during 1989 - 2003, Zeitun and Tian (2007) found that capital structure have
a significant and negative impact on the firms performance measures in both the
accounting and market measures, debt level is negatively related with performance. It
means higher debts causes lower profits.
In a similar study on microfinance institutions in sub-Saharan Africa, Coleman (2007)
found that high leverage is positively related with performance proxy by ROA and ROE.
Husnan (2001) described that the use of debt statistically significant to the change in the
value of non-multinational companies ROE, while it is not significant to the
multinational companies.
However, the research made by Harjanti and Tandelilin (2007) to all manufacturing
companies listed in Jakarta Stock Exchange from 2000 to 2004 indicated that profitability
14 of 44
which was proxy by ROE, basic earning power (BEP), and gross profit ratio had negative
significance to leverage.
Based on Ebaid (2009) research, capital structure choice decision, in general terms, has
weak-to-no influence on the financial performance of listed firms from 1997 to 2005 in
Egypt as one of emerging or transition economies. By using three accounting-based
measurements of financial performance which are return on assets (ROA), return on
equity (ROE), and Gross Margin, the empirical tests come with the result that capital
structure (particularly Short term debts and Total debts) have a negative impact on an
organizations performance which is measured by ROA. Apart from that, capital structure
(including short-term debt, long-term debt and total debt) have no significant impact on
an organizations performance which is measured by ROE and Gross margin.
Jensen and Meckling (1976) argued that the conflict between shareholders and lenders
has the effect of shifting risk from shareholders to lenders and of appropriating wealth in
their favor as they take on risky investment projects (asset substitution). Hence,
shareholders, and managers as their agents, are prompted to take on more borrowing to
finance risky projects. Lenders receive interest and principal if projects succeed, and
shareholders appropriate the residual income; however, it is the lender who incurs the
loss if the project fails. Shareholders, though, while enjoying increased wealth in good
periods, tend to ignore a decline in profitability in bad times. This is due to the fact that
unfavorable consequences are passed onto lenders because of shareholders' limited
liability status. Therefore, the oligopolistic firms, in contrast to firms in competitive
markets, would employ higher levels of debt to produce more when opportunities to earn
higher profits arise. In corporate finance, the agency costs theory supports the use of high
debts, and it is consistent with the prediction of the output maximization hypothesis.
Valeriu and Nimalathasan (2010) pointed out capital structure and its impact on
profitability: a study of listed manufacturing companies in Sri Lanka. The result shows
that debt to equity ratio is positively and strongly associated to all profitability ratios
(gross profit ratio; operating profit ratio; and net profit ratio) except return on capital
employed and return on investment (ROI).
15 of 44
Pratheepkanth (2011) tested the relationship of capital structure (ratios of debt and equity
over fund) with financial performance of firms listed on Sri Lanka Stock Exchange from
2005 2009, indicated that there is a weak positive relationship between gross profit and
capital structure and at the same time, there is a negative relationship between net profit
and capital structure.
Luper and Isaac (2012) examined the impact of capital structure on the performance of
manufacturing companies in Nigeria. The annual financial statements of 15
manufacturing companies listed on the Nigerian Stock Exchange were used for this study
which covers a period of five years from 2005-2009. Multiple regression analysis was
applied on performance indicators such as Return on Asset (ROA) and Profit Margin
(PM) as well as Short-term debt to Total assets (STDTA), Long term debt to Total assets
(LTDTA) and Total debt to Equity (TDE) as capital structure variables. The results show
that there is a negative and insignificant relationship between STDTA and LTDTA, and
ROA and PM; while TDE is positively related with ROA and negatively related with PM.
STDTA is significant using ROA while LTDTA is significant using PM. The work
concludes that statistically, capital structure is not a major determinant of firm
performance.
Nour (2012) investigated the impact of capital structure on firm performance. The study
used fifth performance measures (including return on equity ROE, return on assets ROA, earning per share - EPS, market value of equity to the book value of equity MBVR and Tobins Q) as dependent variables and four capital structure measures
(including short term debt to total assets - SDTA, long term debt to total assets LDTA
and total debt to total assets - TDTA, and total debt to total equity - TDTE) as
independent variable. The investigation is performed using panel data procedure for a
sample of 28 listed companies the Palestinian Stock Exchange (PSE) over the period of
2006 - 2010. The results showed that firms capital structure had a positive impact on the
firms performance measures, in both the accounting and markets measures, and
statistically significant with TDTA except MBVR was significant with TDTA and with
SDTA. Finally, the study findings suggest equations to determine the impact of the
various debts on the firm performance.
16 of 44
A study of Nima, Mohammad, Saeed, & Zeinab (2012) examined the relationship
between capital structure and firm performance of Tehran Stock Exchange Companies is
investigated between the years 2006 to 2011. The study uses three performance measures
(including Gross Profit Margin, Return on Assets and Tobins Q) as dependent variable
and three capital structures (including long term debt short term debt and total debt ratios)
as independent variable. The study reported a significant relationship between dependent
and independent variable, except long term debts with gross profit margin.
2.4 Theoretical Framework:
The theoretical framework is constructed subsequent to the literature review. Derived
from the literature surveyed, the following theoretical framework is designed to facilitate
the research. It depicts the relationship between profitability and its explanatory
variables.
Short-term debts
(Current liabilities)
Long-term debts
(Non-current liabilities)
Profitability
Total debts
(Total liabilities)
Variables used for the analysis include profitability and leverage ratios. Dependent
variable in this study is profitability, which is measured by profit ratios including return
on equity (ROE) and net margin ratio (NM). The independent variables, which are the
explanatory variables, are measured by ratios of short-term debt to total assets (SDTA),
long-term debt to total assets (LDTA), total debts to total assets (TDTA) and total debts
to total equity (TDSE).
17 of 44
2.5 Hypotheses Development:

From literature review above, we see there are many different arguments on relationship
between debts and profitability, or different debt types cause different relationship. The
object of this study is to indentify the impact of respective debt types to the profitability
of manufacturing firms listed on Vietnam Stock Exchange. If the debts influence the
firm's profitability, the correlation between debt and firm's profitability can be expected.
Hypotheses for this study are developed based on the literature review and the actual
concepts in Vietnam financial market.
As a result of a rapid growth but bad control in the past, Vietnam faced the crisis with
high inflation (double digits) and weakened banking system. The increase in key interest
rates resulted in a sharp decrease in money market and credit growth; high cost of capital
also slowed down both domestic production and consumption. In the market, race in
mobilization and breaking cap interest rates happened popularly and frequently. Though
the state bank require commercial banks to comply with the cap rates, but exceeding cap
interest rates still exist. Liquidity troubles in banking system also affected lending
capacity of banks; its really difficult and costly for firms to source funds for business
operation. Consequently, lending rate sometime climbed up to 25% per annual, an
unimaginable rate in any other markets.
Compared to ideal return on investment/ equity ranging from 10% - 20% or net profit
margin of around 5%, sourcing fund from external is the last options of business owners/
managements. Bearing such high interest rate absolutely deteriorates profitability. So, we
argue that debts influences profitability negatively. Thus, the hypotheses are:
H 1 : Theres negative relationship between Short-term Debt and Net Margin
H 2 : Theres negative relationship between Long-term Debt and Net Margin
H 3 : Theres negative relationship between Total Debt and Net Margin
H 4 : Theres negative relationship between Short-term Debt and ROE
H 5 : Theres negative relationship between Long-term Debt and ROE
18 of 44
H 6 : Theres negative relationship between Total Debt and ROE

R
From the hypothesis recruited, 2 models for dependent variables to be described as
NM = 0 1 SDTA 2 LDTA 3 TDTA 4 TDSE + i
ROE = 0 1 SDTA 2 LDTA 3 TDTA 4 TDSE + j
19 of 44
CHAPTER 3: RESEARCH METHODOLOGY

Chapter 2 reviewed literature and proposes hypotheses and research model. Chapter 3
will present how the research was implemented. It discusses the methodology used to
identify the impact of debts and profitability of listed manufacturing firms in Vietnam. It
outlines the research design adopted, identification of variables, sampling method and
procedure of data analysis.
3.1 Research Design:
This research work adopted an ex-post facto design (also called Causal Comparative
Research) and used data from financial statements of manufacturing companies listed on
the Vietnam Stock Exchange from 2009 - 2011. This type of design was used because of
the availability of audited financial statements of the sampled companies. Audited
financial statements are reliable as auditors certify them.
In this experimental research, the impact of debts on profitability was tested through
regression model.
20 of 44
Figure 3.1: Research Process Inflow Chart

Define research problem
Review concepts and theories
Literature Review
Review previous research findings
Formulate hypotheses
Design research
Collect data
Analyze data
Interpret and report
3.2 Variables Definition:

The idea of writing this research was to know the impact of the use of debt to companies
profitability. However, if the data collected from audited reports of different firms with
different size, debt and profit of these firms can not be compared directly. To make data
in every sample corresponding to each other, the ratios of debts and profitability was used
instead of raw figures of debts and return amount.
(1) Ratio of Short Term Debts to Total Assets
(SDTA)
(2) Ratio of Long Term Debts to Total Assets
(LDTA)
(3) Ratio of Total Debts to Total Assets
(TDTA)
(4) Ratio of Total Debts to Shareholders equity
(TDSE)
(5) Ratio of Return to Shareholders equity

(6) Net Profit Margin
(ROE)
(NM/ Net Margin)
21 of 44
Dependent variables:
Return on equity (ROE) measures the rate of return on the ownership interest
(shareholders' equity) of the common stock owners. It measures a firm's efficiency at
generating profits from every unit of shareholders' equity (also known as net assets or
assets minus liabilities). ROE shows how well a company uses investment funds to
generate earnings growth.
ROE = Net income/ Shareholders Equity
Net margin (NM), the ratio of net profits to revenues for a company or business segment,
typically shows how much of each dollar earned by the company is translated into profits.
NM = Net income/ Revenue
Both ROE and NM have numerator is net income. Net income stands in the bottom line
of income statement, is the profit after being deducted by all costs and popularly denoted
as net profit after tax (NPAT).
Independent variables:
SDTA = short - term debt (current liabilities) to total assets. The portion of debt
that is payable within one year. This data falls under current liabilities on
the company balance sheet;
LDTA = long - term debt (fixed/ non - current liabilities) to total assets: Liabilities
those are due to be repaid after more than one year. This is inclusive of
bonds and long-term loans;
TDTA = total debt (total liabilities) to total assets: It is the combined amount of
current liabilities and long-term liabilities. It can be found on the balance
sheet as "Total Liabilities; and
TDSE = total debt (total liabilities) to total equity.
3.3. Samples Collection:
This research paper investigates the relationship between debts in various types including
short term debts, long term debts and total debts and the firms profitability including
22 of 44
return on equity and net margin of manufacturing firms listed on Vietnam Stock
Exchange. This research was limited to the analysis to manufacturing companies given
the important role of this sector in the economy. In addition, firm in same sector have
homogeneity in terms of financial structure.
In this aim, the population of the study was made up of the 223 manufacturing companies
with industry code between 10 and 31 listed on Vietnam Stock Exchange as below table.
Industry (manufacturing sector)
Code
Number of firms
Food
10
45
Beverage
11
Tobacco
12
Textiles
13
Costumes
14
Wood
16
Paper & paper products
17
14
Coke & refined petroleum
19
Chemical
20
Drugs, chemical & medicinal products
21
15
Rubber & plastic products
22
18
Mineral & non metal products
23
47
Metal
24
14
Casted metal products
25
Computer & electronic product
26
Electrical equipments
27
17
Other machineries & equipments
28
Motor vehicles & trailer
29
Furniture
31
Total
20
223
23 of 44
In this study, audited financials in last 3 consecutive years (2009, 2010 and 2011) from
223 firms classified in manufacturing sector of economy was collected. The necessary
data, which are used in this work, are the financial figures including current liabilities,
non-current liabilities, total liabilities, total assets, total equity and net profit provided by
the respective firms, and availably updated on almost stock trading websites. These
figures are trusted to be audited by recognized audit firms, and to make sure they were
correctly input on websites, random checks against firms audited reports were
performed.
3.4. Methods of Data Analysis:
There are three types of data available for an empirical analysis: time series data, crosssectional data, and pooled data (i.e., combination of time series and cross-sectional).
Since the variables are selected from various companies between 2009 and 2011, the type
of data for this study can be considered as pooled. There are two approaches to analyze
pooled data which include classical linear regression model and panel data regression
model. In order to use the classical linear regression model, all firms data should be
considered as homogeneous; otherwise the panel data should be applied. Thanks to
homogeneity of the data in this research, the average of 3 years date was taken to put in
classical linear regression model.
This study uses descriptive statistics, correlation matrix, and multiple linear regressions
to test the average of debts and profits, how the debts correlated to profits and each other,
and the influences of debts on the companies profitability. Method of Ordinary Least
Square (OLS) is used to estimate the regression line. OLS is used because it minimizes
the error between the estimated points on the line and the actual observed points of the
estimated regression line by giving the best fit. All the dependent and independent
variables are pooled into cross-section data.
The process of data analysis could be described as below:
-
Detecting outliers: all outliers suggested by SPSS were re-checked manually to retain
samples with insignificant difference. After detecting 23 outliners, there are 200 rows
got from average of 3 years figures (see Appendix 1).
24 of 44
Checking normality and heteroskedasticity: results showed that dependent variables

(ROE and Net margin ratio) are not perfectly normal distributions, but still acceptable
(see Appendix 1).
Descriptive statistic for all variables
Correlation matrix among variables
Multi linear regression between Net margin and independent variables
Multi linear regression between ROE and independent variables
The results of these processes were detailed in the next chapter.
25 of 44
CHAPTER 4: EMPIRICAL RESULTS & DISCUSSION

This chapter presents the results of data analysis and the discussion on these results.
There are 4 main tables presenting descriptive statistic, correlation matrix between
variables, and multiple linear regressions between 2 dependent variables and independent
variables.
Table 4.1: Variable descriptions

Category
Debts
Profitability
Symbol
SDTA
LDTA
TDTA
TDSE
NM
ROE
Description
Short-term debt to total assets
Long-term debt to total assets
Total debts to total assets
Total debts to shareholders equity
Net margin ratio
Return on equity ratio
Hypothesis
Independent variables
Dependent variables
Table 4.2: Descriptive Statistics
SDTA
LDTA
TDTA
TDSE
Net Margin
ROE
N
200
200
200
200
200
200
Range Minimum Maximum Mean Std. Deviation Variance

68.45%
8.44%
76.89%
42.24%
16.26345%
264.500
41.43%
.00%
41.43%
6.94%
8.32683%
69.336
78.53%
8.66%
87.19%
49.18%
18.18884%
330.834
722.57% 9.56%
732.13% 134.99% 104.54326% 10929.293
27.71% -3.46%
24.25%
7.20%
5.12322%
26.247
60.56% -17.53%
43.03%
17.57%
9.66926%
93.495
Table 2 reported summary statistics for 200 variables used in the study. The table showed
that all of the variables had a positive mean. Moreover, mean statistics provided some
interesting evidence.
First, the mean structures proxies (SDTA Short term debt to total assets, LDTA Long
term debt to total assets, and TDTE - Total debts to total assets) were about 42%, 6.9%,
and 49% respectively, which indicated Vietnamese manufacturing companies in general,
26 of 44
financed their assets by debts, especially by short-term debts. This means they operated
in a risky manner.
Second, the mean of return to equity (ROE) for a sample as a whole was 17.57% which
was acceptable for business purpose as whole but still lower than popular lending rate in
Vietnam in period of 2009-2011 which was fluctuated around 20% per annual. However,
the average net margin of 7.2% could be considered as an ideal figure for any bottom line
of income statement.
Noticeably, mean of TDSE (Total debts to shareholders equity) was 135%, whilst mean
of TDTA (Total debts to total assets) was 49% only which implicated assets in balance
sheets of these firms in general were financed by not only by debts and equity but other
resources such as contribution of minority interest.
The range and Standard deviation of all variables were quite high which indicated the
data was spread out over a large range of values; it means though samples collected in
same industry (manufacturing), the homogeneity of capital structure and performance
was still low.
Table 4.3: Correlation Matrix
SDTA
LDTA
TDTA
TDSE
Net Margin
ROE
SDTA
1
-.011
.889**
.752**
-.528**
-.041
P
LDTA
TDTA
TDSE
Net Margin
ROE
1
.448**
.450**
.028
.045
1
.879**
-.459**
-.016
1
-.376**
.018
1
.545**
**. Correlation is significant at the 0.01 level (2-tailed).

Table 3 established according to Pearson Matrix; it showed the correlation between the
explanatory variables. With significant level of 0.01 (2 tailed), there was medium
negative correlation between 3 independent variables (SDTA, TDTA, TDSE) with net
margin, but LDTA almost had no correlation with dependent variable (NM); whilst all
explanatory variables had no correlation with return on equity (ROE). Among correlation
27 of 44
matrix, SDTA showed a slight high negative correlation with net margin (-0.528),
subsequently followed by TDTA (-0.459) and TDSE (-0.376).
As shown in table above, there was strong positive relationship among independent
variables which may lead to multicollinearity problem which will affect the model power
and its ability in explaining the results. Variance Inflation Factor (VIF) was used which
refers to actual disparity percentage to total disparity, and this will be shown in Table 4
below.
Table 4.4: MLR between Net Margin and independent variables
Variable
Coefficient
T-stat
VIF
Adjusted R-square
Sig.
Constant
14.384
12.608
.268
.000a
SDTA
-.178
-4.932
3.564
LDTA
.000
-.002
1.941
TDSE
.002
.382
4.470
Table 4 represented the result of multi linear regression used to verify the relationship
between SDTA, LDTA, TDSE and Net margin (TDTA was excluded in this model due to
multicollinearity). The results could be interpreted into main points as below:
The result indicated a negative relationship between SDTA and Net Margin as an
increase in SDTA by one will reduce Net Margin by 17.8%, whilst a unit change in
TDSE will increase Net Margin by 0.2 %; and LDTA have no impact on Net Margin
(coefficient of LDTA was .000).
The theoretical model here is:
Net Margin = 0 1 SDTA 2 LDTA 3 TDTA 4 TDSE + i
R
The estimated model here is:

Net Margin = 14.384 - 0.178 SDTA + 0.002 TDSE
The independent variables were barely related with Net margin ration based on
Adjusted R square of model (0.268) which means approximately 26.8 % of variation
in net margin could be explained by independent variables.
28 of 44
Sig. < 0.05 indicated that the model, as a whole, was significantly fit to the data.
VIF was less than 5 and this means the independent variables including SDTA,
TDTA and TDSE were not too inter-correlated. Fox (1991) proved that VIF factor is
less than five (5) this means that there is no multicollinearity problem.
Please see appendix 3 for more details.

Table 4.5: MLR between ROE and independent variables
Variable
Coefficient
T-stat
VIF
Adjusted R-square
Sig.
Constant
19.499
7.715
-.008
.702a
SDTA
-.080
-1.004
3.564
LDTA
-.015
-.126
1.941
TDSE
.012
.832
4.470
Table 5 represented the result of multi linear regression used to verify the relationship
between SDTA, LDTA, TDSE and ROE. Given Sig. = 0.702 > 0.05 (significant level)
indicated that the model, as a whole, did not fit to the data. The independent variables
were almost non-related with ROE based on the Adjusted R-square value (-0.8% only).
Consequently, the null hypothesis was accepted that debts did not significantly affect
ROE.
ROE though is also indicator of profitability, but mostly not affected by debts; could be
subjectively explained that interest occurred by debts lower profit at the bottom line of
income statement which is a directly lower net margin, whilst ROE is resulted by both
profit and equity amount i.e. increase of debts may lower profit but increase of debts
means less use of equity, thus ROE is almost not changed since both numerator and
denominator change in same direction.
Please see appendix 4 for more details.
29 of 44
CHAPTER 5: IMPLICATIONS & CONCLUSIONS

This research assesses the impact of debts on profitability of manufacturing firms in
Vietnamese through financials from 200 selected firms listed on Vietnam Stock
Exchange. Methods of data collection, data analysis and results have been elaborated in
Chapter 3 and 4.
This chapter is to drawn important implication and conclusion about the research.
Managerial implications will be discussed first, then will be followed by limitations, and
will be finished by conclusions which also include recommendations for further research.
5.1. Implication:
The finance decision of the company is characterized as being of extreme difficult,
involving the analysis of many other factors. In the specific case of the Vietnamese
economy, the difficulties are enlarged due to the instability, a common feature of an
economy that recently went through a process of monetary adjustment and that still very
dependent on instruments of monetary politics, especially interest rate, and external
relations.
The present work just tried to examines the impact of debts on profitability of
manufacturing firms in Vietnam. Based on the selected sample size and using debts
indicators like Short-term Debt to Total assets (SDTA), Long-term Debt to Total assets
(LDTA), Total Debts to Total assets (TDTA) and Total debts to Total shareholders
equity (TDSE) as well as Return on equity (ROE) and Net margin ratio as profitability
indicators, the study concludes that statistically debts represented by short-term debt to
total assets (SDTA) have a negative significant impact on net margin, whilst long-term
debts to total assets (LDTA), total debts to total assets (TDTA) and total debt to equity
(TDSE) are not major determinants of firms profitability. These findings imply that an
increase in short-term debt position is associated with a decrease in profitability;
thus, the higher the short-term debt, the lower the profitability of the firm.
The results from this research were not totally matched any previous studies, but
somehow partially matched with the works of Zeitun and Tian (2007) that debt level is
negatively related with performance; Pratheepkanth (2011) that there is a negative
30 of 44
relationship between net profit and capital structure (ratios of debt and equity over fund);
Husnan (2001) that the use of debt is not significant to the multinational companies
ROE; Ebaid (2009) that capital structure (including short-term debt, long-term debt and
total debt) have no significant impact on an organizations performance which is
measured by ROE.
On the contrary, prior empirical studies showed different results compared to my research
are Abor (2005), Arbabiyan and Safari (2009), Harjanti and Tandelilin (2007), Valeriu
and Nimalathasan (2010), Luper and Isaac (2012).
5.2. Limitation:
Although this research was carefully prepared, I am still aware of its limitations and
shortcomings.
The research was conducted in a limited population of 200 manufacturing firms listed on
Vietnam Stock Exchange. It would be better if it was done in a larger sample including
not only listed but also non-listed companies. Furthermore, though manufacturing firms
is one of countrys main industry sectors, but not represent the majority of firms in
Vietnam. In fact there are many other sectors. Therefore, the result may not represent the
result on other sectors in Vietnam; and implication from this result can not be applied to
the whole.
Apart from that, there is problem with the firms in the sample set which adopt different
accounting policies. In addition, the period for annual closing account is different among
the companies. Different accounting policies and period for annual closing account for
comparison will influence the accuracy of the result.
In order to get the more convince and precise result, the time-series data collected should
covered longer period.
In addition, more and new variables of debts and profitability should be captured in the
model in order to obtain more comprehensive results. In addition, it is important to
conduct the study for the period within consistent economic predicament by specify the
accurate time period before and during the crisis in order to avoid biases in the analysis.
31 of 44
5.3. Conclusion:
Corporations need capital in order to improve and grow. A part of the capital can be
provided from internal resources of a corporation such as retained earnings which is
obtained from corporations profit and is not divided among shareholders. The rest of the
capital can be borrowed or be provided from capital markets. Managers have to develop
efficient debt policies in order to suitably face financial issues. Debt policies are related
to the corporations value and a change in financial leverage will lead to a change in total
cost of a capital and the corporations total value. In brief, short-term loans have
negative relationships with firms profitability. The study recommends that managers
should be careful while using short term debts as a source of finance since a negative
relationship exists between debts and profitability variables used in this work. They
should try to finance their activities with retained earnings and use debt as a last option as
supported by the pecking order theory.
Based on the result mentioned above, the following recommendations are suggested:
1. The optimal capital structure for manufacturing firms in Vietnam should be
constituted of less short-term debts (current liabilities) than other resources. In other
words, its better to maintain portion of current liabilities to total assets is less than
portions of non-current liabilities and equity.
2. This study is limited to the sample of 200 manufacturing firms listed on Vietnam
Stock Exchange. Future research should investigate generalizations of the findings
beyond the manufacturing sectors.
3. There are some other ways in which this study could be further extended. First,
employing other performance measures may provide supplementary results. Second,
in this study we use Short-term debt, Long-term debt and Total debts to measure of
debts, but its better to detail into short-term bank loan, Long-term bank loan and
Total bank loan.
4. The banks/ lenders/ creditors are recommended to more cautiously examine the ratio
of short-term debt to total assets from borrowers/ debtors before any financing
decisions to control and reduce bankruptcy costs.
32 of 44
References
Abor, J. (2005). The effect of capital structure on profitability: an empirical analysis of
listed
firms
in
Ghana.
Journal
of
Risk
Finance,
6(5),
438-445.
http://dx.doi.org/10.1108/15265940510633505.
Abor, J. (2007). Debt policy and performance of SMEs. Journal of Risk Finance, 8(4),
364-379. http://dx.doi.org/10.1108/15265940710777315
Anne P. V. (2010). The Modigliani-Miller Theorem. The Modigliani-Miller Proposition
after Fifty Years and Entrepreneurial Finance, 19, 3-7.
Arbabiyan, A. & Safari, M. (2009). The effects of capital structure and profitability in the
listed firms in Tehran Stock Exchange. Journal of Management Perspective, 33, pp.
159-175.
Arif, S., & Muhammad S. M. M. E. (2011). The Impact of Financial Leverage to
Profitability Study of Non-Financial Companies Listed in Indonesia Stock Exchange.
European Journal of Economics, Finance and Administrative Sciences, 32, 137 48.
Brabete, V., & Balasundaram, N. (2010). Capital Structure and its impact on profitability:
a study of listed manufacturing companies in Sri Lanka. Young Economists' Journal,
15, 7-16.
Ebaid, E. (2009). The impact of capital-structure choice on firm performance empirical
evidence
from
Egypt.
The
Journal
of
Risk
Finance,
10(5),
477-87.
http://dx.doi.org/10.1108/15265940911001385
Iorpev, L., & Kwanum, I. M. (2012). Capital Structure and Firm Performance: Evidence
from Manufacturing Companies in Nigeria. International Journal of Business and
Management Tomorrow, 2 (5), 1-17
Grout, A. G., & Zalewska, A. (2006). Profitability Measures and Competition Law.
Retrieved
from
Social
Science
Research
Network,
available
at
SSRN:
http://ssrn.com/abstract=893522 or http://dx.doi.org/10.2139/ssrn.893522
33 of 44
Laurent, W. (2003). Leverage and Corporate Performance: A Frontier Efficiency

Analysis on European Countries. EFMA 2003 Helsinki Meetings, 05-07.
http://dx.doi.org/10.2139/ssrn.300640.
McKinsey Global Institute. (2012). Sustaining Vietnams growth: The productivity
challenge.
Retrieved
November
24,
2012
from
McKinsey
website:
http://www.mckinsey.com/Search.aspx?q=Vietnam%20s%20growth
Mohammad, F. S. & Jaafer, M. A. (2012). The Relationship between Capital Structure
and Profitability, 3 (16), 104 12.
Murray, Z. F. & Vidhan, K. G. (2005). Tradeoff and Pecking Order Theories of Debt.
Handbook of Corporate Finance: Empirical Corporate Finance. Handbooks in
Finance Series, Elsevier/North-Holland, 7, 5-24.
Nour, A. (2012). Capital Structure and Firm Performance; Evidence from Palestine Stock
Exchange. Journal of Money, Investment and Banking, 23, 109 - 15
Nima, S. S., Mohammad, M. L., Saeed, S., & Zeinab, T. A. (2012). Debt Policy and
Corporate Performance: Empirical Evidence from Tehran Stock Exchange
Companies. International Journal of Economics and Finance, 4 (11), 217-24.
http://dx.doi.org/10.5539/ijef.v4n11p217
Ong, T. S. & Teh, B. H. (2011). Capital Structure and Corporate Performance of
Malaysian Construction Sector.
International Journal of Humanities and Social
Science, 1, 1-3.
Prashant, G., Aman, S. & Dinesh, S. (2011). Capital Structure and Financial
Performance: Evidence from India. Retrieved in Aug 2012, from website:
http://www.wbiconpro.com/319-Gupta.pdf
Pratheepkanth, P. (2011). Capital Structure and Financial Performance: Evidence from
Selected Business Companies in Colombo Stock Exchange Sri Lanka. Journal of
Arts, Science & Commerce, 2, 171- 82
Rajan, R.G and Zingales, L. (1995). What Do We Know about Capital Structure? Some
Evidence from International Data. Journal of Finance, 50 (5), 1421-1460.
34 of 44
Romettulla, F. & Elsana, E. (2012). Capital Structure and Profitability: The Macedonian
Case. European Scientific Journal, 8 (7), 51-58.
Wali, R., Goher, F. & Mehboob, A. (2012). Impact of Debt Structure on Profitability in
Textile Industry of Pakistan. International journal of environmental research (IJER),
Mar-Apr 2012, 61-70.
Zeitun, R. and Tian, G. (2007). Capital structure and corporate performance: evidence
from Jordan. Australasian Accounting Business and Finance Journal, 1(4), 40 - 49.
Retrieved from website: http://ro.uow.edu.au/aabfj/vol1/iss4/3
35 of 44
Appendix 1: Outliners
Case Processing
Summary
SDTA
LDTA
TDTA
TDSE
Net Margin
ROE
Valid
223 100.0%
223 100.0%
223 100.0%
223 100.0%
223 100.0%
223 100.0%
Missing
0
0
0
0
0
0
.0%
.0%
.0%
.0%
.0%
.0%
Total
223 100.0%
223 100.0%
223 100.0%
223 100.0%
223 100.0%
223 100.0%
36 of 44
Appendix 2: Normality and Heteroskedasticity
37 of 44
38 of 44
Appendix 3: MLR between Net margin and independent variables

Variables Entered/Removedb
P
Model Variables Entered Variables Removed Method

1
TDSE, LDTA,
SDTAa
a. Tolerance = .000 limits reached.
b. Dependent Variable: Net Margin
. Enter
Model Summary
Model
R Square Adjusted R Square Std. Error of the Estimate
1
.529a
.279
.268
a. Predictors: (Constant), TDSE, LDTA, SDTA
4.38190%
ANOVAb
P
Model
1
Sum of Squares
df
Mean Square
Regression
1459.819
486.606
Residual
3763.409
196
19.201
Sig.
25.343
.000a
P
Total
5223.227
199
Coefficientsa
P
Unstandardized
Coefficients
Model
1
(Constant 14.38
)
4
Std. Error
Standardized
Coefficients
Beta
Collinearity Statistics
t
Sig. Tolerance
1.141
12.60 .000
8
VIF
SDTA
-.178
.036
-.565 -4.932 .000
.281
3.564
LDTA
.000
.052
.000 -.002 .998
.515
1.941
.049
.224
4.470
TDSE
.002
.006
a. Dependent Variable: Net Margin
.382 .703
39 of 44
Excluded Variablesb
P
Model
Beta In t Sig. Partial Correlation
Tolerance
TDT
.a .
.
.
.000
A
a. Predictors in the Model: (Constant), TDSE, LDTA, SDTA
1
Minimum
Tolerance
VIF
.
.000
Collinearity Diagnosticsa
P
Dimen
Model sion
Eigenvalue
1
Condition
Index
Variance Proportions
(Constant)
SDTA
LDTA
TDSE
3.305
1.000
.01
.00
.02
.01
.477
2.631
.01
.01
.47
.00
.197
4.099
.16
.00
.06
.23
4
.020
12.734
.82
.98
.46
.76
Residuals Statisticsa
P
Minimum
Maximum
Mean
Predicted Value
1.7631% 12.9061% 7.1957%
Residual
-11.71090% 17.43534% .00000%
Std. Predicted
-2.006
2.108
.000
Value
Std. Residual
-2.673
3.979
.000
Std. Deviation
2.70846%
4.34875%
1.000
200
200
200
.992
200
40 of 44
41 of 44
Appendix 4: MLR between ROE and independent variables

Variables Entered/Removedb
P
Model Variables Entered Variables Removed Method

1
TDSE, LDTA,
SDTAa
a. Tolerance = .000 limits reached.
b. Dependent Variable: ROE
. Enter
Model Summary
Model
R Square Adjusted R Square Std. Error of the Estimate
1
.085a
.007
-.008
9.70801%
ANOVAb
P
Model
1
Sum of Squares
Regression
Residual
df
Mean Square
133.338
44.446
18472.101
196
94.245
Sig.
.472
.702a
P
Total
18605.440
199
Coefficientsa
P
Unstandardized
Coefficients
Model
1
(Constant 19.49
)
9
Std. Error
Standardized
Coefficients
Beta
Collinearity
Statistics
t
2.528
Sig. Tolerance
VIF
7.715 .000
SDTA
-.080
.080
-.135
- .317
1.004
.281
3.564
LDTA
-.015
.115
-.013 -.126 .900
.515
1.941
.224
4.470
TDSE
.012
.014
a. Dependent Variable: ROE
.125
.832 .407
42 of 44
Excluded Variablesb
P
Model
Beta In t Sig. Partial Correlation Tolerance
TDT
.a .
.
.
.000
A
a. Predictors in the Model: (Constant), TDSE, LDTA, SDTA
1
Minimum
Tolerance
VIF
.
.000
Collinearity Diagnosticsa
P
Mode Dimensio
l
n
Eigenvalue
1
Condition
Index
Variance Proportions
(Constant)
SDTA
LDTA
TDSE
3.305
1.000
.01
.00
.02
.01
.477
2.631
.01
.01
.47
.00
.197
4.099
.16
.00
.06
.23
4
.020
12.734
.82
.98
.46
.76
Residuals Statisticsa
P
Minimum
Maximum
Mean
Predicted Value
16.4439% 23.7008% 17.5737%
Residual
-34.14282% 24.60652% .00000%
Std. Predicted
-1.380
7.485
.000
Value
Std. Residual
-3.517
2.535
.000
Std. Deviation
.81856%
9.63455%
1.000
200
200
200
.992
200
43 of 44
44 of 44

Truong Hanh Duyen

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Truong Hanh Duyen

Hochgeladen von

Copyright:

Verfügbare Formate

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

TRUONG HANH DUYEN

DEBTS AND PROFITABILITY

MASTER OF BUSINESS (Honours)

Ho Chi Minh City Year 2012

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

CHAPTER 1: INTRODUCTION ............................................................................... 5

Vietnam Context: ............................................................................................................................5

CHAPTER 2: LITERATURE REVIEW ................................................................. 11

2.1 The concept of debts: ....................................................................................................................... 11

CHAPTER 3: RESEARCH METHODOLOGY ..................................................... 20

3.1 Research Design: .............................................................................................................................. 20

CHAPTER 4: EMPIRICAL RESULTS & DISCUSSION ..................................... 26

CHAPTER 5: IMPLICATIONS & CONCLUSIONS ............................................ 30

5.1. Implication: ...................................................................................................................................... 30

Appendix 2: Normality and Heteroskedasticity ................................................................... 37

Appendix 3: MLR between Net margin and independent variables .................................. 39

Appendix 4: MLR between ROE and independent variables ............................................. 42

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

The ability of companies in determining suitable financial policies to make investment

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

have wider extent of acceptance for capital budgeting options.

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

1.4 Research structure:

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

CHAPTER 2: LITERATURE REVIEW

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

Operating Profit Margin is a measure of overall operating efficiency, incorporating all

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

2.5 Hypotheses Development:

H 1 : Theres negative relationship between Short-term Debt and Net Margin

H 2 : Theres negative relationship between Long-term Debt and Net Margin

H 3 : Theres negative relationship between Total Debt and Net Margin

H 4 : Theres negative relationship between Short-term Debt and ROE

H 5 : Theres negative relationship between Long-term Debt and ROE

By Truong Hanh Duyen Mbus 1

Debts & Profitability: An examination of manufacturing firms listed in Vietnam

H 6 : Theres negative relationship between Total Debt and ROE