Impact of capital structure on the profitability of real estate firms listed on Hanoi stock exchange amid Covid-19

Abstract

This paper examines the impact of the capital structure on the profitability of 34 listed real estated firms in the Hanoi Stock exchange with the inclusion of the Covid-19 pandemic, period 2018-2021. With the application of fixed effect, random effect models, and Mann & Whitney U tests, supported by diversified tests for checking and solving the model flaws, the study’s findings confirm the negative relationship between the debt-to-total assets variable and profit efficiency of studied real estate firms. This suggests that operating under an expected rising interest rate environment aligned with restricted bank lending real estate sector, Vietnamese real estate firms balance their capital sources, between borrowings, including short-term and long-term loans with equity. Inclining towards equity capital could be more expensive but will help businesses reduce the pressure on borrowing costs and also show how much of the property’s value can be used to secure the debts of the company