The Impacts of Capital Structure on the Profibility of Small and Medium Enpterprises in Thai Nguyen Province, Vietnam

Abstract

The paper uses data from the financial statements of 205 small and medium enterprises from 2010 to 2016 in order to analysis the impacts of the capital structure on the profitability of small and medium enterprises in Thai Nguyen province by using different methods such as OLS, FEM and REM. A firm's capital structure is calculated by dividing debt by equity. The profitability is measured by the ratio of the after-tax return on total assets (ROA). The results show that there is a proportional relationship between the capital structure and profitability of firms. Based on the results of the study, the author suggest some recommendations to improve the capital structure, thereby enhancing the efficiency of business operation of SMEs in Thai Nguyen province in the future