The Effect of Profitability on the Capital Structure of Non Financial Listed Firms in Vietnam: A Desk-Research Synthesis

Abstract

Capital structure is a critical financial decision for non-financial listed firms in Vietnam, set against a context in which stock market capitalization has reached nearly 82 percent of Gross Domestic Product while empirical evidence on the role of profitability remains fragmented. This paper synthesizes, analyzes, evaluates, and compares theoretical frameworks and empirical evidence on the effect of profitability on the capital structure of non-financial listed firms in Vietnam, thereby identifying which underlying theory better fits the domestic institutional context. The paper adopts a desk-research method, systematically synthesizing and cross-referencing published empirical studies at home and abroad on the basis of three foundational theories: trade-off theory, pecking order theory, and agency cost theory. The results show that no single theory holds absolute dominance; the direction of the effect depends on the stage of capital market development, the prevalence of state ownership, and firm specific characteristics. The paper contributes an integrated conceptual framework and offers implications for regulators and corporate managers in formulating financing policy.