This study aims to examine how the capital structure and several factors influence stock returns in different stages of business life cycle by employing the most recent data. To achieve this objective, this study used a panel data that includes 466 non-financial listed companies from 2017 to 2021 on Vietnamese stock exchange and the regression with fixed effects model (FEM). The findings show that capital structure has a positive effect on stock returns. Firm age, profitability, and growth opportunities are related positively to stock returns, while firm size is negatively linked to stock returns. Besides, the empirical results indicate that capital structure positively affects stock returns in pioneer, growth, and decline stages, while capital structure negatively affects stock returns in mature stage. Firm size has a negative influence on stock returns during the mature stage, while liquidity has a negative impact on stock returns during the decline stage. Firm age, profitability, and growth opportunities positively affect stock returns in different stages of life cycle. The empirical results of this study are consistent with the predictions of the pecking order theory and signaling theory that provide some help in understanding the financing behavior of firms in Vietnam.

This study aims to examine how the capital structure and several factors influence stock returns in different stages of business life cycle by employing the most recent data. To achieve this objective, this study used a panel data that includes 466 non-financial listed companies from 2017 to 2021 on Vietnamese stock exchange and the regression with fixed effects model (FEM). The findings show that capital structure has a positive effect on stock returns. Firm age, profitability, and growth opportunities are related positively to stock returns, while firm size is negatively linked to stock returns. Besides, the empirical results indicate that capital structure positively affects stock returns in pioneer, growth, and decline stages, while capital structure negatively affects stock returns in mature stage. Firm size has a negative influence on stock returns during the mature stage, while liquidity has a negative impact on stock returns during the decline stage. Firm age, profitability, and growth opportunities positively affect stock returns in different stages of life cycle. The empirical results of this study are consistent with the predictions of the pecking order theory and signaling theory that provide some help in understanding the financing behavior of firms in Vietnam.

Abor, J. (2005). The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana. The Journal of Risk Finance, 6(5), 438-445. https://doi.org/10.1108/15265940510633505
Adawiyah, N. R., and Setiyawati, H. (2019). The Effect of Current Ratio, Return on Equity, And Firm Size on Stock Return (Study of Manufacturing Sector Food and Baverage in Indonesia Stock Exchange). Scholars Bulletin, 5(09), 513-520.
Adizes, I. (1979). Organizational passages—Diagnosing and treating lifecycle problems of organizations. Organizational Dynamics, 8(1), 3-25. https://doi.org/https://doi.org/10.1016/0090-2616(79)90001-9
Agiomirgianakis, G. M., Magoutas, A. I., and Sfakianakis, G. (2013). Determinants of profitability in the Greek tourism sector revisited: The impact of the economic crisis. Journal of Tourism and Hospitality Management, 1(1), 12-17.
Ahmad, H., Fida, B. A., and Zakaria, M. (2013). The co-determinants of capital structure and stock returns: evidence from the Karachi stock exchange. The Lahore Journal of Economics, 18(1), 81.
Ahmed Sheikh, N., and Wang, Z. (2011). Determinants of capital structure. Managerial Finance, 37(2), 117-133. https://doi.org/10.1108/03074351111103668
Allozi, N. M., and Obeidat, G. S. (2016). The relationship between the stock return and financial indicators (profitability, leverage): An empirical study on manufacturing companies listed in Amman Stock Exchange. Journal Of Social Sciences (Coes&Rj-Jss), 5(3), 408-424.
Anthony, J. H., and Ramesh, K. (1992). Association between accounting performance measures and stock prices: A test of the life cycle hypothesis. Journal of Accounting and Economics, 15(2), 203-227. https://doi.org/https://doi.org/10.1016/0165-4101(92)90018-W
Antoniou, A., Guney, Y., and Paudyal, K. (2008). The Determinants of Capital Structure: Capital Market-Oriented versus Bank-Oriented Institutions. Journal of Financial and Quantitative Analysis, 43(1), 59-92. https://doi.org/10.1017/S0022109000002751
Baker, M., and Wurgler, J. (2002). Market Timing and Capital Structure [https://doi.org/10.1111/1540-6261.00414]. The journal of finance, 57(1), 1-32. https://doi.org/https://doi.org/10.1111/1540-6261.00414
Baker, M., and Wurgler, J. (2006). Investor Sentiment and the Cross-Section of Stock Returns [https://doi.org/10.1111/j.1540-6261.2006.00885.x]. The journal of finance, 61(4), 1645-1680. https://doi.org/https://doi.org/10.1111/j.1540-6261.2006.00885.x
Banz, R. W. (1981). The relationship between return and market value of common stocks. Journal of Financial Economics, 9(1), 3-18. https://doi.org/https://doi.org/10.1016/0304-405X(81)90018-0
Barclay, M. J., and Smith, C. W. (2005). The Capital Structure Puzzle: The Evidence Revisited [https://doi.org/10.1111/j.1745-6622.2005.012_2.x]. Journal of Applied Corporate Finance, 17(1), 8-17. https://doi.org/https://doi.org/10.1111/j.1745-6622.2005.012_2.x
Berger, A. N., and Di Patti, E. B. (2006). Capital structure and firm performance: A new approach to testing agency theory and an application to the banking industry. Journal of Banking and Finance, 30(4), 1065-1102.
Bhandari, L. C. (1988). Debt/equity ratio and expected common stock returns: Empirical evidence. The journal of finance, 43(2), 507-528.
Black, E. L. (1998). Life-cycle impacts on the incremental value-relevance of earnings and cash flow measures. Journal of Financial Statement Analysis, 4, 40-57.
Brounen, D., de Jong, A., and Koedijk, K. (2006). Capital structure policies in Europe: Survey evidence. Journal of Banking and Finance, 30(5), 1409-1442. https://doi.org/https://doi.org/10.1016/j.jbankfin.2005.02.010
Bulan, L., and Yan, Z. (2009). The pecking order of financing in the firm’s life cycle. Banking and Finance Letters, 1(3), 129-140.
Cai, J., and Zhang, Z. (2011). Leverage change, debt overhang, and stock prices. Journal of Corporate Finance, 17(3), 391-402.
Chandra, T., Junaedi, A. T., Wijaya, E., Suharti, S., Mimelientesa, I., and Ng, M. (2019). The effect of capital structure on profitability and stock returns. Journal of Chinese Economic and Foreign Trade Studies, 12(2), 74-89. https://doi.org/10.1108/JCEFTS-11-2018-0042
Damodaran, A. (2001). Corporate Finance: Theory and Practice, New York, John Willey and Sons. In: Inc.
Detthamrong, U., Chancharat, N., and Vithessonthi, C. (2017). Corporate governance, capital structure and firm performance: Evidence from Thailand. Research in International Business and Finance, 42, 689-709. https://doi.org/https://doi.org/10.1016/j.ribaf.2017.07.011
Dickinson, V. (2011). Cash Flow Patterns as a Proxy for Firm Life Cycle. The Accounting Review, 86(6), 1969-1994. https://doi.org/10.2308/accr-10130
El‐Sayed Ebaid, I. (2009). The impact of capital‐structure choice on firm performance: empirical evidence from Egypt. The Journal of Risk Finance, 10(5), 477-487. https://doi.org/10.1108/15265940911001385
Fama, E. F., and French, K. R. (1992). The Cross-Section of Expected Stock Returns [https://doi.org/10.1111/j.1540-6261.1992.tb04398.x]. The journal of finance, 47(2), 427-465. https://doi.org/https://doi.org/10.1111/j.1540-6261.1992.tb04398.x
Frank, M. Z., and Goyal, V. K. (2003). Testing the pecking order theory of capital structure. Journal of Financial Economics, 67(2), 217-248. https://doi.org/https://doi.org/10.1016/S0304-405X(02)00252-0
Frielinghaus, A., Mostert, B., and Firer, C. (2005). Capital structure and the firm’s life stage. South African Journal of Business Management, 36, 9-18. https://doi.org/10.4102/sajbm.v36i4.640
George, T. J., and Hwang, C.-Y. (2010). A resolution of the distress risk and leverage puzzles in the cross section of stock returns. Journal of Financial Economics, 96(1), 56-79. https://doi.org/https://doi.org/10.1016/j.jfineco.2009.11.003
Hamilton, R. T., and Fox, M. A. (1998). The financing preferences of small firm owners. International Journal of Entrepreneurial Behavior and Research, 4(3), 239-248. https://doi.org/10.1108/13552559810235529
Harris, M., and Raviv, A. (1991). The theory of capital structure. The journal of finance, 46(1), 297-355.
Haugen, R. A., and Baker, N. L. (1996). Commonality in the determinants of expected stock returns. Journal of Financial Economics, 41(3), 401-439. https://doi.org/https://doi.org/10.1016/0304-405X(95)00868-F
Hirsch, J., and Walz, U. (2011). Financing Decisions along a Firm’s Life‐cycle: Debt as a Commitment Device. European Financial Management, 17(5), 898-927.
Hovakimian, A., Opler, T., and Titman, S. (2001). The Debt-Equity Choice. Journal of Financial and Quantitative Analysis, 36(1), 1-24. https://doi.org/10.2307/2676195
Jensen, M. C. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. The American Economic Review, 76(2), 323-329. http://www.jstor.org/stable/1818789
Jensen, M. C., and Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360. https://doi.org/https://doi.org/10.1016/0304-405X(76)90026-X
Kallunki, J.-P., and Silvola, H. (2008). The effect of organizational life cycle stage on the use of activity-based costing. Management Accounting Research, 19(1), 62-79. https://doi.org/https://doi.org/10.1016/j.mar.2007.08.002
Khan, W., Naz, A., Khan, M., Khan, W. K. Q., and Ahmad, S. (2013). The impact of capital structure and financial performance on stock returns “A case of Pakistan textile industry.”. Middle-East Journal of Scientific Research, 16(2), 289-295.
Kraus, A., and Litzenberger, R. H. (1973). A State-Preference Model of Optimal Financial Leverage. The journal of finance, 28(4), 911-922. https://doi.org/10.2307/2978343
Lemmon, M. L., and Zender, J. F. (2010). Debt Capacity and Tests of Capital Structure Theories. Journal of Financial and Quantitative Analysis, 45(5), 1161-1187. https://doi.org/10.1017/S0022109010000499
Matemilola, B. T., Bany-Ariffin, A. N., Nassir, A. M., and Azman-Saini, W. N. W. (2017). Moderating Effects of Firm Age on the Relationship between Debt and Stock Returns. Journal of Asia-Pacific Business, 18(1), 81-96. https://doi.org/10.1080/10599231.2017.1272999
Miller, D., and Friesen, P. H. (1980). Momentum and Revolution in Organizational Adaptation. Academy of Management Journal, 23(4), 591-614. https://doi.org/10.5465/255551
Miller, D., and Friesen, P. H. (1984). A longitudinal study of the corporate life cycle. Management science, 30(10), 1161-1183.
Modigliani, F., and Miller, M. H. (1958). The Cost of Capital, Corporation Finance and the Theory of Investment. The American Economic Review, 48(3), 261-297. http://www.jstor.org/stable/1809766
Modigliani, F., and Miller, M. H. (1963). Corporate Income Taxes and the Cost of Capital: A Correction. The American Economic Review, 53(3), 433-443. http://www.jstor.org/stable/1809167
Myers, S. C. (1984). Capital Structure Puzzle. National Bureau of Economic Research Working Paper Series, No. 1393. https://doi.org/10.3386/w1393
Myers, S. C., and Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221. https://doi.org/https://doi.org/10.1016/0304-405X(84)90023-0
Nguyen Hoang, N. (2022). The Nexus Between Capital Structure and Stock Prices: Evidence from Non-agricultural Firms in Vietnam. European Journal of Business and Management Research, 7(4), 66-70. https://doi.org/10.24018/ejbmr.2022.7.4.1489
Nguyen, H. T., and Nguyen, A. H. (2020). The impact of capital structure on firm performance: Evidence from Vietnam. The Journal of Asian Finance, Economics and Business, 7(4), 97-105.
Nguyen, T., and Nguyen, H.-C. (2015). Capital structure and firms’ performance: Evidence from Vietnam’s stock exchange. International Journal of Economics and Finance, 7(12), 1-10.
NGUYEN, T. G., NGUYEN, L., and NGUYEN, T. D. (2021). Capital structure and its determinants: Evidence from Vietnam. The Journal of Asian Finance, Economics and Business, 8(10), 1-10.
Obilor, E. I., and Amadi, E. C. (2018). Test for significance of Pearson’s correlation coefficient. International Journal of Innovative Mathematics, Statistics and Energy Policies, 6(1), 11-23.
Oler, D., and Picconi, M. (2009). Implications of insufficient and excess cash for future performance. Available at SSRN 1092880.
Penman, S. H., Richardson, S. A., and Tuna, I. (2007). The book‐to‐price effect in stock returns: accounting for leverage. Journal of accounting research, 45(2), 427-467.
Pervan, M., and Višić, J. (2012). Influence of firm size on its business success. Croatian Operational Research Review, 3(1), 213-223.
Pfaffermayr, M., Stöckl, M., and Winner, H. (2013). Capital Structure, Corporate Taxation and Firm Age* [https://doi.org/10.1111/j.1475-5890.2013.00179.x]. Fiscal Studies, 34(1), 109-135. https://doi.org/https://doi.org/10.1111/j.1475-5890.2013.00179.x
Purnamawati, I., and Ayu, G. (2016). The effect of capital structure and profitability on stock price (Study of the manufacturing sector in Indonesia Stock Exchange). In.
Robb, A. M. (2002). Small business financing: Differences between young and old firms. The Journal of Entrepreneurial Finance, 7(2), 45-64.
Ross, S. A. (1977). The Determination of Financial Structure: The Incentive-Signalling Approach. The Bell Journal of Economics, 8(1), 23-40. https://doi.org/10.2307/3003485
Spence, A. M. (1979). Investment Strategy and Growth in a New Market. The Bell Journal of Economics, 10(1), 1-19. https://doi.org/10.2307/3003316
Subramaniam, V. A., and Anandasayanan, S. (2018). Capital Structure and Stock Prices: Empirical Evidence from Listed Beverage, Food and Tobacco Companies in Sri Lanka. International Journal of Social and Administrative Sciences, 3(2), 83-90. https://doi.org/10.18488/journal.136.2018.32.83.90
Tian, L., Han, L., and Zhang, S. (2015). Business life cycle and capital structure: evidence from Chinese manufacturing firms. China and World Economy, 23(2), 22-39.
Vithessonthi, C., and Tongurai, J. (2015). The effect of leverage on performance: Domestically-oriented versus internationally-oriented firms. Research in International Business and Finance, 34, 265-280.
Vo, X. V. (2017). Determinants of capital structure in emerging markets: Evidence from Vietnam. Research in International Business and Finance, 40, 105-113. https://doi.org/https://doi.org/10.1016/j.ribaf.2016.12.001
Vo, X. V., and Ellis, C. (2017). An empirical investigation of capital structure and firm value in Vietnam. Finance Research Letters, 22, 90-94. https://doi.org/https://doi.org/10.1016/j.frl.2016.10.014
VU, T. M. T., TRAN, C. Q., DOAN, D. T., and LE, T. N. (2020). Determinants of capital structure: The Case in Vietnam. The Journal of Asian Finance, Economics and Business, 7(9), 159-168.
Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. MIT press.
Yang, C.-C., Lee, C.-f., Gu, Y.-X., and Lee, Y.-W. (2010). Co-determination of capital structure and stock returns—A LISREL approach: An empirical test of Taiwan stock markets. The Quarterly Review of Economics and Finance, 50(2), 222-233. https://doi.org/https://doi.org/10.1016/j.qref.2009.12.001