Master thesis: The impact of retained earnings on the performance of lister firms on the Vietnamese stock market

The distribution of profits is a critical aspect of corporate financial management, with dividend policy traditionally receiving significant attention. However, the strategic role of retained earnings in fostering corporate growth and financial stability, particularly in emerging markets, is increasingly recognized. In Vietnam, where public shareholders' retained earnings constitute a substantial portion of capital and firms often face challenges in external capital access, understanding their impact is crucial. This study aims to provide a comprehensive analysis of the theoretical underpinnings and practical implications of retained earnings on the financial performance of listed firms on the Vietnamese stock market, ultimately guiding optimal profit retention strategies for sustainable development and enhanced business value.

Financial professionals, investors, academics, and policymakers interested in corporate finance, financial management, and the dynamics of the Vietnamese stock market.

This study investigates the profound impact of retained earnings on the operational performance of listed firms within the Vietnamese stock market. Employing a robust methodology encompassing general research, analysis, statistical methods, qualitative approaches, and multiple regression analysis via STATA software, the research meticulously examines key financial variables. These include Return on Assets (ROA), Return on Equity (ROE), Tobin's Q, business size, financial leverage, growth rate, and cash ratio, alongside the primary variable of retained earnings. Data was collected from companies listed on both the Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX) over the period 2020-2023, deliberately excluding firms in the banking and financial services sector due to distinct accounting regulations. The empirical findings reveal a significant positive correlation between retained earnings and business performance, underscoring its crucial role in fostering corporate growth. Furthermore, business size positively influences performance. Conversely, a high degree of financial leverage is found to have an inverse effect, suggesting that excessive debt may dilute efficiency. While a strong cash ratio indicates sound solvency, an overly high ratio might signal inefficient capital utilization. These insights offer valuable guidance for corporate financial management, informing strategic decisions regarding profit distribution and reinvestment to enhance operational efficiency and drive long-term value creation in Vietnam. The findings are particularly relevant for investors, analysts, and policymakers seeking to optimize financial strategies and understand market dynamics.