Factors Affecting the Cost of Capital of Food Processing Enterprises in Vietnam

Thuy Linh Vu and Van Hai Tran

Research on World Agricultural Economy, 2025, vol. 6, issue 3

Abstract: The cost of capital represents a critical hurdle rate that any enterprise must surpass to generate added value and achieve sustainable growth. For food processing enterprises in Vietnam, understanding and managing the factors that influence the cost of capital is vital but remains relatively overlooked in both practice and research. This study investigates the key determinants of the cost of capital for Vietnamese food processing firms, aiming to bridge this knowledge gap and provide practical insights for managers and policymakers. The research is grounded in primary data gathered through a structured survey of 125 food processing enterprises across Vietnam. Using robust quantitative methods and multiple linear regression analysis, the study identifies six significant factors out of seven examined that affect the cost of capital. These include macroeconomic and firm-specific variables such as inflation, market interest rates, corporate income tax rates, financing decisions, distribution decisions, and firm size. Inflation, higher market interest rates, and larger firm size are found to increase the cost of capital, while favorable corporate income tax rates, sound financing decisions, and effective distribution strategies contribute to lowering it. By highlighting how these factors operate and interact, the study offers evidence-based recommendations to help food processing businesses optimize their capital structure and improve financial performance. The findings contribute to the literature on corporate finance in emerging markets and serve as a practical reference for enterprises seeking to enhance capital efficiency and competitiveness in Vietnam’s dynamic economic environment.

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ags:reowae:412764

DOI: 10.22004/ag.econ.412764

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