Porntip Jirathumrong

Type of the article: Research Article

Abstract
The service industry sector is crucial to Thailand’s employment and economic development. The firm value and sustainable growth of firms in this industry inevitably have a beneficial impact on the country. This study investigates the impact of capital structure and financial distress on sustainable growth and firm value among listed companies in Thailand’s service sector. Using unbalanced panel data from 133 firms listed on the Stock Exchange of Thailand, the analysis encompasses 1,117 firm-year observations spanning the period from 2014 to 2023. Data were sourced from the SETSMART database of the Stock Exchange of Thailand. The empirical findings indicate that capital structure, measured by debt to equity ratio, demonstrates a significant negative influence on both sustainable growth (β = –1.8600, p < 0.05) and firm value (β = –1.7600, p < 0.05), suggesting that excessive leverage undermines long-term performance, while financial distress, as captured by the Z-score, shows positive impact on both sustainable growth (β = 1.1253, p < 0.01) and firm value (β = 0.1578, p < 0.01), indicating that reduced financial distress enhances corporate outcomes. These findings underscore important managerial implications. Service firms should optimize capital structure through balanced debt-equity ratios. Proactive financial distress management is crucial for sustaining growth. This study contributes to the corporate finance literature in emerging markets by empirically validating capital structure theories in Thailand’s unique service sector context while providing practical guidance for financial decision-making.