Financial Performance and Organizational Downsizing: Evidence from Smes in Vietnam

In statistics, Lasso is a method that is used commonly for the correction of linear regression coefficients. In the present study, this method was applied to the problem of evaluating the impact of financial performance on organizational downsizing, on a dataset of over 2,500 small and medium enterprises in Vietnam, during the years 2013 and 2015. The results of the research demonstrated that certain financial factors, such as return on assets, firm equity, total sales during the year, asset efficiency, and profit margin, exerted an impact on firm downsizing (both capital and employment downsizing). The factors ‘number of years since founded’ and ‘firm size’ were also observed to exert significant effects on firm downsizing during these years.