The Impact of Capital Structure on Firm Performance of Vietnamese Non-financial Listed Companies Based on Agency Cost Theory
Main Article Content
Abstract
This paper investigates the impact of capital structure on firm performance using a sample of 3,122 observations of 446 non-financial listed companies on the Vietnam stock market during 2011-2017. Using firm performance measures, namely ROE and Tobin Q, we examined if higher leveraged firms are more efficient or less in their performance. We employed the fixed effect model to prove that there is an inverse U-shaped relationship between leverage and ROE, and then we can find a preferred capital structure for Vietnamese non-financial firms. To deal with endogeneity problem of the leverage variable, we employ two stage least squares (2SLS) regression with instrument variable estimators, which helps us strengthen the above results.
Keywords:
Capital structure, firm performance, leverage variable, 2SLS.
References
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[12] V.M. Long, “The relationship between capital structure and firm value: the case of listed companies on the Ho Chi Minh City Stock Exchange. Banking University of Ho Chi Minh City”, Journal of Science - Ho Chi Minh City Open University 53 (2) (2017) 45-56.
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[14] N.T. Cuong, “The relationship between capital structure and firm value: The case of listed companies on the Ho Chi Minh City Stock Exchange. Banking University of Ho Chi Minh City”, Dotoral thesis, Ho Chi Minh City: Vienam National University, 2015.
[15] V. Dawar, “Agency theory, capital structure and firm performance: Some Indian evidence”, Managerial Finance 40 (12) (2014) 1190-1206.
[16] D. Margaritis, M. Psillaki, “Capital structure, equity ownership and firm performance”, Journal of Banking and Finance 34 (2010) 621-632.
[17] S. Titman, R. Wessels, “The determinants of capital structure choice”, Journal of Finance 43 (1) (1988) 1-19.
[18] T.H.V. Duong, “A study of the factors affecting the capital structure of the companies listed on Vietnam stock market”, Doctoral thesis, National Economics University, 2014.
[2] J. Williams, Perquisites, “Risk and capital structure”, Journal of Finance 42 (1987) 29-49.
[3] M. Jensen, “Agency cost of free cash flow, corporate finance and takeovers”, American Economic Review Papers and Proceedings 76 (1986) 323-329.
[4] J. Berk, P. DeMarzo, J. Harford, Fundamentals of Corporate Finance, second edition, Prentice Hall, 2012.
[5] A.A. Berle, G.C. Means, The Modern Corporation and Private Property, New York: The Macmillan Company, 1932.
[6] J.C. Jensen, W.H. Meckling, “Theory of the firm: managerial behavior, agency costs and ownership structure”, Journal of Financial Economics 3 (1976) 305-360.
[7] J. Abor, “The effect of capital structure on profitability: An empirical analysis of listed firms in Ghana”, Journal of Risk Finance 6 (2005) 438-447.
[8] L. Weill, “Leverage and Corporate Performance: Does Institutional Environment matter?”, Small Business Economics 30 (2008) 251-265.
[9] R. Zeitun, M.M. Haq, “Debt maturity, financial crisis and corporate performance in GCC countries: A dynamic-GMM approach”, Afro-Asian J. Finance and Accounting 5 (2015) 231-247.
[10] A.N. Berger, E. Bonaccorsi di Patti, “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 (2006) 1065-1102.
[11] D. Margaritis, M. Psillaki, “Capital structure and firm efficiency”, Journal of Business Finance and Accounting 34 (2007) 1447-1469.
[12] V.M. Long, “The relationship between capital structure and firm value: the case of listed companies on the Ho Chi Minh City Stock Exchange. Banking University of Ho Chi Minh City”, Journal of Science - Ho Chi Minh City Open University 53 (2) (2017) 45-56.
[13] Le Thi Phuong Vy, “Ownership Structure, Capital Structure and Firm Performance: A Study of Vietnamese Listed Firms”, Dotoral thesis. Sydney: University of Western Sydney, 2005.
[14] N.T. Cuong, “The relationship between capital structure and firm value: The case of listed companies on the Ho Chi Minh City Stock Exchange. Banking University of Ho Chi Minh City”, Dotoral thesis, Ho Chi Minh City: Vienam National University, 2015.
[15] V. Dawar, “Agency theory, capital structure and firm performance: Some Indian evidence”, Managerial Finance 40 (12) (2014) 1190-1206.
[16] D. Margaritis, M. Psillaki, “Capital structure, equity ownership and firm performance”, Journal of Banking and Finance 34 (2010) 621-632.
[17] S. Titman, R. Wessels, “The determinants of capital structure choice”, Journal of Finance 43 (1) (1988) 1-19.
[18] T.H.V. Duong, “A study of the factors affecting the capital structure of the companies listed on Vietnam stock market”, Doctoral thesis, National Economics University, 2014.