Ownership Structure and Debt Financing Decision of Vietnamese Listed Companies
Main Article Content
Abstract
Raising capital not only helps firms to meets the capital needs for production and business's development, but also supports them to endure financial risks. Hence, the problem of proactively choosing a reasonable financing structure between equity and debt to maximize corporate value becomes more and more imperative. This paper aims to investigate the relationship between corporate governance, especially ownership structure, and funding decision of Vietnamese listed firms. The study data include 209 non-financial companies with 1,045 firm-year observations obtained from two main stock exchange in Vietnam, including Hanoi Stock Exchange and Ho Chi Minh Stock Exchange, covering a 5-year period from 2014 to 2018. The finding of this study reveals that CEOs, state government, and foreign ownership significantly impact on capital structure, whilst there is no evidence to support the correlation between board ownership and funding decision. As for capital structure specific control variables, including firm size (Size), current ratio (CAR), cash ratio (OPCFTA), tangibility ratio (PPETA), and profitability (ROA) significantly effect on firm leverage.
Keywords:
Capital structure, funding decision, corporate governance, Vietnamese listed firm.
References
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[36] Huang, H., and Song, F., “The Determinants of Capital Structure: Evidence from China”, China Economic Review, 17 (2006) 1, 14-36.
[37] Frank, M., and Goyal, V., “Capital Structure Decisions: Which Factors are Reliably Important?”, Financial Management, 38 (2009), 1-37
[38] Croci, E., Halit G., and Neslihan O., “CEO Compensation, Family Control, and Institutional Investors in Continental Europe,” Journal of Banking & Finance, 36 (2012) 12, 3318-3335.
[39] Ozkan, N., “CEO Compensation and Firm Performance: An Empirical Investigation of UK Panel Data,” European Financial Management: The Journal of the European Financial Management Association, 17 (2011) 2, 260-285.
[2] Kajananthan, R. and Achchuthan, S., “Liquidity and Capital Structure: Special Reference to Sri Lanka Telecom Plc,” Advances in Management and Applied Economics, 3 (2013) 5, 89-99.
[3] Heshmati, A., “The Dynamics of Capital Structure: Evidence from Swedish Micro and Small Firms,” Research in Banking and Finance, 440 (2002) 199-241.
[4] Wanzenried, G., “Capital Structure Dynamics in the UK and Continental Europe,” The European Journal of Finance 12 (2006) 8, 693-716.
[5] Byoun, S., “How and When Do Firms Adjust Their Capital Structures Toward Targets?,” The Journal of Finance (New York), 63 (2008) 6, 3069-3096.
[6] Chong, J. and Darlene, L., “Predictors of Relapse for American Indian Women After Substance Abuse Treatment,” American Indian and Alaska Native Mental Health Research, 14 (2007) 3, 24-48.
[7] Shleifer, A., and Vishny, R., “A Survey of Corporate Governance,” The Journal of Finance (New York) 52 (1997) 2, 737-783.
[8] Graham, J.R. and Harvey, C., “The Theory and Practice of Corporate Finance: Evidence from the Field,” Journal of Financial Economics, 60 (2001), 187-243.
[9] Anderson, R., Mansi, S. and Reeb, D., “Board Characteristics, Accounting Report Integrity and the Cost of Debt,” Journal of Accounting and Economics, 37 (2004) 3, 315-42.
[10] Campbell, K. and Minguez-Vera, A., “Gender Diversity in the Boardroom and Firm Financial Performance,” Journal of Business Ethics, 83 (2008), 435- 451.
[11] Carter, D., B. Simkins and G. Simpson, “Corporate Governance, Board Diversity, and Firm Value,” Financial Review, 38 (2003), 33-53.
[12] Adams, R. and D. Ferreira, “A Theory of Friendly Boards,” The Journal of Finance, 62 (2017),
217-250.
[13] Chaganti, R. and Fariborz D., “Institutional Ownership, Capital Structure, and Firm Performance,” Strategic Management Journal, 12 (1991) 7, 479-491.
[14] Berger, P.G., Ofek, E. and Yermack, D.L., “Managerial Entrenchment and Capital Structure Decisions”, Journal of Finance, 52 (1997) 4, 1411-38.
[15] Mai, T., “The Impact of Corporate Governance on the Capital Structure of the Company,” Online Finance Journal, 2018, https://tapchitaichinh.vn/tai-chinh-kinh-doanh/tac-dong-cua-quan-tri-doanh-nghiep-den-cau-truc-von-cua-cong-ty-300695.html (access 25/07/2021) (in Vietnamese).
[16] Vuong, Q., “Firm Size and its Efficiency with Structured Capital: A View from a Microfinance Perspective,” Online Finance Journal, 2014, https://tapchitaichinh.vn/nghien-cuu-trao-doi/nghien-cuu-dieu-tra/quy-mo-va-hieu-qua-doanh-nghiep-voi-cau-truc-von-nhin-tu-goc-do-tai-chinh-hanh-vi-89231.html (access 25/7/2021) (in Vietnamese).
[17] Rajan, R. and L. Zingales, “What Do We Know about Capital Structure? Some Evidence from International Data,” The Journal of Finance, 50 (1995), 1421-1460.
[18] Myers, C., and Majluf, “Corporate Financing and Investment Decisions When Firms Have Information that Investors Do Not Have,” Journal of Financial Economics, 13 (1984) 2, 187-221.
[19] Baker, M. and J. Wurgler, “Market Timing and Capital Structure,” The Journal of Finance, 57 (2002), 1-32.
[20] Garnham, Nicholas, “Raymond Williams, 1921-1988: A Cultural Analyst, A Distinctive Tradition,” Journal of Communication, 38 (1988) 4, 123-131.
[21] Mehran, H., “Executive Incentive Plans, Corporate Control, and Capital Structure,” Journal of Financial and Quantitative Analysis, 27 (1992), 539-60.
[22] Klein, A., “Audit Committee, Board of Director Characteristics, and Earnings Management,” Journal of Accounting & Economics, 33 (2002) 3, 375-400.
[23] Lefort, F. and Walker, E., “Ownership and Capital Structure of Chilean Conglomerates: Facts and Hypotheses for Governance,” The Journal of Finance, 3 (2000), 3-27.
[24] Brailsford, J., Timothy, B., Oliver, R. and Sandra, L., “On the Relationship between Ownership Structure and Capital Structure,” Journal of Accounting and Finance, 42 (2002), 1-26.
[25] Abor, Joshua, “Corporate Governance and Financing Decisions of Ghanaian Listed Firms,” Corporate Governance (Bradford), 7 (2007) 1, 83-92.
[26] Huang, B.Y., Lin, C.M. and Huang, C. M., “The Influences of Ownership Structure: Evidence from China,” The Journal of Developing Areas, 45 (2011), 209-227.
[27] Kapeliushnikov, R., “Behavioral Economics and the ‘new’ Paternalism1,” Russian Journal of Economics, 1 (2015) 1, 81-107.
[28] Pöyry, Salla, and Benjamin Maury, “Influential Ownership and Capital Structure,” Managerial and Decision Economics, 31 (2010), 311-324.
[29] Vo, Xuan Vinh, and Craig Ellis, “An Empirical Investigation of Capital Structure and Firm Value in Vietnam”, Finance Research Letters, 22 (2017), 90-94.
[30] Zou, H., and Xiao, J., “The Financing Behaviour of Listed Chinese Firms,” The British Accounting Review, 38 (2006) 3, 239-258.
[31] Vithessonthi, C., and Jittima T., “The Effect of Firm Size on the Leverage-performance Relationship During the Financial Crisis of 2007-2009,” Journal of Multinational Financial Management, 29 (2015), 1-29.
[32] Nguyen T., “The Effect of Foreign Ownership on Capital Structure in Vietnam,” Integrative Business and Economics Research, 8 (2017) 1, 20-32.
[33] Freund, Rudolf J., William J. Wilson, and Ping Sa, Regression Analysis: Statistical Modeling of a Response Variable, Burlington: Elsevier Science & Technology, 2006.
[34] Phung, D. N., & Le, T. P. V., “Foreign Ownership, Capital Structure and Firm Performance: Empirical Evidence from Vietnamese Listed Firms,” Journal of Corporate Governance, 12 (2013) 2, 40-58
[35] Booth L., Aivazian, V., Demirguc-Kunt, A., Maksimovic, V., “Capital Structures in Developing Countries”, The Journal of Finance, 56 (2001) 1, 87-130.
[36] Huang, H., and Song, F., “The Determinants of Capital Structure: Evidence from China”, China Economic Review, 17 (2006) 1, 14-36.
[37] Frank, M., and Goyal, V., “Capital Structure Decisions: Which Factors are Reliably Important?”, Financial Management, 38 (2009), 1-37
[38] Croci, E., Halit G., and Neslihan O., “CEO Compensation, Family Control, and Institutional Investors in Continental Europe,” Journal of Banking & Finance, 36 (2012) 12, 3318-3335.
[39] Ozkan, N., “CEO Compensation and Firm Performance: An Empirical Investigation of UK Panel Data,” European Financial Management: The Journal of the European Financial Management Association, 17 (2011) 2, 260-285.