Foreign Ownership, Capital Structure and Firm Value: Empirical Evidence from Vietnamese Listed Firms

Posted: 4 Jan 2013

See all articles by Thi Phuong Vy Le

Thi Phuong Vy Le

Ho Chi Minh City University of Economics and Finance - Faculty of Corporate Finance

Duc Nam Phung

Ho Chi Minh City University of Economics and Finance - School of Finance

Date Written: January 2, 2013

Abstract

This paper examines the relationships among foreign ownership, capital structure, and firm value in the case of listed firms in Vietnam. Using fixed effect model on data of all listed companies (exclude financial firms and banks) in Hochiminh Stock Exchange during the period of 2008-2011, the research finds an interesting evidence that foreign ownership has negative impact on firm value while previous literature indicates controversal results. The result implies that foreign ownership in Vietnam is not concentrated and therefore it cannot play an monitoring role in corporate governance mechanism. The outcome also shows that there is a negative link between foreign ownership and capital structure due to the fact that foreign investors suffer from information asymmetric and increase debt for controlling agency problem. With regard to relationship between capital structure and firm value, increase in debt leverage of listed firms decrease firm value. Hence, traditional theories of capital structure should be adjusted while applying them in emerging markets. Apart of fixed effect method, simultaneous equations model is employed for controlling simultaneity problem.

Keywords: foreign ownership, capital structure, firm value, listed firm, Vietnam

JEL Classification: G32

Suggested Citation

Le, Thi Phuong Vy and Phung, Duc Nam, Foreign Ownership, Capital Structure and Firm Value: Empirical Evidence from Vietnamese Listed Firms (January 2, 2013). Available at SSRN: https://ssrn.com/abstract=2196228 or http://dx.doi.org/10.2139/ssrn.2196228

Thi Phuong Vy Le

Ho Chi Minh City University of Economics and Finance - Faculty of Corporate Finance ( email )

279 Nguyen Tri Phuong street
District 10
Ho Chi Minh City
Vietnam

Duc Nam Phung (Contact Author)

Ho Chi Minh City University of Economics and Finance - School of Finance ( email )

279 Nguyen Tri Phuong, District 10
Ho Chi Minh
Vietnam

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