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

Abstract

Using data of firms listed on Ho Chi Minh Stock Exchange during the period 2008-2011, the paper finds empirical evidence of foreign ownership having a negative impact on firm performance and positive impact on capital structure, while previous literature indicates the opposite. The results reveal that in an emerging market like Vietnam, foreign ownership cannot play a monitoring role in corporate governance mechanism because it is not concentrated. The outcome also shows that foreign investors suffer from asymmetric information, and then tend to increase debt for mitigating agency problem. For controlling simultaneity and endogenous issues, fixed effect method and simultaneous equation model are employed.