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

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.