Financial leverage, state ownership, and firm value: the case of non-financial firms listed in Vietnam

Numerous empirical studies have confirmed the impact of financial leverage on firm value. Nevertheless, these conclusions are inconsistent due to the influence of other factors. In the context of a transition economy such as Vietnam, the state can own a certain percentage of equity capital in companies after equitization. Accordingly, this study aims to evaluate the moderating role of state ownership on the impact of financial leverage on the value of non-financial firms listed in Vietnam. The generalized method of moments was employed to analyze a sample of 481 companies from 2015 to 2021. The findings show that financial leverage has a positive effect on firm value, but this relationship is negatively moderated by state ownership. In addition, financial leverage decreases the firm value of state-owned companies. The paper suggests that the government should focus on assessing financial performance rather than political intervention in using companies’ financial leverage. The results also have implications for accelerating the equitization and divestment of state capital in Vietnamese listed non-financial firms.