Foreign ownership and cost of debt financing: evidence from an emerging market

Quoc Trung Tran

International Journal of Emerging Markets, 2021, vol. 17, issue 9, 2278-2289

Abstract: Purpose - This paper aims to investigate the effect of foreign ownership on cost of debt financing in an emerging stock market. Design/methodology/approach - Cost of debt is a function of foreign ownership. Control variables include state ownership, firm profitability, financial leverage, Tobin'sQ, asset growth, firm size and asset tangibility. The research sample includes 3,263 observations from 405 firms listed in Vietnamese stock market during the period 2009–2017. Findings - The authors find that foreign ownership negatively affects cost of debt and this effect is stronger in non-state-owned enterprises and financially constrained firms. Originality/value - Prior research shows that ownership structure is a key determinant of debt financing cost in many developed markets. This paper contributes to the literature of emerging market finance by showing that foreign ownership reduces cost of debt financing.

Keywords: Foreign ownership; Cost of debt; Debt financing; Emerging markets; Vietnam; G32; G34 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-09-2019-0750

DOI: 10.1108/IJOEM-09-2019-0750

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