Effects of state ownership on companies’ capital structure and profitability: Estimation analysis before and after the Lehman shock

Lai Thi Phuong Nhung and Hidenobu Okuda

Journal of Asian Economics, 2015, vol. 38, issue C, 64-78

Abstract: This paper investigates the capital structure and profitability of the companies listed on the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HASE) in Vietnam by estimating their debt ratios and return rates using the three-stage least squares method applied to the 2006–2011 samples of 435 listed companies. The estimation results show that first, the capital structures of the listed companies matched the features of standardized corporate financing theories better than those of small- and medium-sized Vietnamese enterprises. Second, weak corporate governance due to insufficient monitoring by creditor led the listed companies to borrow excessively in the periods before and after the boom. Third, the state-controlled companies listed on the HOSE are likely to have an advantage over other companies in accessing loans and earning profits, even after the boom period. Fourth, while foreign-affiliated companies were not substantially more profitable during the boom period, they were more profitable in the period after the boom because of better production technology and management. These findings suggest that reforming the Vietnamese market requires the development of a system that ensures information transparency and independent corporate governance, enhances financial openness, and increases the privatization of state-owned companies, including those in the banking sector.

Keywords: Vietnam; Procurement of funds; Corporate profitability; State-controlled companies; 3SLS (search for similar items in EconPapers)
JEL-codes: G32 O16 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:38:y:2015:i:c:p:64-78

DOI: 10.1016/j.asieco.2015.04.001

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