Government cost and firm value: Evidence from Vietnam

Dong Phong Nguyen, Xuan Vinh Vo, Thi Tuan Anh Tran and Thi Kim Thoa Tu

Research in International Business and Finance, 2018, vol. 46, issue C, 55-64

Abstract: This paper investigates the relationship between government cost and firm value at the provincial level in a transitional economy. We shed further light on the question whether local government plays the role of grabbing or helping hand. We use a unique dataset covering government spending and corporate performance characteristics collected from provincial statistical yearbook and Datastream. The results show that there exists a nonlinear U-shaped relationship between local government cost and firm value. Particularly, the threshold value of provincial government spending is about 5%. Furthermore, the U-shaped nonlinear relationship is strongly evidenced in lower quantiles of firm value but not significant at high firm value quantiles, ceteris paribus. The article also offers an interesting result concerning the moderating role of state ownership. The effect of government cost on firm value is stronger for the state-owned firms at lower quantiles of firm value.

Keywords: Government cost; Firm value; Grabbing hand; Helping hand; Quadratic regression function; Quantile regression (search for similar items in EconPapers)
JEL-codes: G38 H20 H50 H70 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:46:y:2018:i:c:p:55-64

DOI: 10.1016/j.ribaf.2017.10.001

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