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

Author

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  • Quoc Trung Tran

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.

Suggested Citation

  • Quoc Trung Tran, 2021. "Foreign ownership and cost of debt financing: evidence from an emerging market," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 17(9), pages 2278-2289, February.
    • Handle: RePEc:eme:ijoemp:ijoem-09-2019-0750
    DOI: 10.1108/IJOEM-09-2019-0750
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    Citations

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    Cited by:

    1. Mariasole Bannò & Giorgia Maria D’Allura & Graziano Coller & Celeste Varum, 2023. "Men are from Mars, women are from Venus: on lenders’ stereotypical views and the implications for a firm’s debt," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(2), pages 651-687, June.
    2. Xiyu Rong & Myung-In Kim, 2024. "ESG and the Cost of Debt: Role of Media Coverage," Sustainability, MDPI, vol. 16(12), pages 1-20, June.

    More about this item

    Keywords

    Foreign ownership; Cost of debt; Debt financing; Emerging markets; Vietnam; G32; G34;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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