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

• Published in: International journal of emerging markets Vol. 17; no. 9; pp. 2278 - 2289
• Main Author: Tran, Quoc Trung
• Format: Journal Article
• Language: English
• Published: Bradford Emerald Publishing Limited 29.11.2022; Emerald Group Publishing Limited
• Subjects: Assets; Corporate debt; Corporate governance; Costs; Debt; Debt financing; Emerging markets; Family owned businesses; Finance; Financial leverage; Financing; Institutional investments; New stock market listings; Ownership; Portfolio investments; Profitability; Public enterprise; Securities markets; Stock exchanges; Stockholders; Vietnam; China; Debt financing; Vietnam; Emerging markets; G32; Cost of debt; G34; Foreign ownership
• ISSN: 1746-8809; 1746-8817
• DOI: 10.1108/IJOEM-09-2019-0750

PurposeThis paper aims to investigate the effect of foreign ownership on cost of debt financing in an emerging stock market.Design/methodology/approachCost of debt is a function of foreign ownership. Control variables include state ownership, firm profitability, financial leverage, Tobin's Q, 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.FindingsThe 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/valuePrior 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.