The role of business risk as a moderator in the relationship between financial leverage and company risk - A case study of non-financial firms listed on HNX and HOSE

Abstract

Based on an objective analysis of the Vietnamese market, this study aims to examine the role of business risk as a moderate variable in the relationship between financial leverage and company risk. A balanced panel data collected from 81 non-financial firms listed on HOSE and HNX in the period 2009-2017 is selected as the sample of the study to conduct the Multiple Linear Regression model. All firms in the study are divided into separate sectors to explore the variation in the impact of financial leverage on company risk among industries. It comes up with the finding that there is a statistically significant positive relationship between financial leverage and company risk with the existence of business risk and business risk is a moderator enhancing this relationship. It also indicates that industry factor differentiates the impact of financial leverage on company risk among distinctive sectors.