Negative stock return shocks effect on capital structure and corporate reaction in Vietnam market (Evidence in Ho Chi Minh stock exchange - HOSE)

Abstract

The thesis has main purpose that is to examine the relationship between capital structure and negative shocks of stock returns. Additionally, we also investigate how firms react to that negative shocks We collect the data from Ho Chi Minh Stock Exchange (HOSE) which are daily stock returns, and financial records of all companies in Vietnam during the period from 2009 to 2017. After we do some tests and models to find out which ones are the most suitable, the study comes up with the Fixed Effects model which is used to test hypothesis. The results proved that the negative shocks had a significant impact on firm’s leverage. Moreover, we had classified the negative shocks into long-lasting shock and transitory shock and the result is long-lasting shock has a significant relationship with firm’s leverage and transitory otherwise. The research also indicates that there is no a significant relationships between net debt issuance and the negative shocks, so we predict that there is a probability that firms tend to use the equity or internal funds rather than use the debt when negative shocks occur.