The effect of growth opportunities on capital, structure under the moderating effect of state ownership - Evidence from non-financial companies listed in Ho Chi Minh stock exchange (HOSE)

Abstract

The aim of this study is to analyze the relationship between capital structure and growth opportunity and to examine the moderating effect of state ownership on this relationship. With the original sample of 352 non-financial companies listed in Ho Chi Minh Stock exchange (HOSE), a total of 1,021 observations are included in the data sample between the years 2018-2020. Common factor analysis is used to obtain the measure of growth opportunties. To analyze the data, pooled OLS and FEM regressions are employed in this study. Empirical results obtained from the analysis show significant and negative relationship between growth opportunity and leverage level, which is measured by the market debt to equity ratio. In addition, state ownership is found to alleviate the negative effect of growth opportunites on leverage. This result is significant for Pooled-OLS regression but not for Fixed-effect model. The results confirm that growth opportunity negatively impacts capital structure while informing a positive moderating effect of state ownership on this negative relationship. Furthermore, firm size is found to be the only control variable that is statistically proved to have a positive relationship with leverage in all regression results, which is consistent with previous studies.