(A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS, VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS)
By Pham Le Phuong Lan (VNP 21)
Academic Supervisor: Dr. Vo Hong Duc
Managerial entrenchment occurs when managers are able to manipulate financing decisions to support their own interests rather than those of shareholders. Furthermore, the market timing activity is considerably explained by managers’ financing decisions through which companies choose to raise debt or equity to finance their investment opportunities. Nevertheless, the relationship between managerial entrenchment and leverage ratio together with the link between market timing and leverage ratio have not been sufficiently considered and investigated in Vietnamese context. This study is conducted to provide empirical evidence of the effect of managerial entrenchment and market timing through firms’ histories on leverage ratio in Vietnam using a sample of 289 non-financial firms listed on HOSE during the period 2006-2015 and using OLS, GMM and endogenous switching method. Findings from this study indicate that there is a negative relationship between managerial entrenchment and leverage ratio; and that there is a negative effect of firms’ histories including financial deficit, various timing measures together with stock price histories on leverage ratios of Vietnam’s listed firms over the research period.
Keywords: managerial entrenchment, market timing, firms’ histories, capital structure.
Abbreviations: HOSE – Ho Chi Minh Stock Exchange, OLS – Ordinary Least Squares, GMM – Generalized Method of Moments.
Full version is available at Library of Vietnam- Netherland Progamme: 1A Hoang Dieu, Phu Nhuan Dist, Ho Chi Minh city, Vietnam.