Corporates' ownership structures, financial constraints and investment decisions in Vietnam

Abstract

State and foreign ownerships are increasing their role in financial management and performance of Vietnamese enterprises under the context of economic integration. Meanwhile, financial constraints and investments are two essential elements affecting corporates’ financial success. This study investigates the influences of governmental and foreign ownerships on financial constraints and investment decisions of enterprises in Vietnam. Using regression models for panel data of 657 non-financial firms listed in Vietnam stock market, the study reveals that firms with higher amount of state-owned shares exhibit higher levels of financial constraints. State ownership also restricts firms’ investments. In contrast, foreign ownership helps to reduce the investment – cash flow sensitivity and enhances the firms’ investment levels.