Record Details

Threshold Effect of Capital Structure on Firm Value: Evidence from Seafood Processing Enterprises in the South Central Region of Vietnam

International Journal of Finance & Banking Studies

View Archive Info
 
 
Field Value
 
Title Threshold Effect of Capital Structure on Firm Value: Evidence from Seafood Processing Enterprises in the South Central Region of Vietnam
 
Creator Cuong, Nguyen Thanh; Nha Trang University, VietNam
 
Subject Finance; Banking
Capital Structure; Firm Value; Panel Threshold Regression Model; SEASCRs
 
Description The purpose of this paper is to investigate whether there is an optimal capital structure at which point firm is able to maximize its value. An advanced panel threshold regression model is applied to test the panel threshold effect of capital structure on firm value among 90 unlisted Seafood Processing Enterprises in the South Central region of Vietnam (SEASCRs) during 2005–2011 period. In this study, I use BVE and ROE as surrogate for firm value and debt ratio (TD/TA) as surrogate for capital structure and as the threshold variable. The empirical results strongly indicate that triple threshold effect exists between debt ratio and firm value when BVE is selected to proxy firm value. However, when ROE is selected to proxy firm value, the result shows that there exists double thresholds effect between debt ratio and firm value. From these results, I may conclude that the relationship between capital structure and firm value has a nonlinear relationship represents an convex Parapol shape. In addition, the findings suggest implications for SEASCRs on flexible usage of financial leverage. Specifically, SEASCRs should not use loans over 57.39%. To ensure and enhance the Firm value, the scope of the optimal debt ratio should be less than 57.39%.
 
Publisher SSBFNET
 
Contributor —
 
Date 2014-07-15
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/332
 
Source International Journal of Finance & Banking Studies (ISSN: 2147- 4486); Vol 3, No 3 (2014): July; 14-29
2147-4486
 
Language eng
 
Relation http://www.ssbfnet.com/ojs/index.php/ijfbs/article/view/332/300