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Leverage and investment: The moderation role of firm size - Evidence in Vietnam

By Mai Cao Tue (VNP 23)

Supervisor: Dr. Le Thanh Loan

Abstract:

Business environment has been modernized dramatically, and determinants of investment decisions have been changing. In the expansion progress, companies have to invest in new machines, infrastructure, and technologies to increase productivity as well as reduce long-term costs, so the decision-making process definitely plays an important role in a company’s development. The primary purpose of this research is to investigate the effect of financial leverage, firm size, and their combination on investment decisions. The study employs the panel data of 494 non-financial Vietnamese listed enterprises from 2008 to 2017 with different estimation methods, and the results are consistent in all estimated regression models. Specifically, the outcomes reveal the significantly negative effect of debt ratio on investment, while firm size is in the opposite direction. Moreover, the interaction of financial leverage and firm size illustrates the positive impact, which portrays the positive moderation effect of firm size on the leverage – investment relationship.

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