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The Impact of Real Estate on Debt Usage Based on Cash Flow Percentiles


Debt utilization across the three different measures is positive, but not statistically significant.

Table 4.14: Impact of BDDT on debt usage based on cash flow percentiles


Independent variable

Low OCF/TA

Average OCF/TA

OCF/TA high level

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

lata

fdc

ltd

lata

fdc

ltd

lata

fdc

ltd

lncfv

-0.025*

0.011

-0.019*

-0.04**

-0.019*

-0.03***

0.002

0.005

0.002

(0.014)

(0.02)

(0.011)

(0.018)

(0.01)

(0.01)

(0.005)

(0.011)

(0.002)

size

0.006

0.002

0.019**

0.003

0.002

0.003

0.007

0.016***

0.005

(0.01)

(0.01)

(0.01)

(0.006)

(0.012)

(0.009)

(0.005)

(0.005)

(0.005)

funeral

-0.044

-0.041

0.229**

-0.034

0.02

0.024

-0.003

0055*

0.044

(0.042)

(0.044)

(0.091)

(0.05)

(0.039)

(0.072)

(0.03)

(0.032)

(0.05)

liq

-0.004

-0.011*

0

-0.003

-0.003

-0.001

-0.01***

-0.002

-0.001

(0.003)

(0.006)

(0.001)

(0.011)

(0.004)

(0.003)

(,006)

(0.002)

(0.001)

profit

-0.071

-0.043

-0.083

0.947

-0.332

-0.752

-0.242**

-0.085

-0.014

(0.383)

(0.582)

(0.276)

(1,097)

(0.745)

(0.568)

(0.108)

(0.084)

(0.038)

growth

-0.014

0.01

-0.02

0.026

0.004

-0.002

0.01

-0.012

-0.006

(0.029)

(0.009)

(0.018)

(0.038)

(0.009)

(0.013)

(0.007)

(0.009)

(0.004)

user

0.005

-0.103

-0.269

-0.858

0.291

0.5

0.247

-0.032

-0.089

(0.449)

(0.483)

(0.36)

(1,213)

(0.804)

(0.612)

(0.217)

(0.174)

(0.154)

GDP

0.01

-0.018*

0.002

0.008

0.003

0.017*

-0.006

-0.007

0.002

(0.011)

(0.011)

(0.008)

(0.015)

(0.011)

(0.009)

(0.006)

(0.006)

(0.004)

induslev

-0.071

-0.095

0.141

0.052

-0.032

-0.051

0.07

0.041

0

(0.106)

(0.067)

(0.105)

(0.079)

(0.072)

(0.072)

(0.049)

(0.045)

(0.035)

L.lata

0.893***



0.856***



0.596***



(0.172)

(0.172)

(0.141)

L.fdc



0.586***


0.904***



0.726***


(0.168)

(0.178)

(0.119)

L.ltdc


0.873***




0.9***



0.796***

(0.121)

(0.172)

(0.139)

Coefficient

block

-0.107

0.236

-0.58*

-0.21

-0.037

-0.153

0.035

-0.33***

-0.13

(0.219)

(0.227)

(0.303)

(0.225)

(0.249)

(0.241)

(0.102)

(0.118)

(0.132)

Observe

735

735

735

693

693

693

822

822

822

AR(2)

0.196

0.222

0.226

0.660

0.769

0.562

0.396

0.159

0.576

Hansen

0.817

0.327

0.789

0.880

0.616

0.813

0.510

0.552

0.248

lata = total liabilities/total assets; fdc= total debt/(total debt+equity); ltdc= total long-term debt/(total long-term debt+equity); lncfv= natural logarithm of real estate; size= natural logarithm of total assets; induslev= industry average DBTC; gdp = economic growth rate; nsdt = depreciation expense/total assets; growth = market value/book value of common equity

; profit = operating profit/total assets ; liq = current assets/current liabilities ; tang = fixed assets/total assets. OCF/TA

= DTHĐ/total assets. The model is estimated using the SGMM method with robust standard error correction. Statistical significance level: *** p<0.01, ** p<0.05, * p<0.1

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The Impact of Real Estate on Debt Usage Based on Cash Flow Percentiles

(Source: Author's calculation)


This result implies that when there is an increase in cash flow risk, Vietnamese listed companies with high operating income have not increased the use of debt in their capital structure. Partly because companies with high operating income have internal capital to offset the costs arising from operating income and impact on capital structure Harris and Roark (2019). At the same time, with abundant operating income, companies are still able to pay for regular operations in production and business. This result partly supports the pecking order theory. Specifically, companies with large operating income will have additional funds for their business operations. Therefore, companies will prioritize using internal capital first. Therefore, when operating income increases, companies have not changed their capital structure to reduce business risks. This result is similar to the research results of Harris and Roark (2019) and Santosuosso (2015) on the relationship between the risk of debt and the use of debt of enterprises when the debt of enterprises is high. Unlike the high percentile of debt, the average percentile of debt has a negative and statistically significant coefficient of debt. Specifically, the coefficient of debt with the total debt ratio (lata), debt ratio (fdc), and long-term debt ratio (ltdc) is -0.04; -0.019 and -0.03, respectively, corresponding to the statistical significance levels of 5%, 10% and 1% in order. Thus, when there is an increase in debt, the listed enterprises reduce the use of debt in the capital structure in the case of average debt. Because listed enterprises in Vietnam have a high debt ratio in the capital structure, if the average cash flow is only enough to ensure payment for regular operations. Therefore, when there is an increase in the BDDT, enterprises tend to reduce debt at the average DTHD level to reduce the risk of cash shortage for the enterprise's business operations. This result is not similar to that of US enterprises (Harris and Roark, 2019), but is similar to the results

Research results of (Santosuosso, 2015).

Finally, when the enterprise has the lowest level of operating revenue, the coefficient of the BDDT with the total debt ratio (lata), and the long-term debt ratio (ltdc) is negative and statistically significant at the 10% level, but the coefficient of the BDDT with the debt ratio (fdc) is positive and not statistically significant. In other words, an increase in the BDDT will cause the use of long-term debt and total debt in the enterprise to decrease, but external debt will not decrease. When the enterprise's operating revenue is at its lowest level, the enterprise lacks cash for business operations, is likely to encounter financial distress problems and is at risk of bankruptcy. At the same time, investment opportunities decrease when the enterprise has


Low operating expenses. Therefore, in response to cash flow risks, listed companies will reduce the use of debt for long-term investment activities, and total debt in the company to reduce costs. However, according to the trade-off theory, companies still maintain external loans to ensure the regular operation of the company. The negative correlation between BDD and CTV when the operating expenses are low of listed companies in Vietnam is completely opposite to that of companies in the US (Harris and Roark, 2019). This is because listed companies in Vietnam with low operating expenses will reduce debt to reduce costs and the risk of insolvency caused by BDD.

Chapter 4 Summary


The content of this chapter can be summarized as follows. First, the study examines the impact of BDD on the use of debt of listed enterprises in Vietnam. The research results are tested for robustness by using the representative operating profit to calculate BDD, examining the impact of the crisis period and the linear regression method with fixed effects. The research results show that BDD has a negative impact on BDD. Next, the study continues to examine the impact of CEO's experience in the financial sector, state and foreign ownership and the regulatory enterprise's DTHD on the impact of BDD on CTV. The results show that the main relationship considered changes differently when there is an impact from these conditional factors. In the next chapter, a summary of the main research results, limitations of the research and suggestions for further research directions will be presented in detail.


CHAPTER 5: CONCLUSION AND POLICY IMPLICATIONS


Chapter 5 will summarize the research issues that have been carried out in the thesis. At the same time, based on the results of empirical research on the impact of BDDT on the CTV of listed enterprises in Vietnam, the author will mention the findings and significance of the thesis from a theoretical and practical perspective. From there, the thesis gives some suggestions for business administrators in Vietnam. Finally, the thesis mentions the limitations that still exist in this study and proposes research directions that can be continued in the future.

5.1 Thesis findings


The thesis conducts research on non-financial listed companies in Vietnam in the 11-year period from 2018-2019 to determine the impact of BDT on CTV. With a sample of 5,497 observations of listed companies on the Hanoi and Ho Chi Minh Stock Exchanges updated to 2019. The study is based on three methods of measuring debt use by the book value method and BDT measurement method according to (De Veirman and Levin, 2011). The research results contribute to the empirical evidence system on the relationship between BDT and CTV in some contents.

Firstly, previous empirical evidence focused on measuring the change in turnover of enterprises based on standard deviation, variance or sample moving average, there have not been many studies directly measuring the change in turnover by the residual of the regression model of the difference in turnover with the year variable over time according to De Veirman and Levin (2011). Studies on the CTV of Vietnamese enterprises have not considered the change in turnover according to this measurement method. In the study, the change in turnover is measured according to the De Veirman and Levin (2011) method to consider the fluctuations in cash flow including the impact of each time.

Second, previous studies have mainly focused on countries with developed capital markets, or countries with strong economic development, and have not considered the influence of CEO experience in the financial sector (Memon et al., 2018, Harris and Roark, 2019, Dudley and James, 2015, Keefe and Yaghoubi, 2016).


ownership and DTHĐ issues in enterprises. Vietnam - an emerging market, with a long-term centrally planned economy with a financial allocation and product contracting regime before transitioning to a market economy. In the context of implementing business according to plan, the role of BĐTDT and CTV has not really received attention. When transitioning to a market economy, these two factors directly affect the existence and development of enterprises. Therefore, the study focuses on testing the relationship between these two factors in the context of Vietnam.

Third, previous studies focused on the impact of BDDT and CTV simply, without considering the role of CEOs, the role of state ownership as well as foreign ownership, and the role of DTHĐ in enterprises. In this study, the author re-examines and finds differences in (i) the relationship between BDDT and CTV based on the difference in CEOs' experience in the financial sector; (ii) the relationship between BDDT and CTV based on the difference in state and foreign ownership structures; (iii) the relationship between the two factors based on the difference in DTHĐ of enterprises. Through this, the aim is to supplement the understanding of the impact between the two factors on the financial management capacity of CEOs.

The results of the first hypothesis test show that high BD can reduce the use of total debt, debt and long-term debt of enterprises due to concerns about financial distress or bankruptcy risks or to insure and prevent potential risks for enterprises. These results are statistically significant. The research results are similar to some recent papers (Keefe and Yaghoubi, 2016, Memon et al., 2018, Levine and Wu, 2014).

When analyzing the role of CEO experience in finance, it shows that the impact of BĐT on the business performance of the company between CEOs with and without financial experience. CEOs with financial experience tend to increase the use of total debt, borrowing, long-term debt and short-term debt when BĐT increases. CEOs with financial experience hold less cash, and use BBTC for the business production activities of the company (Custódio and Metzger, 2014). Therefore, according to the theory


pecking order theory: When the exchange rate is high and business operations are unstable, enterprises will increase external funding sources. On the contrary, CEOs with no experience in the financial sector reduce the use of debt when the exchange rate is high. The results confirm the role of CEO financial experience in capital allocation activities at enterprises.

In addition, the research results show the weakening effect of state ownership on the relationship between BD and CTV. State-owned enterprises tend to increase the proportion of long-term debt in their capital structure when BD increases due to the guarantee and support of the state to avoid difficulties in the investment activities of enterprises. Meanwhile, in foreign-owned enterprises, there is no clear impact on the inverse relationship of BD to CTV. This is because most foreign-owned enterprises maintain a low level of BD to reduce the possibility of facing financial distress or bankruptcy.

Finally, the research results also show that the size of the enterprise's total assets will moderate the impact of the change in working capital on the shareholders. For enterprises with large total assets, the increase in working capital has not been found to have any impact on the use of debt because the enterprise has enough cash to maintain its business operations. However, at lower cash flow levels than the increase in working capital, listed enterprises in Vietnam tend to reduce debt in the shareholders to prevent the risk of cash shortage leading to financial exhaustion.

5.2 Recommendations of the thesis


First of all, the change in turnover has a negative and statistically significant impact on the use of debt by listed enterprises. This result first implies that enterprises need to pay attention to risk management activities to reduce the change in turnover. Stable turnover will help enterprises easily mobilize debt capital, thereby proactively sourcing capital for production and business activities. In addition, in the case of enterprises with high change in turnover, it will increase costs and make it difficult to borrow from outside, enterprise managers should be cautious when making decisions to change shareholders, mobilizing additional appropriate external debt capital to ensure that there is no shortage of cash for business activities. At the same time, listed enterprises in Vietnam should not use a lot of debt to supplement temporary cash shortages.


short-term, instead should reduce the use of capital for long-term investment activities.

Second, firms with CEOs with financial experience will weaken the influence of BDD and reduce the use of debt in CTV. CEOs with financial experience tend to manage capital according to the established target capital structure. At the same time, these CEOs can mobilize external capital even when credit conditions are tight (Custódio and Metzger, 2014). Therefore, with high BDD, these CEOs continue to increase the use of debt to achieve the optimal capital structure. This result suggests that from the perspective of business owners, they can consider recruiting CEOs based on financial experience criteria to suit the financing policies of the enterprise in each period. For example, enterprises that want to maintain a stable financing policy during difficult business periods, or enterprises that have problems mobilizing capital, can recruit CEOs with financial experience. In addition, businesses in the mature stage of the business cycle can also consider recruiting a CEO with financial experience to effectively use their capital when having a BĐT.

Third, state ownership will reduce the impact of the reduction of the BDT on the use of debt of listed enterprises. Therefore, state-owned enterprises need to consider adjusting the capital structure in the case of BDT and using debt at a high level so as not to affect the operating capital of the enterprise.

Finally, considering the size of the business's operating revenue, the enterprise should maintain a large enough operating revenue to ensure its business operations. Then, despite high turnover, the enterprise can still mobilize external funding sources to serve the decisions within the enterprise. In case the enterprise's operating revenue is not large enough, or is at a low level, when encountering high turnover, the enterprise should consider reducing the use of external debt to reduce costs, while calculating the reduction of production and regulating the existing cash flow used for necessary activities to maintain business operations.

5.3 Limitations of the thesis and future research directions


5.3.1 Limitations of the thesis


The study has identified the impacts of BDDT on the shareholders of listed companies in Vietnam and the relationship between these two factors under the conditions of business activities in the enterprise, the operator and ownership in the enterprise. However, the study still has some limitations due to the context of the economy in the reform period, the financial market is in the early stages of development.

Firstly , although the panel data in the study is relatively large, the study has not included many other factors affecting CTV such as factors on the characteristics of the board of directors, factors on the behavior of managers as well as other types of ownership in the enterprise. The study would be more complete if there were full information on these factors. At the same time, the study could also use many methods to measure the studied factors such as the investment activities of enterprises in research and development as a representative of investment characteristics in enterprises, or the expected inflation rate as a representative of macroeconomic factors. However, due to limitations in the ability to access data and information collected over a long period of time based on official and unofficial sources with data on ownership, investment, and characteristics of managers, the study has not mentioned these factors in its study.

Second, although the research data covers a period of 11 years - a longer research period than previous studies on CTV in Vietnam, this research period is still quite modest compared to other studies in the world. Specifically, the study by Frank and Goyal (2009) covers a period of 50 years. Similarly, the study by Keefe and Yaghoubi (2016) was conducted in the period from 1974 to 2012. With a data period of 12 years, it is not possible to consider all the strong fluctuations in the enterprise's DTHĐ, changes in the macro economy as well as the conditions of the business environment that can affect the research results.

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