Can Dividends Affect the Investment Decisions of Listed Firms in Vietnam?
This paper aims to estimate the impact of dividends on the investment decisions of listed firms in Vietnam. The relationship between dividends and investments is explained using agency and asymmetric information theories. In markets with low information transparency, such as the Vietnamese stock market, these theories are used. Fama and Miller (1972), for example, argued that the dividend should not be based on the investment of firms. The study, however, uses a quantitative research method known as the System Generalized Method of Moments (SGMM), which addresses the endogeneity issue and tests the hypothesis in the model to highlight dependent investment decisions on dividends. As a result, the author concludes that dividends have a statistically significant negative impact on investment decisions.
Keywords: agency theory, asymmetric information theory, dividends, investment, SGMM, Vietnam.
FAMA E. F., & MILLER M. H. The Theory of Finance (1 ed.). Hinsdale, Holt Rinehart & Winston, 1972.
VO X. V. Leverage and corporate investment – Evidence from Vietnam. Finance Research Letters, 2019, 28(C): 1-5. https://doi.org/10.1016/j.frl.2018.03.005
SHAH S. N. The Principal-Agent Problem in Finance. Charlottesville, The CFA Institute Research Foundation, 2014. https://www.cfainstitute.org/-/media/documents/book/rf-lit-review/2014/rflr-v9-n1-1-pdf.pdf
JENSEN M. C., & MECKLING W. H. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 1976, 3(4): 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
JENSEN M. Agency cost of free cash flow, corporate finance, and takeovers. American Economic Review, 1986, 76(2): 323-329. https://www.jstor.org/stable/1818789
BRAV A., GRAHAM J. R., HARVEY C. R., and MICHAELY R. Payout Policy in the 21st Century. Journal of Financial Economics, 2005, 77(3): 483-527. https://doi.org/10.1016/j.jfineco.2004.07.004
KATO H. K., LOEWENSTEIN U., and TSAY W. Dividend policy, cash flow, and investment in Japan. Pacific-Basin Finance Journal Elsevier, 2002, 10(4): 443-473. https://ideas.repec.org/a/eee/pacfin/v10y2002i4p443-473.html
WANG C. P., HUANG H. H., and WANG D. Y. Investment, Dividend, Debt Decisions, and Business Life Cycle. Journal of Statistics and Management Systems, 2010, 13: 1305-1321. http://dx.doi.org/10.1080/09720510.2010.10701535
EVANS F. N., & HADRAT Y. Investigating the Effect of Dividend Policy on the Wealth of Stockholders of Listed Companies on the Ghana Stock Exchange. International Journal of Economics and Finance, 2016, 8(7): 47-54. http://dx.doi.org/10.5539/ijef.v8n7p47
SAHIBZADA M. H., & ZUBAIR H. Impact Of Dividend Policy On Shareholders Wealth: A Comparative Study Among Dividend Paying And Non-Paying Technology-Based Firms In USA. International Journal of Information, Business, and Management, 2017, 9(3): 2232-2240. https://www.proquest.com/openview/cff4917815d210cef4be3cb6d405935e/1?pq-origsite=gscholar&cbl=2032142
SADDIQ Y. A., ALIYU M. S., and KURFI A. K. Effect of Dividend Policy on Investment Decisions of Blue Chip Companies in Nigeria. Dutse Journal of Economics and Development Studies, 2018, 6(2): 234-243. https://fud.edu.ng/journals/dujeds/2018_DEC_Vol_6_No_2/DUJEdS%20027_MUHKTAR%20S.%20ALIYU.pdf
PHAN D. N., & PHAN T. A. D. Determinants of Corporate Investment Decisions: The Case of Vietnam. Journal of Economics & Development, 2013, 15(1): 32-48. https://doi.org/10.33301/2013.15.01.02
DANG T. Q. A., & PHAM T. Y. N. The effect of dividend policy on stock price volatility of listed companies on Vietnam's stock market. Journal of Development and Integration, 2015, 26(36): 60-65. https://user-cdn.uef.edu.vn/newsimg/tap-chi-uef/2016-01-02-26/9.pdf
NGUYEN T. N. T., & BUI K. P. The relationship between investor sentiment and firms' dividend policy: Evidence in Vietnam. Journal of Asian Business and Economic Studies, 2019, 30(1): 5-25. http://jabes.ueh.edu.vn/Content/ArticleFiles/c14e2625-2cb3-4c64-be04-6753fe7a2478/JABES-2018-11-V353.pdf
MCNICHOLS M. F., & STUBBEN S. R. Does Earnings Management Affect Firms’ Investment Decisions? The Accounting Review, 2008, 83(6): 1571-1603. https://doi.org/10.2308/accr.2008.83.6.1571
SRUTHI D., ROJA R. C., and LAVANYA C. Impact of Dividend on Investment Decision. International Journal of Management and Applied Science, 2017, 3(4): 45-47. http://iraj.doionline.org/dx/IJMAS-IRAJ-DOIONLINE-7781
QUIRY P., FUR Y. L., SALVI A., DALLOCCHIO M., and VERNIMMEN P. Corporate Financial: Theory and Practice (3 ed.). Chichester, John Wiley & Sons, 2011. https://doi.org/10.1002/9781119424444
MILLER M., & MODIGLIANI F. Dividend Policy, Growth, and the Valuation of Shares. The Journal of Business, 1961, 34(4): 411-433. https://econpapers.repec.org/scripts/redir.pf?u=https%3A%2F%2Fdoi.org%2F10.1086%252F294442;h=repec:ucp:jnlbus:v:34:y:1961:p:411
NAZIR M. S., NAWAZ M. M., ANWAR W., and AHMED F. Determinants of Stock Price Volatility in Karachi Stock Exchange: The Mediating Role of Corporate Dividend Policy. International Research Journal of Finance and Economics, 2010, 55: 100-107. http://www.internationalresearchjournaloffinanceandeconomics.com/ISSUES/IRJFE%20issue%2055.htm
HENNESSY C. A., & WHITED T. M. How Costly Is External Financing? Evidence from a Structural Estimation. The Journal of Finance, 2007, 62(4): 1705-1745. https://www.jstor.org/stable/4622315
ALI A., & YOUSAF S. Determinants of Cash holding in German Market. Journal of Business and Management, 2013, 12(6): 28-34. https://10.9790/487X-1262834
JANGILI R., & KUMAR S. Determinants of private corporate sector investment in India. Reserve Bank of India Occasional Papers, 2010, 31(3): 67-89. https://mpra.ub.uni-muenchen.de/id/eprint/39839
DRAKE P. P., & FABOZZI F. J. Financial Ratio Analysis. In DRAKE P. P. The Basics of Finance: An Introduction to Financial Markets, Business Finance, and Portfolio Management. New Jersey: John Wiley & Sons Inc, 2010: 258-260. https://doi.org/10.1002/9780470404324.hof003054
DANG V. A. Leverage, debt maturity and firm investment: An empirical analysis. Journal of Business Finance & Accounting, 2011, 38(1-2): 225-258. https://doi.org/10.1111/j.1468-5957.2010.02215.x
AYGUN M., SULEYMAN I., and SAYIM M. The impact of debt structure on firm investments: Empirical evidence from Turkey. Archives of Business Research, 2014, 2(2): 24-30. https://doi.org/10.14738/abr.22.174
ALZOUBI T. How does Cash holding affect the Firm’s Investment Decision. World Journal of Social Science, 2015, 5(3): 58-67. https://www.researchgate.net/publication/286458567
BIKAS E., & GLINSKYT’E E. Financial Factors Determining the Investment Behavior of Lithuanian Business Companies. Economies, 2021, 9(45): 1-19. https://doi.org/10.3390/economies9020045
DAVIS L. E. Financialization and the non-financial corporation: An investigation of firm-level investment behavior in the United States. Metroeconomica, 2018, 69: 270-307. https://doi.org/10.1111/meca.12179
MYERS S. C. Determinants of corporate borrowing. Journal of financial economics, 1977, 5(2): 147-175. https://doi.org/10.1016/0304-405X(77)90015-0
ZHAI J., & WANG Y. Accounting information quality, governance efficiency, and capital investment choice. China Journal of Accounting Research, 2016, 9(4): 251-266. https://doi.org/10.1016/j.cjar.2016.08.001
RAMALINGEGOWDA S., WANG C.-S., and YU Y. The Role of Financial Reporting Quality in Mitigating the Constraining Effect of Dividend Policy on Investment Decisions. The Accounting Review, 2013, 88(3): 1007-1039. https://doi.org/10.2308/accr-50387
BROWN J. R., & PETERSEN, B. C. Why has the investment-cash flow sensitivity declined so sharply? Rising R&D and equity market developments. Journal of Banking and Finance, 2009, 33: 971-984. https://ssrn.com/abstract=1411230
ROODMAN D. How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal, 2009, 9: 86–136. https://doi.org/10.1177%2F1536867X0900900106
BLOOM N., SADUN R., and VAN REENEN J. The organization of firms across countries. The Quarterly Journal of Economics, 2012, 127(4): 1663-1705. https://doi.org/10.1093/qje/qje029
FAMA E. The Empirical Relationships Between the Dividend and Investment Decisions of Firms. American Economic Review, 1974, 64(3): 304-318. https://www.jstor.org/stable/1808884
HORNE J. C., & WACHOWICZ J. M. Fundamental of Financial Management (13 ed.). New York, Financial Times/Prentice Hall, 2008.
GITMAN L. J. Principles of Managerial Finance (12 ed.). New Jersey, Pearson Prentice Hall, 2009.
- There are currently no refbacks.