[논문]Leverage and Bankruptcy Risk - Evidence from Maturity Structure of Debt: An Empirical Study from Vietnam

NGUYEN, Thi Thanh; KIEN, Vu Duc

doi:10.13106/jafeb.2022.vol9.no1.0133

Leverage and Bankruptcy Risk - Evidence from Maturity Structure of Debt: An Empirical Study from Vietnam 원문보기

Journal of asian finance, economics and business, v.9 no.1, 2022년, pp.133 - 142

NGUYEN, Thi Thanh (Department of Financial Analysis, Faculty of Corporate Finance, Academy of Finance) , KIEN, Vu Duc (Department of Financial Analysis, Faculty of Corporate Finance, Academy of Finance)

Abstract ▼ AI-Helper

This study examines the relationship between debt maturity structure and bankruptcy risk. There are various studies of leverage's effect on bankruptcy risk. Debt maturity, however, has not received the attention it deserves, especially in emerging markets with a high degree of information asymmetry. Using Vietnamese listed company data and various estimations, we find that leverage is positively associated with the likelihood of default. Importantly, short-term leverage shows a significantly positive effect on bankruptcy risk, while long-term leverage does not show significant results. The findings highlight that rollover risk firms are exposed to when using short-term debt increases bankruptcy risk. Meanwhile, firms do not cope with this risk in case of long-term debt adoption. High information asymmetry in emerging markets may be the main reason for the difference. The result is robust for subsamples of firms in different financial conditions, in concentrated and competitive industries, as well as for manufacturing and non-manufacturing companies. We also find that firms in a better financial situation and concentrated industries experience a higher short-term leverage effect than their counterparts. We, however, do not find a significant difference in the impact between manufacturing and non-manufacturing companies. This paper is among the first to examine the relation between debt maturity and bankruptcy risk in Vietnam.

주제어

표/그림 (6)

표 Table 1: Industry Classification
표 Table 2: Summary Statistics
표 Table 3: Regression Results of Capital Structure on Bankruptcy Risk: Entire Sample
표 Table 4: Regression Results of Capital Structure on Bankruptcy Risk: Different Financial Conditions
표 Table 5: Regression Results of Capital Structure on Bankruptcy Risk: Industry Concentration
표 Table 6: Regression Results of Capital Structure on Bankruptcy Risk: Manufacture and Non-Manufacture Industries

AI 본문요약
AI-Helper

가설 설정

H1: Higher leverage increases bankruptcy risk.
H2: Short-term debt increases bankruptcy risk.
H3: Long-term debt also increases bankruptcy risk.

대상 데이터

This database is advantageous since it provides all financial items on annual financial reports (balance sheet, income statement, and cash flows statement) of all Vietnamese listed firms. Data covers 659 companies and 5916 firm-year observations from 2005 to 2019.
Uğurlu and Aksoy (2006) find that Ohlson’s logit model is more accurate than Altman’s MDA model. The study was conducted on a sample of 27 pairs of Turkish bankrupt and non-bankrupt companies. This study examines the bankruptcy probability from 1993 to 2003 to provide insights into bankruptcy risk in changing economic environment.

이론/모형

To estimate the model, we use all three common regression models in corporate finance research: Ordinary least square (OLS), Fixed effect model (FEM), Random effect model (REM). Since these models are estimated under different assumptions, results would be more convincing when looking at estimations of all three models.

성능/효과

High information asymmetry in emerging markets may be the main reason for the difference. Besides, firms with better financial conditions and concentrated industries experience higher short-term leverage effects. We, however, do not find a significant difference in the effect between manufacturing and non-manufacturing companies, but the effect is still evident for these subsamples.
Our paper offers several contributions to the literature of leverage and bankruptcy risk in emerging markets. First, we provide robust evidence of the relationship between leverage and bankruptcy risk in the emerging market. Second, we take debt maturity into account when examining the leverage effect on the bankruptcy risk.
We find that leverage is positively associated with the likelihood of default. Remarkably, short-term leverage shows a significantly positive effect on bankruptcy risk, while long-term leverage does not show significant results. High information asymmetry in emerging markets may be the main reason for the difference.
First, we provide robust evidence of the relationship between leverage and bankruptcy risk in the emerging market. Second, we consider debt maturity when examining the leverage effect on the bankruptcy risk. Specifically, even though total leverage significantly increases bankruptcy risk, we find that the effect comes from short-term debt rather than long-term debt in the emerging market.
55 is sizable. The results support the hypothesis that firms with high short-term leverage have higher bankruptcy risk.

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