Determinants of firm’s capital expenditure: Empirical evidence from Vietnam

Abstract: This research was conducted to investigate the factors affecting the company’s capital expenditure. Data were collected from the firms listed on Ho Chi Minh Stock Exchange (HOSE) over the period of nine years from 2010 to 2018, including the sample of 192 non-financial listed companies. Three statistical approaches were employed to address econometrics issues and to improve the accuracy of the regression coefficients: Random Effects Model (REM), Fixed Effects Model (FEM) and Generalized Method of Moments (GMM). The results show that free cash flows and firm size influenced positively on capital expenditure. By contrast, other factors such as dividend, interest expenses, depreciation and working capital had negative effects on capital expenditure. Based on the research results, some key intuitive recommendations were proposed for managers and investors in order to help them in making decisions.

How to cite this paper

 Nguyen, H & Nguyen, T. (2020). Determinants of firm’s capital expenditure: Empirical evidence from Vietnam.Management Science Letters , 10(5), 943-952.

Refrences

Alti, A. (2003). How sensitive is investment to cash flow when financing is frictionless? The Journal of Finance, 58(2), 707-722.
Berndt, E. R., Fuss M. & Waverman L. (1980). Empirical analysis of dynamic adjustment models of the demand for en-ergy in US manufacturing industries. Final Report (Electric Power Research Institute, Palo Alto), 1947-1974.
Becker, B., & Sivadasan, J. (2010). The effect of financial development on the investment-cash flow relationship: cross-country evidence from Europe. The BE Journal of Economic Analysis & Policy, 10(1).
Chirinko, R. S. & H. Schaller. (1995). Why does liquidity matter in investment equations?. Journal of Money, Credit and Banking, 27, 527 - 548.
Dalbor, M. & Jiang, L. (2013). Determinants of capital expenditures in the U.S. restaurant industry. The Journal of Hos-pitality Financial Management, 21(2), 77-86
Fazzari, S.M. & Athey, M.J. (1987). Asymmetric information, financing constraints, and investment. The Review of Eco-nomics and Statistics, 69(3), 481-487.
Fazzari, S.M., Hubbard, R.G & Petersen, B.C. (1988). Financing constraints and corporate investment. Brookings Papers on Economic Activity, 183-188.
Gaver, J. J. (1992). Incentive effects and managerial compensation contracts. Journal of Accounting, Auditing, and Fi-nance, 7 (spring), 137-156.
George, R., Kabir, R. & Qian, J. (2011). Investment-cash flow sensitivity and financing constraints: New evidence from Indian business group firms. Journal of Multinational Financial Management, 21, 69-88.
Gilchrist, S. & Himmelberg, P. (1995). Evidence on the role of cash flow for investment. Journal of Monetary Econom-ics, 36, 541-572.
Haller, S., & Murphy, L. (2012). Corporate expenditure on environmental protection. Environmental and Resource Eco-nomics, 51(2), 277-296.
Hansen, L.P. (1982). Large sample properties of generalized methods of moments estimators. Econometrica, 50, 1029-1054.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership struc-ture. Journal of Financial Economics, 3(4), 305-360.
Kaplan, S. N., & Zingales, L. (1997). Do investment-cash flow sensitivities provide useful measures of financing con-straints?. The quarterly journal of economics, 112(1), 169-215.
Kuh, E., & Meyer, J. R. (1957). The investment decision. Harvard University Press: Cambridge. Jensen, M.C & Meck-ling, W.H., (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Finan-cial Economics, 3(4), 305-360.
Miller, M. H., & Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. the Journal of Busi-ness, 34(4), 411-433.
Ninh, L.K (2007). Determinants of capital expenditures decision of non-stated enterprises in Mekong Delta Area. Journal of Economics, 4, 3-15
Nair, R. D. (1979). Economic analyses and accounting techniques: an empirical study. Journal of Accounting Research, 17 (spring), 225-242.
Qandhari, S. G. A. & Khan, M. M. S. & Rizvi, W. (2016). The relationship between cash flow and capital expenditure in the sugar industry of Pakistan. The Journal of Developing Areas, 50(6), 341-353.
Schaller, H., (1993). Asymmetric Information, Liquidity Constraints, and Canadian Investment. Canadian Journal of Economics, 26, 552-574.
Trang, N.T.N & Quyen, T.T (2013). Relationship between leverage and investment decision. Journal of Development and Integration, 9, 10-5.
Vogt, S. (1997). Cash flow and capital spending: evidence from capital expenditure announcements. Financial manage-ment, 26(2), 44-57.

Journals

MSL Volumes

Keywords

Authors

Countries

Management Science Letters

Determinants of firm’s capital expenditure: Empirical evidence from Vietnam Pages 943-952 Download PDF

Add Reviews