The moderation role of investment opportunities in modifying the impact of state ownership on corporate risk-taking behavior

Le Quang Minh1, Nguyen Hoang Minh2
1 Banking University Ho Chi Minh City, Ho Chi Minh City, Vietnam
2 University of Economics and Law, Vietnam National University, Ho Chi Minh City, Vietnam

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Abstract

This study aims to examine the moderation role of investment opportunities in the effect of state ownership on risk-taking behavior. The research used the financial data of non-financial listed firms in Hanoi and Ho Chi Minh stock exchanges. The sample includes firm observations during the period from 2015 to 2020. These selection criteria yield a sample of 2,664 firm-year observations. The data are collected from Bloomberg. Moreover, the findings are robust by year-fixed  effects along with clustered standard errors. The research finds that state ownership negatively affects corporate risk-taking behavior. On the other hand, investment opportunities can moderate the negative impact of state ownership on corporate risk-taking activities. The study proposes two policy recommendations. First, state-owned firms should improve their corporate governance to deal with agency problems. Second, the government should consider policies to encourage state-owned firms to increase their risk-taking behavior.

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