Capital structure decisions of ASEAN-6 family firms: Implications for Southeast Asia
Date of Award
Doctor of Philosophy
School of Business & Law
Dr Jaime Yong
Associate Professor Hadrian Djajadikerta
Dr Ghialy Yap
Background: Southeast Asia has emerged as the hub of the global value chain and will continue to develop in the post-COVID era. Family firms play an essential role in the evolution of the region’s economy; however, research on family firms in Southeast Asia is still scarce. Capital structure decisions are vital for the expansion and survival of businesses. These decisions are particularly crucial to family firms in the region because they are characterised as relatively young, small, and managed by families with higher levels of risk aversion, and fear of losing control than non-family firms. Therefore, this thesis aims to investigate the impact of family ownership on capital structure decisions in Southeast Asia, using a sample of six Association of Southeast Asian Nations (ASEAN-6) countries.
Method: Financial data from 2007 to 2017 regarding public non-financial companies in the ASEAN-6—Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam—were employed to determine the effect of family ownership on the capital structure decisions of companies in the region. Further, family firms and non-family firms’ subsamples are compared to examine the differences in financing behaviours between two types of firms. In addition, the effects of firm characteristics (namely size, tangibility, profitability, growth and board size), the industry effects and the effects of country-level factors (such as, Legal Rights Index, interest rates) on debt ratios and preferences for short-term and long-term debt at regional, national and sectoral levels are also investigated and discussed in detail.
Findings: The findings demonstrate that family firms employ less debt than non-family firms, particularly in the face of higher risk, for instance, when debt levels are already relatively high. This thesis finds that the financing behaviours of family firms in ASEAN-6 are driven by their strong risk aversion and control motives. Size, a proxy for company risk and reputation, and information transparency are key considerations in the borrowing decisions of family firms. The consistent inverse effect of profitability provides evidence for significant information asymmetry and the adoption of Pecking Order Theory financing strategies in the region. The findings also provide empirical evidence supporting the Agency Theory of capital structure for listed companies in Southeast Asia, particularly family firms. As the ASEAN-6 comprises countries at diverse stages of economic development, with sectors at various stages of growth and maturity, tangibility, growth, board size and countrylevel factors such as Legal Rights Index and interest rates have different effects on leverage levels and company preferences for long-term and short-term debt amongst different countries and sectors.
Contribution and implications: This thesis contributes to the global picture of family firms’ capital structure decisions with empirical evidence based on a broad sample of ASEAN-6 family firms and provides implications not only at the regional level but also at the national and sectoral levels, as well as at different levels of debt. The findings of this thesis can inform the decisions of investors and firms in the other Southeast Asian countries and offer insights for policymakers aiming to improve and develop the corporate environment for family firms through improving the availability of capital, loosening financial constraints and improving investor protection. For corporate leaders, the thesis findings suggest strategies to improve companies’ financial performance—particularly that increasing informational transparency and careful risk management may enhance firm accessibility to capital markets.
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Tran, K. T. (2021). Capital structure decisions of ASEAN-6 family firms: Implications for Southeast Asia. https://ro.ecu.edu.au/theses/2475