Bond and Firm Value: The Moderating Role of Economic Freedom

Abstract

Purpose: This study investigates the impact of bond debt on firm value in Vietnam and examines the moderating role of different dimensions of economic freedom, including overall economic freedom, financial freedom, and investment freedom. The core objective is to determine whether economic freedom mitigates or amplifies the effect of bond debt on firm value in an emerging-market context.
Research Design/Methodology/Approach: The analysis employs panel data from 344 non-financial firms listed on the Ho Chi Minh Stock Exchange (HOSE) during 2010–2023. The system GMM estimator is used to address endogeneity, autocorrelation, and the dynamic nature of the model. Three interaction models are constructed to test the moderating effects of overall economic freedom (ECOF), financial freedom (FINF), and investment freedom (INVF).
Findings: Bond debt generally reduces firm value. Overall economic freedom and financial freedom amplify the negative effect of bond debt, whereas investment freedom attenuates this effect. Control variables such as revenue growth, firm size, and GDP growth positively influence firm value, while inflation exerts a negative effect.
Originality/Value: This study distinguishes bond debt from total leverage and simultaneously assesses the moderating roles of three dimensions of economic freedom-an approach not previously applied in Vietnam. The findings offer new evidence for emerging markets, supporting firms in optimizing capital structures and informing policymakers in enhancing transparency and efficiency in the corporate bond market.