Market liquidity and capital structure: Does it really matter for Vietnam’s family ownership?


 This study analyzes the moderating effect of different kinds of family ownership on the relationship between market liquidity and capital structure. Using a new sample of 315 Vietnam listed firms for five years, we figured out a significant negative link between stock market liquidity and capital structure. However, it is well noted that there is an adverse reaction from family ownership where the higher the dual-class control and dynamic structure mechanism, the more control-enhancement the family ownership will be, which leads to a higher risk aversion regarding debt-bankruptcy. In this sense, corporate leverage had responded positively to an increase in stock liquidity in the case of family ownership intervention.


Introduction
Ever since the paper by Modigliani and Miller (1958) was published, market liquidity has been posited as one of the most dominant factors determining the leverage ratio (Butler, Grullon, & Weston, 2005;Hennessy & Whited, 2005;Lipson & Mortal, 2009). The literature, empirically, has confirmed the profound impact of stock liquidity on the corporate leverage for different contexts from the developed markets (Hennessy & Whited, 2005;Lipson & Mortal, 2009;Sharma & Paul, 2015) to the developing markets such as Thailand (Udomsirikul, Jumreornvong, & Jiraporn, 2011), or Vietnam (Thanh & Mai, 2017;Vo, 2017). However, there is a challenging question from the "agency" theory revealed the contradict benefits among different groups of ownership that the concentrated ownership patterns would potentially subsume the effects of other factors on capital structure choice of the firms (Deesomsak, Paudyal, & Pescetto, 2004;Sharma & Paul, 2015). Furthermore, most of the literature on the determinants of capital structure was ample but inclusive and neglect the role of ownership intervention, especially in the case of family ownership. Family members scared of losing their control may try to reinforce their power and would potentially overwhelm the main effects of market liquidity toward capital structure so that they preferred more debt than outside sources (C éspedes, González, & Molina, 2010; King & Santor, 2008;Setia-Atmaja, Tanewski, & Skully, 2009;Sharma & Paul, 2015).
Our study overcomes this gap by examining the interaction effects of family ownership and market liquidity on capital structure, and it is the first attempt to consider these effects in the context of one emerging country, namely Vietnam. Empirically, Duc and Tri (2014), Kien and Duc (2015) , Kien (2020) has emphasized, as there is the presence of "divided powers" and "gap power" from the group of concentrated holders among Vietnam listed company. We address this literature gap by constructing the new data set of Vietnam's family ownership (a sample of 315 listed firms during five years sample from 2013 to 2017), and demonstrating the potential effects of family power on the relationship between market liquidity and capital structure. It is worth that this study can be one of the first of its kind in current literature analyzing the interaction effect of stock liquidity and the family's ownership on capital structure, especially for the ASEAN region. In addition, this paper, exclusively for the capital structure, is profoundly different from all previous studies of determinants of capital structure in Vietnam's market (Dang, Ly Ho, Dzung Lam, Thao Tran, & Vo, 2019;Moussa & Elgiziry, 2019;Thanh & Mai, 2017;Tran, Hoang, & Tran, 2018) where it employed several measurements of three types of market liquidity, two proxies of leverage, and various dimensions of family controls to secure the results and robustness to robust results for the analysis. Lastly, the panel data sample's potential bias will be solved efficiently by using a new modern technique of panel quantile regression.

Market liquidity, capital structure and family ownership
The relationship between stock liquidity and capital structure has been extensively studied, primarily progressed by Modigliani and Miller (1958). Miller and Rock (1985) and Lev (1988) suggested that the link between the asymmetric information and security characteristic has to lead the corporate capital structure to adverse selections, includes a higher transaction cost and a lower volume of trades. This, in turn, induces administrators to use leverage to signal information for future earning of firms (Miller & Rock, 1985). Given the increasing attention to liquidity within the characteristic of asymmetric information, it is also vital to clarify more on the Pecking Order theory by Myers and Majluf (1984). Firms will tend to depend firstly on their possible earnings, next on debt sources, and finally on equity financing. At this time, the noticeable increase of market liquidity can lower the cost of equity and would lead equity to be more attractive than debt, which will decrease the percentage of debt in the corporate capital structure (Udomsirikul et al., 2011). As a result, under the mechanism of asymmetric information, the Pecking Order preference and the trade-off of the costs of debt would motivate the firm to issue equity when there is higher liquidity instead of debt (ElBannan, 2017;Fama & French, 2002). , Frieder and Martell (2006), Lipson andMortal (2009), andKryzanowski, Lazrak, andRakita (2010) tested the relationship between stock market liquidity and corporate capital choice, agreed that there is a significant negative effect of the level of security liquidity toward firm leverage. This revealed that firms with higher stock liquidity could lessen the reliance on the equity cost.
Despite the growing interest in how market liquidity links to the leverage ratio, there is another problem altering the corporate capital structure. It is well established that the concentrated ownership patterns, especially in the emerging market, would potentially subsume the effects of other factors on the firms' capital structure (Deesomsak et al., 2004;Sharma & Paul, 2015). As such, companies with higher concentrated ownership would be more suffered from a higher level of leverage, which means more debt but litter equity. It will serve the purpose of strengthening voting power and lowering the possibility of a hostile takeover (Bianco & Nicodano, 2006;Stulz, 1988). Such problems will be more worsen since the agency conflict and family-owned interest presented a dominant control. Indeed, the profound effect of family ownership toward leverage choices is ample among the family's theory. Primarily Gomez-Mejia, Nunez-Nickel, and Gutierrez (2001), and Gomez-Mejia, Larraza-Kintana, and Makri (2003), characterized the arguments of "the reinforcement the family's power", which means that they may put the high priority on either maintaining the family reputation or reinforcing their power from generation to generation. As a result, family business would preclude external funds and prefer more on internal sources or their owned relationship with a lender. Similar with this argument, Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson, and Moyano-Fuentes (2007) and Sirmon, Arregle, Hitt, and Webb (2008) concerned about "the respondent to the threat", has illustrated that family affiliation with the unique features of socio-emotional, would tend to fasten firm's vision with survival purpose. Consequently, they often decide to maintain longterm preservation and stable wealth creation, leading them to avoid outside funds. Finally, on the view of "agency theory", Berrone, Cruz, & Gomez-Mejia (2012) decomposed the different idiosyncrasy of family's choices as they responded to risk, verified that family's firm would not be willing to use more equity to react with risk. Instead, they will consider depending on endowment, preservation, or debt to finance the issue.

Data design
We Reuter Eikon, the data of family ownership requires more complicated steps. Specifically, we first access the published reports for each company, which were officially provided by their website. We next hand-checked and cross-checked the board structure and executive information from different company reports, such as annual reports, the prospectus, board of management, corporate governance reports, and shareholders' meeting documents. Finally, filtering the data sources of family and relative members, we categorize and re-code the information to fit with the variable construction of this study (the detail of variable measurement will be explained right after in this section) 5 Drawing on Baker and Wurgler (2002) and ElBannan (2017), we construct two separate measurements, namely log of debt and market leverage, to specify the capital structure. The former is estimated by taking a log form of debt volume of a firm (ln_debt). The later proxy is the market leverage, specified by the ratio of book debt divided by the market value of assets (lev_market).
For stock market liquidity, we employ three different indicators of liquidity to strengthen reliability and robustness as follows.
First, following Amihud (2002), the market illiquidity is defined as the weekly ratio of Vietnam's stock return and its weekly trading volume, average over a year: Where VOL iw is the respective weekly trading volume. Niw represents the average number of weekly shares outstanding. Volatility is measured by taking the standard deviation of EBIT.
As mentioned above, this study will be utilized by using the data collected from Thomson Reuter Eikon. However, for family variables, motivated by Kien (2020), we use the more

Regression strategy
Acknowledge  (2015), we employ the following control variable: firm size, market-to-book ratio (market_book), firm profitability (EBIT to asset ratio), asset tangibility (tangible asset over total asset), non-debt tax shield (the ratio of depreciation over total asset), Vietnam standard industry index (industry) 6 .
Our model has been applied for the fitted quantile regression for panel data (QRPD), facilitating the mechanism of alternative non-additive fixed-effect (QRPD), non-separable disturbance term, and especially the Markov Chain Monte Carlo framework (Powell, 2016).
Canay (2011) suggested that the technique of QRPD can provide the sufficient condition in which the more consistent and asymptotic normal distribution would be identified. Also, the QRPD may generate the pure location shift of parameters, and put to all conditional quantiles under control of exploring heterogeneous covariates estimators rather than the affordable mean effects of the classical fixed and random effects models (Koenker, 2004). Lastly, , Lamarche (2010), and Powell (2016) confirmed the new empirical evidence that QRPD can show the unbiased Gaussian and minimized estimation of asymptotic variance, and jointly estimation which can generally treat for the conditional endogenous problem and non-separable disturbance term.

Empirical results and discussion
Significantly, our results show that the corporate's capital structure (estimated by the log of debt and market leverage) respond negatively to an increase in market liquidity among three tables of quantile regression (table 1, 2, 3). Specifically, we discover that the results of most coefficients are robust in three different measures of market liquidity: stock illiquidity -illiq (Amihud, 2002), the share turnover ratio -sh_turn (Amihud, 2002), and the modified turnover ratio -mo_turn (Udomsirikul et al., 2011)  and fam_pow*mo_turn) have positively impacted on the corporate capital choices. Finally, Table    1198 Notes: The table shows the panel quantile regression for causal relationship between market liquidity (respected by three different dimensions of illiquidity, share turnover ratio, and modified turnover) and corporate leverage (two proxies of log of debt and market leverage) as the company is argued to be controlled by the level of family's power (the number of people who hold the important positions or obtain the high proportion of shares, have the relative relationship with the directors). *** denotes the significance at the 1%, ** 5%, and * 10% level, respectively with t-statistic in the parenthesis. See Table A1 in Appendix for the full estimation results with explicit estimations of the control variables. 1198 Notes: The table shows the panel quantile regression for causal relationship between market liquidity (respected by three different dimensions of illiquidity, share turnover ratio, and modified turnover) and corporate leverage (two proxies of log of debt and market leverage) as the company is argued to be controlled by the voting power of family ownership (measured by total number of owning shares of all family members). *** denotes the significance at the 1%, ** 5%, and * 10% level, respectively with t-statistic in the parenthesis. See Table A1 in Appendix for the full estimation results with explicit estimations of the control variables.

Conclusion
Using Our results shed light on the current literature and current practical market operation that may have implications. Firstly, this study may raise a satisfying conclusion for financial managers and planners. As there is higher asymmetric information or weak liquid stock, it would lead the firm to lower creditworthiness, making the firm have less chance of accessing debt markets. In this manner, the administration has to reconsider and readjust their situation to improve their stock liquidity. Secondly, based on these results, the authority, mainly in the Vietnam market, should strengthen their problem of asymmetric information that would foster more chances for the market to access different debt financing sources. Last but not least, the results of this research would try the best of author's knowledge, to call for the highlight interests of family ownership in new emerging countries where there is lack of good corporate governance quality, then can help to facilitate more research for finance decision and family's intervention. The market leverage measured by the ratio of book debt divided by the market value of assets by each firm each year. Noticeably, the market value of an asset will be measured by subtracting the total asset to total equity, then adding market equity (where market equity is calculated by the multiplication of the outstanding shares to the share price) Stock market liquidity Illiq i,t the stock illiquidity was estimated by Amihud (2002), reveals the weekly stock return as a percentage of its volume trading on the specific Vietnamese unit, average over a year: