Ownership structure, adjustment speed toward target leverage and CEO power

Purpose This study aims to investigate the impact of ownership structure on firm adjustment speed toward the target leverage. Design/methodology/approach The study employs a partial adjustment model on a sample of 694 publicly listed firms from 2007 to 2021 in Vietnam. Findings The study finds that state and foreign ownerships inhibit the speed at which firms approach their optimal level of debt. Interestingly, this negative association is less pronounced in firms managed by powerful CEOs (duality CEOs; highly experienced CEOs; CEOs who they own or their families possess a large number of shares). Further, state and foreign ownership are found to be positively associated with firm performance. This beneficial impact weakens, however, when firms use more debts. Originality/value The outcome reveals that having a powerful CEO on board can help businesses in this emerging market counteract the detrimental effects that foreign and state ownership leave on the process of adjusting leverage.