The non-linear impact of state ownership on corporate risk-taking in Vietnamese listed firms

This study aims to explore the non-linear impact of state ownership on corporate risk-taking in Vietnamese listed firms. Corporate risk-taking is determined by the volatility of stock returns, which includes total risk and idiosyncratic risk. The research data is collected from annual audited financial reports of 577 non-financial listed firms on the Hochiminh Stock Exchange and Hanoi Stock Exchange from 2007 to 2017. The regression outcomes, estimated by the dynamic system GMM estimator, significantly and consistently indicate that the impact of state ownership on corporate risk-taking is a U-shaped non-linearity. State ownership reduces corporate risk-taking behavior; but beyond a certain level of share held by the government, additional levels of state ownership lead to excessive hazardous activities. This article has contributed to the literature by adding empirical evidence on the non-linear impact of state ownership on corporate risk-taking in a typical emerging market. Some recommendations should be considered by state-owned firms, such as increasing the percentage of state ownership for firms operating in high-risk fields that aim for socio-economic development, whereas reducing state ownership for others to achieve profitability goals.