This paper examines the impact of debt on firm value. Especially, we investigate the impact of leverage at both the firm level and industry level on the value of the firm in the context of the Vietnamese emerging economy. Besides a single regression econometric model to investigate the impact of firm-level debt ratio on firm value, we build several multilevel models to test the effect of industry-level debt ratio on the firm value. Multilevel or hierarchical models are gradually expanded from the null (or empty) model to the random intercept and the random-coefficient model. The effects of firm size, firm profitability, and managerial ownership are also controlled in our tests. Our results reveal that in the Vietnamese market, firm value is negatively and significantly associated with both two indicators of leverage employed in the research. Especially, the sensitivity of firm value to firm leverage manifests stronger under the effect of industry-level leverage. The multilevel approach shows its advantages in analyzing the clustering data.
