The prestige of stock exchanges and corporate cash holding in transition economies: a study on Vietnamese listed firms

“International Financial Centres” (IFCs) such as London or New York are one of several contributing factors toward the continued economic success of their respective countries in the twentieth-century. Other countries have attempted to create their own IFCs with mixed successes. This study examines factors that might predict the appearance of IFCs and the differences in financial scale. Of particular interest is the debate between ‘bank-based’ versus ‘capital-based’ financial systems and how it impacts the growth and success of IFCs. Results suggest that bank-based systems are marginally more effective at promoting and benefitting from IFCs. Stronger financial market regulations are also positively associated with the growth of IFCs and the resulting benefits that they provide to the rest of the economy. Together, this suggests that the optimal policy mix to promote IFCs may involve some degree of government involvement beyond strictly maintaining free and fair financial markets for the private sector.

Liquidity is a firm’s ability to pay its current obligations as they come due and thus remain in business in the short run, which reflects the ease with which assets can be converted to cash. The objective of working capital management (WCM) is to minimize the cost of maintaining liquidity while guarding against the risk of insolvency, working capital policy applies to short-term decisions, and capital structure finance applies to long-term decisions.
Several studies have been conducted on the impact of WCM on cash holding levels. The impact of WCM on liquidity and cash holding levels is analyzed in this study. The study also makes a comparison between large- and small-scale firms. Panel data for 62 Jordanian industrial firms covering an eleven-year period (2006–2016) have been analyzed. The descriptive analysis indicates that large firms hold more cash than small firms, as well as more debt, cash flow and growth.
The findings of the data set indicate that WCM, as a variable (working capital net of cash), is a strong predictor of firm cash holding levels. When a firm has several cash substitutes, it will maintain low cash levels. The separate analysis shows that there are significant differences between small- and large-scale firms for determinates related to cash holding levels. Firm size and cash flow ratios were strong predictors of cash holding levels for both samples.

The unprecedented outbreak of COVID-19 has affected every aspect of the human life, be it health, social, or economic dimensions. The anxiety and uncertainty wobbled the economies of affected countries worldwide. This study attempts to quantify the impact of COVID-19 on the performance of major stock markets of G-7 nations vis-à-vis BRICS nations. An event study methodology is employed to capture the effect of the systematic event in the form of Buy and Hold Abnormal Returns (BHAR) and Average Buy and Hold Abnormal Returns (ABHAR). The study considers a 90-day observation window, consisting of six sub-event windows after the COVID-19 news up-doves the world, and 120 days prior to the selected event date to estimate average expected returns. BHAR values in the four event windows are statistically significant, covering stock markets from panic and nosedive to their correction and recovery. ABHAR values reported are significantly negative in the event window ranging from –0.15% to –38.43% for G-7 and –0.06% to –37.12% for BRICS nations. Despite similar ABHAR trends, the BHAR values and correlation matrix exhibit a diverse reaction in BRICS nations compared to the highly synchronized reaction in the G-7 group of nations in the COVID period.