The sensitivity of cash flows to cash holdings: case studies at Vietnamese enterprises
-
DOIhttp://dx.doi.org/10.21511/imfi.17(1).2020.23
-
Article InfoVolume 17 2020, Issue #1, pp. 266-276
- Cited by
- 1072 Views
-
595 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Cash management plays an important role in the business operations. However, holding too much cash results in unnecessary expenses such as opportunity costs, management costs, and representation costs due to negative cash holdings. This study examines the sensitivity of cash flows to cash holdings. The paper uses regression methods for table data, including FEM, REM, GLS, and GMM regression, with a research dataset including non-financial companies listed on Vietnam’s stock market in the period 2008–2018. Empirical results show that cash flows are positively associated with cash holdings levels. At the same time, research has shown an asymmetry in cash flows sensitivity to cash holdings. The study also classified the companies with limited and no financial restrictions. In the Vietnamese context, compared to unrestricted companies, financially restricted companies have a lower cash flows sensitivity. The research results are the basis for enterprises to manage cash better and increase business efficiency in the future.
- Keywords
-
JEL Classification (Paper profile tab)G32, G30, M40
-
References18
-
Tables6
-
Figures0
-
- Table 1. Summary of measurement variables in the research model 1
- Table 2. Descriptive statistics
- Table 3. Correlation matrix
- Table 4. Regression results of model 1
- Table 5. Regression results of model 2
- Table 6. Regression results of model 3
-
- Acharya, V. V., Almeida, H., & Campello, M. (2007). Is cash negative debt? A hedging perspective on corporate financial policies. Journal of Financial Intermediation, 16(4), 515-554.
- Almeida, H., Campello, M., & Weisbach, M. S. (2004). The cash flow sensitivity of cash. Journal of Finance, 59(4), 1777-1804.
- Almeida, H., Park, S. Y., Subrahmanyam, M. G., & Wolfenzon, D. (2011). The structure and formation of business groups: Evidence from Korean chaebols. Journal of Financial Economics, 99(2), 447-475.
- Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. Journal of Finance, 23(4), 589-609.
- Bao, D., Chan, K. C., & Zhang, W. (2012). Asymmetric cash flow sensitivity of cash holdings. Journal of Corporate Finance, 18(4), 690-700.
- Bates, T. W., Kahle, K. M., & Stulz, R. M. (2009). Why do US firms hold so much more cash than they used to? Journal of Finance, 64(5), 1985-2021.
- Erickson, T., & Whited, T. M. (2000). Measurement error and the relationship between investment and q. Journal of Political Economy, 108(5), 1027-1057.
- Faulkender, M., & Wang, R. (2006). Corporate financial policy and the value of cash. Journal of Finance, 61(4), 1957-1990.
- Fazzari, S., Hubbard, R. G., & Petersen, B. (1988). Investment, financing decisions, and tax policy. American Economic Review, 78(2), 200-205.
- Horioka, C. Y., & Terada-Hagiwara, A. (2014). Corporate Cash Holding in Asia. Asian Economic Journal, 28(4), 323-345.
- Kaplan, S. N., & Zingales, L. (1997). Do investment-cash flow sensitivities provide useful measures of financing constraints? Quarterly Journal of Economics, 112(1), 169-215.
- Ogundipe, L. O., Ogundipe, S. E., & Ajao, S. K. (2012). Cash holding and firm characteristics: Evidence from Nigerian emerging market. Journal of Business & Economics, 1(2), 45-58.
- Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of Financial Economics, 52(1), 3-46.
- Riddick, L. A., & Whited, T. M. (2009). The corporate propensity to save. Journal of Finance, 64(4), 1729-1766.
- Shah, A. (2011). The corporate cash holdings: Determinants and implications. African Journal of Business Management, 5(34), 12939-12950.
- Whited, T. M. (1992). Debt, liquidity constraints, and corporate investment: Evidence from panel data. Journal of Finance, 47(4), 1425-1460.
- Whited, T. M., & Wu, G. (2006). Financial constraints risk. Review of Financial Studies, 19(2), 531-559.
- Wu, W., Rui, O. M., & Wu, C. (2012). Trade credit, cash holdings, and financial deepening: Evidence from a transitional economy. Journal of Banking & Finance, 36(11), 2868-2883.