Relationship between cash holding and capital structure of Vietnamese public companies in the COVID-19 pandemic context
-
DOIhttp://dx.doi.org/10.21511/imfi.20(3).2023.18
-
Article InfoVolume 20 2023, Issue #3, pp. 212-223
- 295 Views
-
150 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Determining the capital and cash holdings pattern is among the most critical decisions of firm executives. This study investigates the link between cash holdings and capital structure to help executives consider the best pattern of capital and cash. The study collected a sample of 5,747 observations from public companies in Vietnam during 2019–2022 and employed the panel data regression method for analysis. The findings demonstrate a correlation between capital structure and cash holding ratio that is statistically significant. However, these relationships are inconsistent between the cash holdings and each component of the capital structure. Current debt and total debt ratios have a positive and linear association with cash holdings, while non-current debt ratio has a negative and nonlinear association. The study highlights a heterogeneous association of the cash holding ratio with three proxies of debt structure. The results reveal that, during COVID-19, the effects of the non-current debt ratio on cash holding and of cash holding on the current debt ratio have no statistical significance.
- Keywords
-
JEL Classification (Paper profile tab)G11, F61
-
References19
-
Tables10
-
Figures3
-
- Figure 1. Cash holding ratio of listed companies by year and industry
- Figure 2. Results of the capital structure by year
- Figure 3. Results of the capital structure by industry
-
- Table 1. Instrument measurement
- Table 2. Summary of data by year and business sector
- Table 3. Descriptive statistics of variables
- Table 4. Autocorrelation matrix results
- Table 5. Results of Model 1 regression analysis from 2019 to 2022
- Table 6. Results of Model 2 regression analysis from 2019 to 2022
- Table 7. Cash holding ratio before and during COVID-19
- Table 8. Capital structure of public companies before and during COVID-19
- Table 9. Regression results of Model 1 during COVID-19
- Table 10. Regression results of Model 2 during COVID-19
-
- Al-Najjar, B. (2011). The inter-relationship between capital structure and dividend policy: empirical evidence from Jordanian data. International Review of Applied Economics, 25(2), 209-224.
- Al-Najjar, B. (2013). The financial determinants of corporate cash holdings: Evidence from some emerging markets. International Business Review, 22(1), 77-88.
- Anderson, R. W., & Hamadi, M. (2016). Cash holding and control-oriented finance. Journal of Corporate Finance, 41, 410-425.
- Bates, T. W., Kahle, K. M., & Stulz, R. M. (2009). Why do US firms hold so much more cash than they used to? The Journal of Finance, 64(5), 1985-2021.
- Dang Ngoc, H., Truong Thanh, H., Van Thuy, V. T., Nguyen Thi Thanh, L., Hoang Thi Viet, H., Nguyen Thi Lan, A., & Nguyen Thi Hong, N. (2020). Accounting Conservatism and Cash Dividend Policy of Enterprises in Vietnam. Paper presented at the IFCAA 2020. Ha Noi, VietNam.
- Deloof, M. (2003). Does working capital management affect profitability of Belgian firms? Journal of Business Finance & Accounting, 30(3-4), 573-588.
- Denis, D. J., & Sibilkov, V. (2010). Financial constraints, investment, and the value of cash holdings. The Review of Financial Studies, 23(1), 247-269.
- Ferreira, M. A., & Vilela, A. S. (2004). Why do firms hold cash? Evidence from EMU countries. European Financial Management, 10(2), 295-319.
- Hung, D. N., Van, V. T. T., & Hung, N. D. (2020). The sensitivity of cash flows to cash holdings: case studies at Vietnamese enterprises. Investment Management & Financial Innovations, 17(1), 266-276.
- Kim, C.-S., Mauer, D. C., & Sherman, A. E. (1998). The determinants of corporate liquidity: Theory and evidence. Journal of Financial and Quantitative Analysis, 33(3), 335-359.
- Loncan, T. R., & Caldeira, J. F. (2014). Capital structure, cash holdings and firm value: a study of Brazilian listed firms. Revista Contabilidade & Finanças, 25, 46-59.
- Maheshwari, Y., & Rao, K. V. (2017). Determinants of corporate cash holdings. Global Business Review, 18(2), 416-427.
- Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261-297.
- Myers, S. C. (1984). Capital structure puzzle. Journal of Finance, 39(3), 575-592.
- Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221.
- 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.
- Ozkan, A., & Ozkan, N. (2004). Corporate cash holdings: An empirical investigation of UK companies. Journal of Banking and Finance, 28(9), 2103-2134.
- Rauh, J. D., & Sufi, A. (2010). Capital structure and debt structure. The Review of Financial Studies, 23(12), 4242-4280.
- Van, V. T. T., Hung, D. N., Tram, N. N., & Hoang, A. L. (2022). Cash Flow and External Financing in the Covid Pandemic Context and Financial Constraints. Journal of Organizational Behavior Research, 7(2), 109-119.