Corporate cash holdings: Determinants and implications from Vietnamese market
Cap, Kim Hoang
2014 dissertation for MSc in International Accounting and Finance. Selected by academic staff as a good example of a masters level dissertation. This paper investigates the determination of corporate cash holdings in Vietnam. The sample includes Vietnamese publicly-traded firms for the period 2010-2013. Determinants include financial indicators as firm-specific characteristics and state ownership as an institutional factor for the purpose of exploring the existence of agency costs for this emerging market. Findings of the study suggest that the theoretical frameworks, namely trade-off model, pecking order theory and free cash flow theory, are at work for the Vietnamese sample. Significant determinants are profitability, firm size, leverage, dividend payout and investment in asset tangibility. However, the findings do not confirm the largely found relationship between market-to-book ratio and corporate cash holdings for Vietnamese firms, which is normally expected to be positive in sign. At industry level, findings for determinants on cash holdings by different industry sectors show a significant variance, especially for the sectors that are mainly composed of state-own enterprises (SOEs). In general, sectors with mostly private firms mirror the results of the entire sample better. Although agency problems due to state ownership are detected at industry level, they are not severe in general.
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