Firm-level estimations of cash-cash flow sensitivities in the context of financial constraints, income uncertainties and agency conflicts - Evidence from Ho Chi Minh stock exchange (HOSE0
Abstract
Based on the model framework from D’Espallier et al. (2014), this study is built up to reckon firm – varying cash – cash flow sensitivities (CCFS) of 219 companies listed on Ho Chi Minh stock exchange (HOSE) in the period of 2014 - 2016. Empirically, this research is able to work out which Vietnamese firms operate under high and low CCFS by modelling heterogeneous coefficient in Almeida et al.’s (2004) reduced – form cash equation using Bayesian approach. The paper’s outcomes unveil that cash holdings behavior of Vietnam enterprises is triggered by the pattern of cash flow. In other words, there is a positive relationship between cash stockpile and cash flow rate in Vietnam market. More importantly, when applying ex post evaluation framework to canvass the association of CCFS and different firms’ characteristics, it is demonstrated that high CCFS firms tend to capture the fluctuation in income rather than constraints status and quality of corporate governance. Particularly, financial frictions is not regarded as an adequate proxy to gauge Vietnamese corporations’ impetus to buffer cash. Instead, these companies tend to maintain this liquid balance so as to smooth the variation in earnings as well as to avoid the potential income shock.