Cash holdings and bank borrowing behavior in private enterprises - Evidence from Vietnam
Abstract
In this paper, we examine and analyze the cash holdings and bank borrowing behavior of the private enterprises in Vietnam. To do so, we reviewed Marco et al (2012) model to determining the cash holdings and a modified debt structuring model from Chen et al (2013) to analyze the bank borrowing proportion of the private enterprises, then we construct a robust model to find any significant impact of the cash holdings to their bank borrowing. Since previous papers have shown empirical results in how private firms among developing and developed countries manage their cash holdings and how is their bank to public debt structure in proportional credit management, there is not yet any study to show us about the relationship between these crucial factors taken in long-term sustainability. Thus, this paper contributes to the current research about how private firms in Vietnam manage their cash holdings, their bank borrowing behaviors towards the need of funds and whether this borrowing behavior is driven by their cash holdings management. By implementing a unique data set taken on private companies that are currently listed on both HOSE and HNX, our results based on a cross-sectional time-series panel data have shown that there is significant impact of Vietnamese private firms on their bank borrowing behavior with a negative coefficient. We also found that Vietnamese private firms maintain a low level of 10% in cash ratio and a neutrally bank borrowing behavior.