Determinants of corporate cash holdings: A study of listed manufacturing companies in Vietnam

Abstract

This study is carried out to examine the determinants of cash holdings (cash and equivalent) in

the Vietnamese manufacturing firms during the period 2006-2011. The application of the tradeoff theory, pecking order theory and agency theory in this study associates with the empirical researches to find out and analyzing the firm’s characteristics which impact on the cash holding level. The results support for the negative effects of bank debt, leverage, liquid assets. And it also provides the evidences for the positive relationship of cash holdings and cash flows, dividend payments, size of firm. In addition, the results of study can show that in Vietnam, managerial ownership has an unimportant role in the decision of cash holdings. It leads to the view that agency problem in Vietnam is less severe than developed countries like US or UK. And the growth opportunities factor also has no relationship with the cash holdings.

Unlike some former researches, this study does not concern the target cash holding so the simple regression for the static panel data model is used. Only the quantitative method is applied by collecting and processing data of 48 listed manufacturing companies operating in Vietnam. All the data come from the Audited Consolidated Financial Statements, Annual Reports and Note to Financial Statements. The association of Microsoft Excel and Eviews 5.1 is applied to do the stages of analyzing data.