The Impact Of Stock Liquidity On Coporate Cash Holdings: Evidence In Vietnam Listed Companies

Abstract

The buyback motivation is highlighted by the implications of liquidity in stocks on cash reserves of companies which is an important and attractive issue for Vietnamese listed firms. The study aims to investigate and design a framework for the stock liquidity's effect on corporate cash reserves. In the research, the liquidity ratio of stock is measured by ILLIQ by Amihud (2002). The quantitative research method with secondary data of 253 listed companies was collected from Eikon Thomson Reuters, TVSI, and Vietstock about financial data of two Vietnamese Stock Exchanges which are HOSE, HNX with various industry except financials and utilities in the period of 2017 – 2022. After multiple regression models and examining the three models' autocorrelation and heteroskedasticity and endogeneity test. The FGLS regression model is selected to be the most suitable tool for analyzing data to analyze how liquidity of stocks affects the amount of cash reserves by corporations. Increased liquidity of stock decreases a tendency to hold cash of companies. The research reveals that corporate reserves of cash are negatively impacted by the liquidity of stocks in Vietnam-listed businesses.