The effect of firm structure on corporate cash holding - Evidence from non-financial companies listed in HOSE

Abstract

This study examines the correlation between firm structure and cash holdings by investigating the differences in the diversified and focused business structures of non-financial corporates listed on Ho Chi Minh Stock Exchange (HOSE). The scope of this research is roughly 355 non-financial firms, with the total of 984 firm-year observations, in the timeframe of 2017 to 2019 so that it can reflect a practical vision of the business operations taking place in Vietnam. To analyze this relationship, the amount of cash holdings is measured as a dependable variable, which is the ratio of the total of cash and marketable securities to total assets, while the firm structure is determined as a dummy variable indicating whether the business structure is diversified or focused. Moreover, this study also takes into consideration other factors previously stated to have influence on firm cash holdings, which includes the firm size, growth opportunities, net working capital, operating cash flow, cash flow risk, leverage, capital expenditure, and dividend payments. The findings of the study are constructed through the t-test method and running regression models, such as the Ordinary Least Square model and the Fixed-effect model. The research has noticed an inverse correlation between firm structure and cash holdings, which can be interpret that diversified firms tend to hold less cash than the focused firms. According to the findings of the study, the implications on how business managers should regulate the optimal financial decisions for maintaining and developing the business performance have been constructed.