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Does ownership matter in corporate cash holdings? Evidence from an emerging market

Author

Listed:
  • Thi Hong An Thai
  • Minh Tri Hoang

Abstract

Purpose - Using imbalanced panel data of nonfinancial Vietnamese listed firms from 2005 to 2021, this paper explores the potential effect of ownership on firms' cash levels. Design/methodology/approach - Two hypotheses are tested using different methods, including pooled ordinary least squares (POLS) and system-generalized method of moments (GMM), to investigate the ownership–cash holding relationship for various firm scenarios. Both book and market measures of the cash ratio are examined. Findings - Results show that foreign and state ownership encourages firms to increase their cash reserves. The positive relationship between ownership and cash holding is, especially, pronounced for firms in the financial deficit. Research limitations/implications - This research suggests that in this emerging market, outside ownership substantially accelerates cash to hedge against the unexpected issues caused by poor investor protection, low political accountability and information asymmetry. Originality/value - The study contributes to the existing understanding of the relationship between ownership and corporate cash holdings in the context of a typical emerging market. Besides, it expands the existing knowledge to the extent of such relations in the event of a financial shortage.

Suggested Citation

  • Thi Hong An Thai & Minh Tri Hoang, 2024. "Does ownership matter in corporate cash holdings? Evidence from an emerging market," Journal of Economics and Development, Emerald Group Publishing Limited, vol. 26(2), pages 123-138, February.
    • Handle: RePEc:eme:jedpps:jed-09-2023-0168
    DOI: 10.1108/JED-09-2023-0168
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    More about this item

    Keywords

    Foreign ownership; State ownership; Cash holding; Budget deficit; D22; G32; H70; O16; O53;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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