Firm Value,Corporate Cash Holdings and Financial Constraint: A Study from a Developing Market |
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| Authors: | Thi Lien Hoa Nguyen Le Ngan Trang Nguyen Thi Phuong Vy Le |
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| Affiliation: | University of Economics Ho Chi Minh City |
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| Abstract: | This paper investigates the nonlinear relationship between firm value and corporate cash holdings in a sample of non‐financial Vietnamese firms from 2008 to 2013. We focus on both static and dynamic regressions to test for a nonlinear relationship. Our results reveal an ‘inverse U‐shape’ relationship between firm value and cash holdings, which is in line with trade‐off theory. Specially, we further test whether the optimal cash level changes under different financial conditions. In turn, this paper shows evidence of a nonlinear relationship between firm value and cash holdings under different financial circumstances and that each type of firm will adjust its optimal cash level based on business conditions. |
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