Impact of financial leverage on cash holding structure: The case of non-financial listed firms in Vietnam
Từ khóa:
Cash holding structure, Financial leverage, Nonlinear effect
Tóm tắt
The aim of this paper is to assess the impact of financial leverage on cashholding structure represented by the proportion of cash equivalents in total
cash and cash equivalents of non-financial companies listed in Vietnam. We
selected a sample of 300 firms from the years 2015 to 2022, and analyzed
the secondary data obtained from the audited financial statements of these
companies. Through robust GLS estimation, the findings show that financial
leverage has a nonlinear effect on the cash holding structure, characterized
by an inverted U-shaped relationship. Specifically, financial leverage posi
tively impacts the cash holding structure if they are maintained at low levels,
however this relationship turns negative at higher levels of financial lever
age. These findings suggest that firms should manage their operations dif
ferently based on their levels of financial leverage. Firms with low leverage
are encouraged to maintain lower cash reserves and invest in marketable
securities to optimize liquidity and profitability. Additionally, they could
consider issuing debt to enhance investment and operational capabilities,
thereby maximizing corporate value. Conversely, firms with high leverage
are advised to hold more cash and demand deposits to mitigate the risks
of financial distress and bankruptcy, as they are more susceptible to such
outcomes. Policymakers may consider implementing measures to reduce
the possibility of financial difficulties, such as reducing reliance on debt
financing and promoting equity financing opportunities.