Debts and corporate cash holdings: Evidence from ASEAN-5

  • Received December 28, 2021;
    Accepted February 16, 2022;
    Published February 23, 2022
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/imfi.19(1).2022.14
  • Article Info
    Volume 19 2022, Issue #1, pp. 186-200
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This paper investigates the impact of debts on corporate cash holding levels and how this impact varies through five large markets of the ASEAN economic community due to different business environment features, namely, macroeconomic factors and legal characteristics. Using the Generalized Method of Moments for dynamic panel models to analyze mega data of non-financial ASEAN-5 firms from 2009 to 2018, this study examined that ASEAN-5 firms maintain relatively high cash after the financial crisis. Second, macroeconomic policies strongly affect the adjustment speed of corporate cash holdings and corporate cash reserve levels in ASEAN-5 firms. Besides, the estimates indicate that there is an alternative nexus between debts and cash reserves in ASEAN-5 firms. Finally, the impact of debts on corporate cash holdings is sustainably influenced by the macroeconomic conditions and the specific characteristics of the legal environment. This paper provides a rational framework for decision-making by corporate managers and macro-policymakers to solve the agency problems related to the alternative nexus between free cash flow and debt.

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    • Table 1. Descriptive firm variables in the whole sample
    • Table 2. Pair correlations of firm variables in the whole sample
    • Table 3. Descriptive statistics for firm variables across five countries of the ASEAN region
    • Table 4. Macroeconomic factors across five countries in the ASEAN region over 10 years
    • Table 5. Specific characteristics of the legal environment across five countries in the ASEAN region
    • Table 6. Influence of debts and macroeconomic factors on corporate cash holdings in a dynamic model
    • Table 7. Influence of debts and macroeconomic factors on corporate cash holdings in a dynamic model for each country of the ASEAN region
    • Table 8. Influence of debts on corporate cash holdings according to macroeconomic factors in a dynamic model
    • Table 9. Influence of debts on corporate cash holdings according to the legal-specific characteristics in a dynamic model
    • Conceptualization
      Thi Huong Giang Vuong, Huu Manh Nguyen
    • Data curation
      Thi Huong Giang Vuong, Huu Manh Nguyen
    • Formal Analysis
      Thi Huong Giang Vuong, Thi Thuy Hang Le, Huu Manh Nguyen
    • Funding acquisition
      Thi Huong Giang Vuong, Thuy Hang Dao, Thi Thuy Hang Le, Huu Manh Nguyen
    • Supervision
      Thi Huong Giang Vuong, Huu Manh Nguyen
    • Writing – original draft
      Thi Huong Giang Vuong, Thuy Hang Dao
    • Methodology
      Thuy Hang Dao, Thi Thuy Hang Le
    • Software
      Thuy Hang Dao, Thi Thuy Hang Le
    • Resources
      Thuy Hang Dao, Thi Thuy Hang Le
    • Validation
      Thuy Hang Dao, Thi Thuy Hang Le
    • Visualization
      Thuy Hang Dao, Thi Thuy Hang Le
    • Investigation
      Huu Manh Nguyen
    • Writing – review & editing
      Huu Manh Nguyen