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Unexpected money growth, nonfinancial firms as large shareholders and investment-cash flow relationship: Evidence from Vietnam

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  • Nguyen, Bao Khac Quoc
  • To, Bao Cong Nguyen
  • Nguyen, Nham Thi Hong

Abstract

This paper uses a sample of listed firms to raise questions as to how unexpected money growth affects firm-level investment in Vietnam, resembling tightening monetary policy impact. We find that most results that hold true in other countries also apply to Vietnamese firms during the years of our study. In particular, we find that higher cash flows are associated with higher investment when the assumption of tightening monetary policy is conducted, which is stronger in firms with external financial constraints. We also examine the impact of non-financial firm ownership and find that its presence reduces the investment impact of tightening monetary policy for affected firms. These results imply that the impacts of changes of the monetary stance on corporate investment seem to differ in a way that depends on cash flow and firm ownership characteristics.

Suggested Citation

  • Nguyen, Bao Khac Quoc & To, Bao Cong Nguyen & Nguyen, Nham Thi Hong, 2022. "Unexpected money growth, nonfinancial firms as large shareholders and investment-cash flow relationship: Evidence from Vietnam," Journal of Economics and Business, Elsevier, vol. 119(C).
    • Handle: RePEc:eee:jebusi:v:119:y:2022:i:c:s0148619522000108
    DOI: 10.1016/j.jeconbus.2022.106054
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    More about this item

    Keywords

    Cash flow; Corporate investment; Non-financial firms as large shareholders; Tightening monetary policy; Unexpected money growth;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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