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Foreign Ownership and Corporate Cash Holdings in Emerging Markets

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  • Xuan Vinh Vo

Abstract

This article examines the link between foreign ownership and corporate cash holdings. We utilize a data sample of firms listed on the Ho Chi Minh City stock exchange covering the period 2007–2015. Employing different econometric techniques for panel data, we find that higher foreign ownership is associated with more corporate cash holdings. This finding suggests that foreign investors in the Vietnam stock market are subject to precautionary motive and agency motive forcing firms to hold more cash. However, the outcome suggests potential agency problems because managers might subsequently use this cash reserve for their own advantages. These problems are even more pronounced in emerging markets where investor protection mechanism is weak. Accordingly, this highlights the importance of a monitoring mechanism to refrain corporate managers from investing in value†destroying projects.

Suggested Citation

  • Xuan Vinh Vo, 2018. "Foreign Ownership and Corporate Cash Holdings in Emerging Markets," International Review of Finance, International Review of Finance Ltd., vol. 18(2), pages 297-303, June.
    • Handle: RePEc:bla:irvfin:v:18:y:2018:i:2:p:297-303
    DOI: 10.1111/irfi.12130
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    Cited by:

    1. Vo, Xuan Vinh & Nguyen, Thi Lam Anh & Tuan, Le Quoc & Luu, Hiep Ngoc & Vu, Kieu Trang, 2020. "Local business environment, domestic CEOs and firm performance in a transitional economy: Empirical evidence from Vietnam," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 236-249.
    2. Tran, Quoc Trung & Nguyen, Van Phong & Dang, Duong Huy Chuong & Nguyen, Ba Phong & Le, Phuong Linh, 2023. "Local corruption and capital structure," Finance Research Letters, Elsevier, vol. 55(PB).
    3. Xiangyu Chen & Muhammad Safdar Sial & Dang Khoa Tran & Waseem Alhaddad & Jinsoo Hwang & Phung Anh Thu, 2020. "Are Socially Responsible Companies Really Ethical? The Moderating Role of State-Owned Enterprises: Evidence from China," Sustainability, MDPI, vol. 12(7), pages 1-19, April.
    4. Choi, Paul Moon Sub & Chung, Chune Young & Vo, Xuan Vinh & Wang, Kainan, 2020. "Are better-governed firms more innovative? Evidence from Korea," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 263-279.
    5. Jacob Cherian & Muhammad Safdar Sial & Dang Khoa Tran & Jinsoo Hwang & Thai Hong Thuy Khanh & Mansoor Ahmed, 2020. "The Strength of CEOs’Influence on CSR in Chinese listed Companies. New Insights from an Agency Theory Perspective," Sustainability, MDPI, vol. 12(6), pages 1-13, March.
    6. Xuan Vinh Vo, 2020. "Foreign Investors and Stock Price Crash Risk: Evidence from Vietnam," International Review of Finance, International Review of Finance Ltd., vol. 20(4), pages 993-1004, December.
    7. Đặng, Rey & Le, Nhu Tuyen & Reddy, Krishna & Vu, Manh Chien, 2022. "Foreign ownership and corporate risk-taking: Panel threshold evidence from a transactional economy," Finance Research Letters, Elsevier, vol. 45(C).
    8. Liem Thanh Nguyen & Khuong Vinh Nguyen, 2021. "Accounting Comparability and Cash Holdings in Vietnam," IJFS, MDPI, vol. 9(2), pages 1-14, May.

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