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Monetary loosening and cash holdings: Evidence from an emerging market

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  • Tran, Quoc Trung

Abstract

Vietnamese government consistently pursues an expansionary policy during the period from 2007 to 2017. In addition, as an emerging market, Vietnam monetary policy relies mainly on quantity-based mechanism. We investigate the effect of monetary expansion on corporate cash holdings in Vietnamese stock market. We argue that monetary loosening negatively affects cash holdings via both precautionary and transaction cost motives. With a sample of 4,503 observations from 751 firms, we find that money supply growth is negatively related to cash holdings, cash-cash flow sensitivity and value of cash.

Suggested Citation

  • Tran, Quoc Trung, 2020. "Monetary loosening and cash holdings: Evidence from an emerging market," Finance Research Letters, Elsevier, vol. 36(C).
    • Handle: RePEc:eee:finlet:v:36:y:2020:i:c:s1544612319304167
    DOI: 10.1016/j.frl.2019.101312
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    2. Yi, Er, 2023. "Corporate governance, information disclosure and investment - Cash flow sensitivity," Finance Research Letters, Elsevier, vol. 55(PB).

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    More about this item

    Keywords

    Monetary policy; Cash holding; Emerging market;
    All these keywords.

    JEL classification:

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

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