The Moderating Role of Financial Constraints on the Relationship between Cash Holding Decisions and Debt Maturity Structure: Evidence from Vietnam
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Purpose: The paper deals with the relationship between cash holdings and debt maturity structure in the moderating role of financial constraints in emerging market economies like Vietnam to determine the relationship better. Design/methodology/approach: The study compiles data from the financial statements of 1,035 listed companies of the Ho Chi Minh City Stock Exchange and the Hanoi Stock Exchange, Unlisted Public Company Market from 2014 to 2023. After controlling for outliers, the study uses the correlation matrix analysis method and estimates the regression model, overcoming the defects of heteroscedasticity and autocorrelation using the Feasible Generalized Least Square method. Findings: The results show an inverse relationship and mutual impact between cash holdings and debt maturity structure in financially constrained companies. Companies prefer to use cash to hedge against risks when facing financial difficulties. Research shows that market-to-book value, firm size, and cash flow have positive effects; in contrast, leverage and capital expenditures negatively affect cash-holding decisions. Research limitations/implications: The study provides managerial implications for companies in cash holdings and debt maturity structure to hedge long-term risks. Originality/value: The research results are an essential basis for enterprises' financial decisions.
Abstract
Purpose: The paper deals with the relationship between cash holdings and debt maturity structure in the moderating role of financial constraints in emerging market economies like Vietnam to determine the relationship better. Design/methodology/approach: The study compiles data from the financial statements of 1,035 listed companies of the Ho Chi Minh City Stock Exchange and the Hanoi Stock Exchange, Unlisted Public Company Market from 2014 to 2023. After controlling for outliers, the study uses the correlation matrix analysis method and estimates the regression model, overcoming the defects of heteroscedasticity and autocorrelation using the Feasible Generalized Least Square method. Findings: The results show an inverse relationship and mutual impact between cash holdings and debt maturity structure in financially constrained companies. Companies prefer to use cash to hedge against risks when facing financial difficulties. Research shows that market-to-book value, firm size, and cash flow have positive effects; in contrast, leverage and capital expenditures negatively affect cash-holding decisions. Research limitations/implications: The study provides managerial implications for companies in cash holdings and debt maturity structure to hedge long-term risks. Originality/value: The research results are an essential basis for enterprises' financial decisions.