Adjustment behavior of corporate cash holdings: evidence from Vietnam

This paper examines the cash holdings behavior of Vietnamese listed companies, focusing on whether a target cash level exists that maximizes firm value and the speed at which firms adjust towards this target. The study finds that the average cash holding for these firms is approximately 10%. It reveals a nonlinear relationship between cash holdings and firm value, confirming the existence of an optimal cash level. Using pooled OLS, Fixed Effects (FE), and Generalized Method of Moments (GMM) models, the adjustment speed towards the target cash level is estimated to be around 0.58. Vietnamese firms tend to adjust their cash holdings more quickly during a financial crisis, but more slowly during the COVID-19 pandemic. This research contributes to the literature on cash holdings in emerging markets and provides new insights into the speed of adjustment in response to financial crises and the pandemic.