THE MEDIATING ROLE OF CASH HOLDINGS IN THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE AND FIRM VALUE: EVIDENCE FROM LISTED SERVICE FIRMS

This study examines the relationship between corporate governance, cash holdings, and firm value among listed service firms in Vietnam. The rapid development of digital technologies, including artificial intelligence (AI) and financial technology (FinTech), has brought new demands for financial flexibility and corporate governance, particularly in the service sector. This raises an important question of whether firms' cash holding decisions provide a link between corporate governance and firm value. The analysis is based on panel data collected from service firms listed on the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX) from 2020 to 2024. Corporate governance is measured using five governance characteristics, including board size, board independence, CEO duality, board gender diversity, and foreign ownership. Firm value is proxied by Tobin's Q, while cash holdings are measured as the ratio of cash and cash equivalents to total assets. The empirical procedure involves fixed-effects and random-effects estimations and the Hausman test. FGLS is used after diagnostic tests identify heteroskedasticity and autocorrelation, while the indirect effects are tested using bootstrap analysis. The results are not uniform across the five governance characteristics. CEO duality is positively associated with cash holdings, whereas board gender diversity and foreign ownership are positively associated with firm value. No significant relationship is found between cash holdings and firm value, and the bootstrap results do not support the mediating role of cash holdings. Thus, for the firms in the sample, the evidence points to direct relationships between specific governance characteristics and firm value rather than an indirect relationship through cash holdings. The study adds evidence from Vietnamese listed service firms, a setting that has received relatively limited attention in research on the governance–cash–value relationship. The results also underline the relevance of board composition and ownership structure when firms and policymakers consider measures to improve corporate governance.