DYNAMIC PANEL INVESTIGATION OF CORPORATE CASH HOLDINGS AND THEIR FINANCIAL OPERATIONAL AND GOVERNANCE DETERMINANTS IN VIETNAMESE RETAIL FIRMS

Abstract

The study seeks to identify the joint effect of financial, operating, and governance features on the cash levels of retail firms listed in Vietnam. Instead of viewing the cash policy as a one-time decision that determines the cash balance, we model the cash level as a dynamic process where the current level is a function of past periods' cash level and speed of adjustments towards a target value. To test hypotheses empirically, we use a balanced panel of 38 listed retail firms in HOSE, HNX, and UPCOM from the period of 2020 to 2025, comprising 228 firm-year observations collected from their financial statements and official disclosures. The main equation is estimated with two-step system GMM approach, which takes into account Windmeijer-corrected standard errors, collapsed instruments, and limited lag depth to control for endogeneity. The coefficients imply considerable persistence in cash policies: the coefficient on lagged cash balance is 0.401, meaning that the annual adjustment speed is about 59.9%. Leverage, non-cash net working capital, ownership concentration, and dividends paid lower the cash balance, while profitability, growth in sales, days of inventories, volatility of cash flows, digitization, and independence of the board positively influence the cash balance. In an economic sense, the days of inventories, leverage, digitization, and cash flow volatility are the most influential variables for the long-run balance of cash. The study suggests the existence of cash management policy with target ranges per business segments, integration of the forecast by treasury with sales and inventories in real time, and governance in the process of using excess liquidity.