Global Crude Oil Price Volatility and Cash Holdings: Evidence from Listed Firms on Vietnamese Stock Markets

Abstract

This study investigates the impact of oil price uncertainty on the cash holdings of listed companies in Vietnam during the 2010-2022 period by using panel models and various measures of oil price uncertainty. Data were collected from listed firms on the Vietnamese stock market to test the hypotheses. Based on precautionary motives and the trade-off theory related to cash holdings, the study predicts that oil price uncertainty significantly influences corporate cash holdings. The empirical results demonstrate that oil price volatility positively affects corporate cash holdings. Specifically, companies tend to hold more cash and adjust their cash holdings more quickly to meet financial needs and mitigate bankruptcy risks when oil price uncertainty increases. These findings, which are reinforced through experiments using different measures and estimations, have important implications for companies in managing their cash holdings to ensure financial stability. The study's implications underscore the need for companies to focus on managing their cash holdings, thereby effectively adjusting their financial strategies in the context of oil price volatility.