Asymmetric Cash Flow Sensitivity of Cash Holdings: Empirical Evidence from Firms Listed in HSX

Abstract

This paper investigates the asymmetric cash flow sensitivity of cash holdings for non-financial firms listed in Ho
Chi Minh Stock Exchange (HSX) covering the period from 2009 - 2014. Employing different analysis techniques
for panel data including OLS, fixed effects, and GMM estimators; our empirical results suggest that the cash flow
sensitivity of cash holdings is asymmetric to cash flow. This paper further divides firms into financially constrained
and unconstrained ones and finds that the magnitude of the asymmetry of cash flow sensitivity of cash is less for
a financially constrained firm than for a financially unconstrained firm. Finally, our study, when considering the
agency problem, shows that firms with better outside monitoring will dissave to take good investment opportunities.