Accounting Comparability and Cash Holdings in Vietnam

Liem Thanh Nguyen and Khuong Vinh Nguyen
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Liem Thanh Nguyen: Faculty of Finance and Banking, University of Economics and Law, Ho Chi Minh City 700000, Vietnam
Khuong Vinh Nguyen: Vietnam National University, Ho Chi Minh City 700000, Vietnam

IJFS, 2021, vol. 9, issue 2, 1-14

Abstract: The management of cash requires careful considerations to allow firms to benefit from proper resource allocations while mitigating agency issues. Accounting comparability can play an important role in tackling information asymmetry and agency cost, thus enabling managers to hoard more cash. This research aims to investigate the link between accounting comparability and cash holdings in an emerging market. Using a sample of listed firms in Vietnam from 2010 to 2019 and System Generalized Method of Moments, the study finds that comparability is positively associated with corporate cash holdings, confirming the value of the former as an effective governance mechanism. Additionally, we find a non-linear impact of comparability on cash holdings; in other words, comparability specifically enhances cash holdings for firms with high levels of comparability. We further document that cash holdings improve firm performance only for firms with high levels of comparability. Such evidence implies that only firms with high levels of financial statement comparability show commitment to tackle agency cost and information asymmetry.

Keywords: accounting comparability; cash holdings; agency cost; information asymmetry (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2021
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