State Ownership and the Relationship between Investment and Cash Flow: The Case of Vietnamese Listed Firms

Thoa T. K. Tu and Uyen T. U. Nguyen

Emerging Markets Finance and Trade, 2021, vol. 57, issue 1, 175-197

Abstract: The article examines the effect of state ownership on the relationship between investment and cash flow in Vietnam, a small transitional economy. Using a sample of companies listed on Vietnam’s stock exchanges, we find that the investment–cash flow relation for both state-owned and non-state-owned firms is U-shaped. In addition, state-owned companies have higher cash flow sensitivity of investment, which perhaps is due to their socioeconomic and political responsibilities, poor corporate governance, and agency problem. Moreover, the investment of high-growth companies, both with and without state ownership, has lower dependence on internal cash flow. Additionally, low-growth state-owned companies have higher cash flow sensitivity of investment than those without state ownership, suggesting inefficient investment by the former.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:57:y:2021:i:1:p:175-197

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DOI: 10.1080/1540496X.2019.1610874

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