The impact of macroeconomic uncertainty on corporate investmentthe case study of vietnam shareholder

Background

Stable and long-term sustainable growth is a key objective for both domestic and foreign economists, driving nations to prioritize this goal The impact of macroeconomics is a significant concern for researchers, policymakers, investors, and business portfolio managers Macroeconomic volatility affects various sectors of the economy, leading to adjustments in economic growth and production processes Specifically, macroeconomic uncertainty is often linked to short-term fluctuations in variables such as gross domestic product (GDP), inflation, budget deficits, and current accounts Additionally, this volatility can undermine long-term growth potential by diminishing confidence and willingness to invest.

Then o t i o n o f macroeconomicu n c e r t a i n t y hasn o t beenc o m p l e t e l y integr atedbetweenthestudies.Therebymacroeconomicinstabilityisunderstoodasacircumstan ceo f economicm a l a i s e w h e r e t h e e c o n o m y d o e s n o t seemt o haver e m a i n e d s t a b l e andwhere,e v e n t u a l l y , s o m e t h i n g needst o b e d o n e f o r draggingi t backo n track(Azam,2001).A c c o r d i n g t o H a u s m a n andGavin( 1 9 9 6 ) , macroeconomics t a b i l i z a t i o n requiresensuringt h r e e factorsi n o n e e c o n o m y c o m p o s i n g growth,i n v e s t m e n t andl a b o r productivity.Otherw o r k s i n t h e fieldi n c l u d e t h e researchofFische r( 1 9 9 3 ) , B l e a n e y (1996)andIsmihanetal.

(2002),w h o allt a k e relatedapproachest h a t anincreasingmacroeconomicuncertainty m eansariseinoneoftheindexesthatwouldh o l d inflationrate,deficittoGNPratioandfor eigndebttoGNPratio.Meanwhile,Sametietal.

(2012)alsoarguethatmacroeconomicuncertaintyisassessedbythevolatilityofasetofmacroec onomicv a r i a b l e s whicha r e growth,i n f l a t i o n , currentb a l a n c e d e f i c i t , forei gnexchangereservesandbudgetdeficits.Ingeneral,itcanbeprimarilyunifiedthatmacroecono micu n c e r t a i n t y i s a conceptt h a t describest h e d e t e r i o r a t i o n o f importantma croeconomicvariablesintheeconomy,manifestedandmonitoredovertimethroughacomb inationofthesevariablessuchasgrowth,inflation,currentaccountdeficit,foreignexchange reserves,externaldebtandbudgetdeficits.Theseaforesaidindexesareseriousdriversofecono micgrowth.

Intermso f t h e c r i t e r i a o f t h e MaastrichtTreaty( o r s o – calledconvergencecriteria)bytheEUMemberStatesin1991,macroeconomicstabilityisme asuredbyfiveindicatorsasfollows:

Thefirsti s a l o w ands t a b l e inflation.A higho r unstablei n f l a t i o n a r y effectt hreatenseconomicgrowthandincreasestheriskpremium.Sincemanytypesofratesareadjuste dforinflation,thenthevolatilityofinflationmayalterGovernmentrevenuesandpersonal debt ThehighestinflationrateundertheMaastrichtcriteriais 3percent.

Thes e c o n d i s t o staya l o w levelofl o n g – t e r m interestr a t e s T h i s indicatorreflectsastableinflationexpectationinthe future.Alth oughthecurrentinflation rateisl o w , highl o n g – terminterestratessuggestt h a t inflationm a y r i s e i n t h e n e a r l y t i m e H o l d i n g lowint erestratesmanifeststhattheeconomyisstabilizingandmaycontinuetob e sostable.The highestdegreeof long–terminterestratebasedontheMaastrichtTreatymakesupabout9%.

Nationaldebtt o GDPratioi s t h e n e x t criteriat o adapttherebyt h e l o w leveldisplay st h a t t h e Governmenthast h e flexibilityt o e m p l o y t a x r e v e n u e s s o ast o m e e t d o m e s t i c capitalneedsratherthanrepayforeigncreditors.Inaddition,alownationaldebtalsoallowsl enientuseoffiscalpolicyinthefaceofcrisisand60percentis thehighestapprovalofnatio naldebtto GDPratioaccordingtotheconvergencecriteria.

Besides,budgetdeficithast o b e remainedl o w Regardingt h e c r i t e r i a o f t h e T r e a t y ofMaastricht,thebudgetdeficitat3 percent ofGDPis acceptable.

Andfinally,c u r r e n c y stabiliz ation i s t h e p o l i c y – orientedobjective.C u r r e n c y s t a b i l i z a t i o n allowsimportsandexportstodevelopinline withlong– termstrategiesandt o minimizeexchangerateriskforinvestors.Ast h e criteriaofthec o n v e r g e n c e criteria,t h e eurohasthe highest fluctuationbandof2.5%.

During the period under consideration, Vietnam's economy faced significant macroeconomic uncertainty as outlined by the Maastricht Treaty criteria The General Statistics Office reported that inflation was notably high, peaking at 23.1% in 2008 due to the global crisis, and reaching 18.7% in 2011 compared to the end of 2010 Although inflation rates have shown a gradual decline recently, they remained a serious concern, influenced by policymakers' management efforts Interest rates also experienced volatility, with a sharp increase between 2009 and 2011, peaking at 17% per year in response to high inflation By the end of 2010, national debt accounted for 48.1% of GDP, reflecting a 3% increase from 2009 and a rising trend projected to reach 57.3% of GDP by 2015 Vietnam has maintained a continuous budget deficit exceeding 5% over the past 11 years, the highest in Southeast Asia, indicating a persistent macroeconomic challenge that exceeds the acceptable levels set by the Maastricht Treaty.

Economic uncertainty arises when government fiscal and monetary policies fail, resulting in fluctuating economic indicators such as high inflation, rising unemployment, and significant trade deficits, which threaten financial stability This stagnation leads to a decline in domestic purchasing power Loayza and Raddatz (2007) highlight that inadequate economic policies, alongside external shocks like foreign trade disruptions and volatile capital inflows, contribute to macroeconomic uncertainty Furthermore, Clipa and Caraganciu (2009) note that in an open economy, particularly in developing nations, the impacts of a global crisis can propagate through financial channels, foreign trade, and investment.

Intheperiodbeforetheendof2007,Vietnamhasalwaysbeenconsideredoneoft h e brig hts p o t s i n t h e g l o b a l economicm a p Byj o i n i n g t h e W o r l d T r a d e O r g a n i z a t i o n (W TO)in2007,therealGDPgrowthratereachednearly7.1%andmorehighlythanthegrowthof advancedeconomiesandthewholeworld with 5.7%and2.7%,respectively.

Thefinancialcrisisi n t h e U n i t e d Statesfroml a t e 2 0 0 7 hasr a p i d l y s p r e a d t o majoreconomies,hasbecomeafinancialcrisis,aglobalrecessionandaseriousimpactoneconomi esaroundtheworld.Vietnamisnotoutsidetheimpactwiththedeclineof1.4%i n GDPgrowth b u t b e i n g s t i l l highert h a n t h e growtho f t h e r e s t o f w o r l d b e c a u s e t h e nationwasnot directlyaffectedbythecrisis.

Figure1.2:RealGDPgrowth inVietnam,advancedeconomies,emergingandd e v e l o p i n g e conomies,and the world.

According to Paul Krugman, a prominent expert on the global economy, the crisis has led to a decline in demand for durable and capital goods in the U.S over the medium term, significantly impacting developed economies like Japan and Germany In contrast, countries with advantages in producing consumer goods, such as China and Vietnam, will experience less severe outcomes and recover more quickly Although the effects may seem minimal, the global financial crisis notably hindered Vietnam's economic growth targets in 2008, with the GDP growth rate reaching only 5.7%, below the National Assembly's goal of 7% GDP growth further slowed in 2009 but rebounded in 2010.

Intheintegrationandopening upoftheeconomy,investmentis amajorfactorint h e aggregatedemandofthewholeeconomyingeneralandmostenterprisesinp articular.Accordingt o W o r l d Bankdata,investmentu s u a l l y accountsf o r 2 4 % to2 8

% o f t h e aggregatedemandofallcountriesintheworld.Increasedinvestmentmakesthede mandf o r relevantfactorsincrease,theproductionofvariousindustriesgrow,attractsmorelabo rforce,reducesunemploymentaswellasimprovessocialwelfare.Alltheseeffectsfacilitateeco nomicdevelopment.

AccordingtoGeneralStatisticsOffice,theabilitytoattractforeigndirectinvestmen t(FDI)i n t h e yearso f worlde c o n o m i c fluctuationsh a s decreasedmarkedly.Investmentgro wthwas31.5%i n

In 2007, Vietnam experienced a significant increase in Foreign Direct Investment (FDI) after joining the World Trade Organization (WTO) However, the global crisis led to a decline in FDI inflows and instability in indirect investment from foreign investors The massive influx of capital put pressure on the money supply, resulting in rising inflation This capital surge during the latter half of 2007 and early 2008 caused a drop in the exchange rate, prompting the State Bank of Vietnam to intervene in the foreign exchange market to stabilize it Consequently, the rapid increase in money circulation led to a sharp rise in the Consumer Price Index (CPI), peaking at 23.1% by the end of 2008 Investment growth in 2008 fell significantly to half of previous levels and continued to decline in the following years, averaging only 13% per year during this period.

Ascanbeagreedt h a t i n v e s t m e n t playsa veryimportant r o l e i n t h e f o r m a t i o n anddevelopmento f anenterprise,s o r e q u i r i n g investmentdecisionsm u s t b e c a r e f u l l y considered.Theinvestmentdecisionismadeafterconsideringvariousfactorswhene x a m i n i n g the mostinfluentialfactorexistingin almostenterprises,the factor ofeconomicuncertainty.Determiningthepresentvalueofinvestmentprojects,constructingopti mumcapitalbudgetingpracticesandminimizingthecostofcapitalforfirmsdependmainlyont h e estimationofmacroeconomic volatility.

Sustainable growth is essential for enterprises aiming for long-term survival in the market Various factors influence a firm's ability to grow sustainably, including the specific business context and broader economic trends Mergers and acquisitions (M&A) play a crucial role in helping new businesses enter rapidly growing markets and enabling established firms to transition to new phases, avoiding recession According to Maney et al (2011), M&A has evolved into a consolidation strategy that encompasses strategic growth, expansion, and innovation In a stable economy, the average transaction deal price is closely monitored, with firms often valued at or above market value Favorable economic conditions lead to an increase in deal volume, serving as an effective means for growth alongside organic expansion In Vietnam, M&A activity has recently gained momentum, marking its emergence compared to global trends.

N um be ro fT ra ns ac ti on s V al ue of T ra ns ac ti on s( in bi l.U SD )

28.Particularlysince2007,thenumberofmergersandacquisitionshasincreasedsharplyi n b o t h v o l u m e andscale,w i t h 1 1 9 deals,attachedt o t h e factt h a t V i e t n a m joinedt h e W T

O o n J a n u a r y 11, 2 0 0 7 M&Aa c t i v i t y took placei n v a r i o u s fieldss u c h asfinance,ban king,securities,insurance,etc.Since2008,M&AtransactionsinVietnamhaverisens i g n i f i c a n t l y inb o t h v o l u m e andvalue.In2 0 1 2 , therewere364 dealsw o r t h 4 2 billiond ollarandup to 535 dealsby2015 with 5.3 billiondollar.

ThemostvisiblefeatureofM&AactivitiesinVietnamisthatthevastmajorityo f M&Atransactionshaveforeignelements,accountingfor66%.Thepresenceofforeignbusinesse sinVietnam'sM&AdealshasdepictedthelevelofattractionoftheVietnamesemarketandthen eedforforeigninvestorstoentertheVietnamesemarketisthroughtheconnectionwithna tionalpartners.SimilartoFDIattraction,themostimportantfactorofattractingM & A a c t i v i t i e s i s t h e businessi n v e s t m e n t e n v i r o n m e n t ands t a b l e macroeconomic situation.

Ontheotherside,macroeconomicuncertaintyhasdifferentdegreeofeffectsondiffe rentpatternsoffirms.Mostoftheempiricalevidenceshowsthatfirmswiththelevelo f growthr ateandfinancingconstraintssignificantly affectcorporateinvestments.Bondetal.

(2003)t e s t t h e impacto f financialfactorso n corporateinvestmentsi n Belgium,France,Ger manyandtheUKandfindsignificanteffectsinallnations.Theyreportmoree c o n o m i c a l l y significantresultsfortheUK,suggestingthatfinancialconstraintson

8 corporateinvestmentsmayberelatively moreseverein the moremarket– orientedUK financialsystemt h a n i n t h e continentalE u r o p e a n c o u n t r i e s , whicht e n d t o b e bank– based.SimilarfindingswereobtainedbyHalletal.

(1999)wheninvestigatingwhetherafirm’scashf l o w influencesinvestmentsandR&Di n Fre nch,Japanesea n d U S high– techfirms.They documentasignificantimpactinallnationsandahighersensitivity ofinvest mentsandR & D int h e U S , w h i c h , l i k e t h e UK,i s characterizedbya market– basedfinancialsystem.Int e r m s o f highgrowthfirms,m a i n l y smalla n d m e d i u m s i z e d en terprises,theirinvestmentopportunitiesaremoresignificantlyconcernedandplayimportantrol einmakingprofitsaswellasincreasingfirms’value.

Asmentionedabove,stableandsustainablygrowthisexpectedtobeimportantf o r investmentsactivitieso f companies.V o l a t i l i t y ofmacroeconomicsi n differentcountries willhavevaryingdegreesofinfluenceandwilldependonthepoliticali n s t i t u t i o n s and theregulationsofthecountries.Therearealotofresearcharticlesonthist o p i c butunderdiffere ntresearchcorners.Thispaperisbasedonapreviousstudye x a m i n i n g theeffectsofeconomic uncertaintyoncorporate financialpolicies ingeneralorcorporateinvestmentofenterprisesinparticular b ut approachedbyam e t h o d wh ichhasbeentakenadvantagewidelyanddeeply.

Researchobjectives

Theresearchaimstoexamin e howthe capitalinvestmentof Vietnameseenterpri sesisaffectedbythemacroeconomic uncertainty.

The objective of this study is to investigate the relationship and impacts of macroeconomic volatility on enterprise investment in the stock market Previous research has explored the effects of economic uncertainty on corporate investment through various channels, with investment measured in different ways, such as cash holdings (see Ki and Mukherjee, 2016; Im, Park, and Zhao, 2017) This study aims to fill gaps in past research by An (2017) using evidence from Vietnam Specifically, it employs two distinct proxies for investment—capital expenditures and mergers and acquisitions (M&A)—rather than focusing solely on capital expenditures, anticipating strong negative correlations among these variables.

Inmyanalysis,Ialsoinvestigatethebehavior offirms with andwithoutfinancialconstraintstofurtherexploretheimpactofmacroeconomicuncertaintyon

9 investmentsoft h e s e enterprises.To bem or e detailed, I expectfirmsw i t h o u t financialc onstraintshave

9 morecapitalforgrowthandthereforemacroeconomicuncertaintywillhavemoreseriousimpa ctonthesefirmsthanonfirmswithfinancialconstraints.Similarly,Ialsoexpectthatfirmswithhig hergrowthrateareimpactedmoreseriouslybymacroeconomicuncertaintyt h a n firmswithl owergrowthrate.Followingpaststudies,therearesomemethodsusingt h e criteriatodistin guishthecharacteristicsofenterprisesintodifferentsubsamples.Fazzarietal.

(1988)suggestedclassifyingf i r m s exanteemployingd i v i d e n d payoutbehaviourandleve rageoffirmsastheproxies.MyresearchisbasedonthestudyofPhanetal.

(2017)intheliteratureofShareholderlitigationandcorporatecashholdingswhichu s e growt hrateandfinancialconstraintsfor dividingsubsamplesandexploringtheimpacto f macroeconomicu n c e r t a i n t y onc o r p o r a t e i n v e s t m e n t s Besides,s i z e andpayoutratioarethecriterionforthedivergenceofnon– financialconstraintsandfinancialconstraints.First,afirmfacinghighereconomicuncertainty mayhavelowervalueofinvestmentandt h e degreeo f c o r r e l a t i o n i s s t r o n g f o r firmsw h i c h a r e m o r e f i n a n c i a l l y unconstrained.Second,afirmconfrontinghighereconomicun certaintycouldhavelowervalueofinvestmentand it issimilarlystronger forfirmswith ahigherrateofgrowth.

Furthermore,onemoreexceptionaltechniqueisaddedtoestimatethevolatility macroeconomicinmystudy.FollowingBaum(2005)Ifit ageneralizedARCH(GARCH)m o d e l t o producet h e conditionalvariancederivedfromGARCHmodel,averagedt o annualfrequency,whichisthenusedasameasureofmacroeconomi cuncertaintyinmystudy.

Researchobjects and scopes

Researchobjects

Theobjecto f researchi s t h e relationshipandt h e impacto f m a c r o e c o n o m i c u n c e r t a i n t y on the investment ofenterprisesin thestockmarket.

Researchscopes

Theresearchmagnitudeconsistsof732firmslistedontheHoChiMinhStockExch ange(HOSE),HanoiStockExchange(HNX),andUnlistedPublicCompanyMarket(UPCO M),asof31/12/2015.Studydurationisconsideredfortheperiodof11yearsfrom2 0 0 5 t o

Researchmethodology

Thestudyusesquantitativemethods,basedondatafrom732firmslistedbetween2 005and2015ontheHoChiMinhCityStockExchange,HanoiStockExchange,andU n l i s t e d P u b l i c C o m p a n y Market.T h e t w o m a i n variablesdevelopedt o

10 measureinvestmenta r e CapitalE x p e n d i t u r e ( C A P E X ) andMergersa n d Acquisitio ns(M&A).

Int h i s paper,t w o p r o x i e s consideredasmacroeconomicu n c e r t a i n t y a r e t h e v o l a t i l i t y ofrealgrossdomestic product(GDP)andconsumerpriceindex(CPI).

Them o d e l employsc o n t r o l variabless u c h aso p e r a t i n g c a s h flow,Tobin'sQ , salesgrowth,nationalelectionandGDPgrowth.

TherebythemodelisbasedontheresearchproposedbyGulenandIon(2015)int h e s t u d y ofP o l i c y u n c e r t a i n t y a n d corporateinvestmentandi n c o n j u n c t i o n w i t h t h e proposedm o d e l byBaumetal.

(2005)i n t h e s t u d y o fT h e impacto f macroeconomicuncertaintyonnon- financialfirms'demandforliquidity.

Moreover,myanalysisresearchest h e d e p e n d e n c e o f a b i n a r y variableundero t h e r independentvariablesbyusingthepanelprobit regressionmodelforM&Abinaryd i s t o r t i o n soastoinvestigatetheimpact ofmacroeconomicuncertaintyonM&Aactiv ities.

The study employs quantitative methods and requires panel data for analysis I conduct regression using three approaches: Pooling Regression, Fixed Effect Model, and Random Effect Model, to assess the robustness of the results across different methods It is essential to identify the most suitable regression method by utilizing the Lagrange Multiplier test (LM test) and the Hausman test The Lagrange Multiplier test is applied to choose between Pooling Regression and the Random Effect Model, while the Hausman test is used to compare the Fixed Effect Model with the Random Effect Model Based on the outcomes of these tests, I select the most appropriate regression model.

Researchsignificance

Thes tu dy isexpectedt o i d e n t i f y theimpacto f macroeconomicu nc er ta in t y on t h e investmentofVietnamenterprises,namelythoselisted on theHo ChiMinh CityStockExchange,HanoiStockExchange,andUnlistedPublicCompanyMarket.Fromt hat,theauthorcandrawconclusionsandassessmentsoftheeffectofmacroeconomicvolatilityo ncorporateinvestmentaswellasmergersandacquisitionsactivitiesofenterprisesinparticular.

Inaddition,paper’soutcomesareanticipatedtocontributeempiricalevidencetot h e nationaleconomicmanagementa g e n c y w i t h respectt o t h e influenceo f macroeconomicvolatilityo n enterprises’i n v e s t m e nt,s i n c e t h e n intensifyingt o control uncertainty,promoteinvestmentand providepracticalobservationsforwho dobusinessinordertobetterunderstandtheeffectofmacrouncertaintyo n investmentandM&AactivitiesofVietnamenterprises.

Researchstructure

This paper is structured as follows: Section 1 provides a general introduction, outlining the formation of the topic, research objectives, problems, scope, methods, and key findings Section 2 reviews relevant literature and develops testable hypotheses, detailing the theoretical foundations, background theories, and research model Section 3 describes the research methods, including data collection, sample selection, and variable measurement Section 4 presents the research results, focusing on model analysis and validation, variable significance, and discussions Finally, Section 5 concludes the study by summarizing key issues, acknowledging research limitations, and suggesting avenues for future research.

Therelationshipbetweenmacroeconomicuncertaintyandinvestment

Macroeconomicuncertainty

Macroeconomicsstudiest h e e c o n o m y atanoveralllevelthroughgeneralindicatorss uchasn a t i o n a l o u t p u t , inflationrates,t h e proportiono f unemployment.T h e conceptofmac roeconomicuncertaintyi s widelym e n t i o n e d inthepolicy– orientedliterature.Inthepastliteratures,however,thisconceptisalmostneverreallydetermined ,andseemstoreferinturntohighinflation,overvaluedcurrency,unstablerealexchangerate,bal anceofpaymentdeficit,orfiscaldeficit,etc.AccordingtoAzam(2001),everythingt h a t i s goingwrongi n a country’smacroeconomicconditioni s oftencalledmacroeconomic uncertainty.

Basedo n thet wo originalresearchesofBaume t al.

Gross Domestic Product (GDP) represents the monetary value of all finished goods and services produced within a country's borders over a specific time period There are three primary methods to determine GDP: the expenditure approach, the output (or production) approach, and the income approach Corporate investment plays a significant role in contributing to GDP growth and overall economic development Real GDP is the inflation-adjusted measure that reflects the value of all goods and services generated by a nation in a given year, expressed in base-year prices The base year serves as a reference point for comparing other years, and real GDP is also referred to as gross domestic product in constant prices.

 ConsumerPriceIndex(CPI)i s a percentagem e a s u r e t h a t reflectst h e relativecha ngei n consumerpriceso f a basketo f consumergoodsandservices,suchastransportation,food andmedicalcare overtime.The indexi s basedonly ononebasketrepresenti ngtheentireconsumergoods.ThefluctuationintheCPIi s requiredtoassesspricechang esassociatedwiththecostofliving.TheCPIisoneo f themostcommonlyusedindicato rformeasuringpricesandthechangeinprice

The ultimate goal of government is to stabilize a nation's economy and sustainably boost its growth To address economic challenges, countries must implement stabilization policies, with the government regulating economic strategies to achieve macroeconomic objectives such as efficiency, justice, stability, and growth Fiscal and monetary policies are crucial for determining a country's macroeconomic stability and should be coordinated by the Ministry of Finance and the Central Bank to mitigate uncertainty The methods and mechanisms of this coordination can vary significantly based on the development stage of a country's institutions and financial markets.

Monetary policy is a crucial macroeconomic strategy employed by central banks to manage the money supply and interest rates, aiming to achieve macroeconomic targets related to prices, output, and employment The primary goal of monetary policy is to ensure monetary stability and moderate inflation control, which serves as the foundation for long-term economic growth In the short term, monetary policy can facilitate this objective through three main tools: the compulsory reserve ratio, the discount rate, and the buying and selling of government securities By influencing interest rates, monetary policy regulates the investment and consumption behaviors of economic entities However, it cannot directly affect aggregate demand like fiscal policy; instead, it operates through intermediary targets such as money supply and market interest rates.

Fiscal policy refers to the government's decisions regarding taxation and spending, which directly influence the composition of aggregate demand and affect macroeconomic targets, primarily economic growth In times of recession, the government can implement expansionary fiscal policy by reducing taxes and increasing public investment to stimulate the economy Conversely, during periods of inflation and rapid growth, contractionary fiscal policy may be employed, involving tax increases and reduced spending to prevent the economy from overheating.

 Regardingforeigntradepolicy,impacting ontradebalanceandpaymentbalancethr oughinterventionpolicies,exchangerates,andimportandexporttaxes.Foreigntradepoli ciescreatefavorableconditionsfordomesticenterprisestopenetrateande x p a n d t h e i r marketsoverseas,e x p l o i t i n g t h o r o u g h l y comparativeadvantagesoft h e dom esticeconomy.Inaddition,thegoalofthepolicyistoprotectthedomesticmarket,creatin gconditionsfordomesticenterprisestostandfirmanddevelop inbusiness.Foreignt radepolicyisapartofacountry'sforeignpolicyinprocessofaccomplishing growthobjectives.

Corporateinvestment

Corporate investment is a crucial activity that significantly influences business value and impacts the interests of business owners while determining enterprise growth These investments utilize financial, material, labor, and intellectual resources to generate profits and socio-economic benefits over the long term Companies allocate long-term capital to develop and acquire essential assets to meet their business objectives, primarily through the execution of investment projects Thus, investment is a strategic decision for enterprises, representing a long-term financing choice that greatly affects business efficiency Errors in estimating investment capital can result in substantial capital wastage and serious repercussions for the business.

Inaddition,d e p e n d i n g o n t h e classificationcriterionsuchasinvestmentobjective s,investmentownersortheperiodoftimeofinvestmentandexecutingprocess,therearedifferent typesofinvestmentasfollows:investmentoutsidetheenterprisesandinvestmentinsideth eenterprises;directinvestmentandindirectinvestment;short–terminvestmentandlong– terminvestment.Moreover,investmentactivitiesusuallytakeplacei n t w o stagesinwhicharecapitalinvestmentandcapitalrecovery.

Capitalexpenditure,o r denotedasC a p e x , aref u n d s u t i l i z e d byt h e f i r m t o upgradeorpurchasenewphysicalassetssuchasrealestate,

(forexample,buildings,land,etc.),factoriesforproduction,orequipment.Thistypeofcostisu sedtodevelopproductionandm a i n t a i n b u s i n e s s operations.Suchcostsi n c l u d e everyt hingfromr o o f repairtobuildinganewfactory.Capitalexpenditure iscollectedfromfinancialstatementso f enterprisesanddecisionsofcorporatecapitalexpend itureareregardedasanessentialitemtomaximizethemarketvalueoffirm(seeMcConnell,1985).

M&Ahasevolvedsinceitsoriginsintheearly1900s.Thisactivityhasinitiallybee noutspreadonadomesticscalewhenfirmshaveboughtintheirownmarketinordert o increase t h e i r share,p r o d u c t i v i t y ande f f i c i e n c y i n t h e i r businessoperations.Thesefirms havesubsequentlyconsolidatedandjoinedforceswithinacommonindustrysoastostrengthensiz eoffirms.

InVietnam,legally,accordingtotheprovisionsofArticle17oftheCompetitionLaw( 2004),"Mergermeansthetransferofallassets, rights,obligationsandbenefitsofo n e orm oreenterprisestoanotherenterprise,andtoterminatetheexistenceofthemergedenterprise.Acqui sitionmeansthepurchasebyanenterpriseofallorpartofthepropertyo f anotherenterprisesu fficientenoughtocontrolordominatethewholeorapartoftheacquiredbusiness".

Mergers and Acquisitions (M&A) involve gaining partial or full control of a business through the consolidation of firms or assets, allowing investors to possess ownership of part or all of that business The primary goal of M&A is to exert control over an enterprise rather than simply owning shares like small and retail investors If an investor acquires a stake that enables them to participate in significant decision-making within the firm, it qualifies as M&A activity In contrast, if an investor only owns shares that do not grant them sufficient influence over important enterprise matters, it is considered a standard investment activity.

Factorsimpactingon theinvestmentofenterprises

Inpractice,itisa measureoftherateofchangethat a nation'sgross domestic pro duct(GDP)goesthroughfromoneyeartoanother.Thismeasuredoesnotadjustforinflation;iti sexpressedinnominalterms.Thisisalsooneofthemostimportanteconomicindicatorsu s e d t o e x a m i n e t h e performanceo f a nationandcomparei t w i t h othersaswellasbetweendifferent periods.Fromachievedresults,economistscanevaluateandforecasttheirfutureandproposefea siblestrategiesandpolicies.Rapid growthrepresentsagrowingeconomythatcreatesmoreopportunitiesfor firms toincreaserevenuewhicharethe output of theeconomy.

Investmentandeconomicgrowthhavethepositiverelationship,inotherwords,hig hertheinvestmentis,higherthegrowthis.Dunning(1988)mentionsthattheattractiono f foreign directinvestmentdependsverymuchonthefactorsandcharacteristicsoftheh o s t country. Althoughintheshorttermtherelationshipbetweeninvestmentandeconomicgrowthtendstob elow,butinthelong run,investmentratesareperceivedtobec l o s e l y linkedt o e c o n o m i c growth.Bycontrast,i n t i m e s o f economicdownturn,GDPgrowthslowsdownandmaybenegative.Thisexpresses anunstableanddifficultsituation,investorswilllimittheirinvestmentto expand thescaleandproduction.

(2012)examinetheimpactsofpoliticaluncertaintyonthebehavioroffirmsregardingc o r p o r a t e investmenti n t h e contexto f nationalelectionsanddocumentt h a t t h e cyclesofi n v e s t m e n t expendituresc o r r e s p o n d t o yearso f n a t i o n a l electionsallovertheworld.Theiroutcom esalsosuggestthatpoliticaluncertaintyleadsenterprisestorestrictt h e i r i n v e s t m e n t expe ndituresu n t i l dealingw i t h t h e electoraluncertainty.Accordingt o Gulen( 2 0 1 5 ) , Govern mente l e c t i o n s w i l l leadt o changesi n managementpoliciesandnewleaders.Electionsarese enasfactorsthatinfluencepolicyinstabilityandi n d i r e c t l y affectt h e investmento f t h e businessi n a goodo r worsedirectionfromt h e perspectiveoftheinvestor.

Dependingontheperspectiveofinvestors,electioncyclesareseenasfactorsofp o l i c y uncertaintyandindirectlyaffectcorporateinvestmentinapositiveornegativeway.T h e nat ionalelectiontakesplaceeveryfourorfiveyearsdependingonthepolicyofeachcountry.Infact ,an extraordinarysessionofCongresscanalsocausemarketturmoil.

Salesofbusinessare thetotalrevenueachievedwhensellinggoodsandservices,financialactivitiesando t h e r s o f ente rprisesata givent i m e andt h i s i s o n e o ft he mo st p r i m e financiali n d i c a t o r s o f e v e r y business.T h e amountbywhicht h e a v e r a g e salesv o l u m e ofafirm'sproductsor s erviceshasrisen,typically fromoneyeartothe nextiscalledbysalesgrowth.Salesgrowths howsthatwhetherenterpriseworkswellornot,themacroconditionscreatefavorableconditions forbusinessenterprisesandstable growth,helpingbusinessesattractmoreinvestmentcapitalas wellasaccumulatemoreproperties.

Tobin's Q ratio is defined as the market value of a company divided by the replacement cost of its assets Developed by James Tobin in 1968, this ratio suggests that the total market value of all firms on the stock market should equal their replacement costs A Q ratio greater than one indicates that a firm is generating returns above its replacement cost, encouraging investment, while a ratio below one signals that the company will limit investment due to undervaluation A low Q suggests that a firm's stock is undervalued compared to the cost of replacing its assets, whereas a high Q indicates that the stock is overvalued relative to its replacement cost In Tobin's model, stock valuation significantly influences investment decisions, and this indicator is affected by macroeconomic conditions, including government policies and foreign investments in an open economy.

Cash flow refers to the movement of money into or out of a business, project, or financial product, and is a crucial indicator of a firm's financial health By measuring cash flow, businesses can assess their value and current situation, influencing key economic decisions Positive cash flow indicates rising liquid assets, enabling debt payments, reinvestment, shareholder returns, and cost coverage, while also providing a buffer against future financial challenges In contrast, negative cash flow signifies a decline in liquid assets Additionally, cash flow serves as a measure of operational efficiency for enterprises and reflects how policymakers manage and control the economy This information can lead to necessary adjustments in management and operations to support domestic enterprises Furthermore, net cash flow is closely tied to investment levels; an increase in net cash flow suggests that businesses have more capital available for expansion and growth.

Impactofmacroeconomicuncertaintyoncorporateinvestment

Inthispaper,therelationshipandeffectsofmacroeconomicuncertainty ontheinv estmento f enterprisesi n t h e s t o c k marketa r e examined.O n t h e o t h e r s i d e , i t i s essentialto specifyhowthelevelofeffectsare forfirmswith ahigherandlowerdegreeofgrowthrateandf o r f i r m s whicharem o r e f i n a n c i a l l y constra inedandn o n – financialconstraint.

Them a i n variableusedt o measureanenterprise'sinvestmenti s Investmentwhichi s computedbyt w o waysc o m p r i s i n g capitalexpenditures,andM&A.Besides,therearet w o variablesk n o w n asp r o x i e s t h a t representm a c r o e c o n o m i c u n c e r t a i n t y t o meas urev o l a t i l i t y consisting o f realg r o s s d o m e s t i c product( G D P ) andc o n s u m e r pricei n d e x (CPI).

Inaddition,themodelusesoperatingcashflow,Tobin'sQ,salesgrowth,elections,andt herateofgrossdomesticproductgrowth(GDPgrowth)ascontrolvariablestoinvestigatethe irimpactsintherelationbetweenmacroeconomicuncertaintyandcorporateinvestment.

Basedonthepreviousempiricalstudiesaswellastheliteratureandparticularlyt h e t heoreticalm o d e l , i t i s requiredt o expectt h e resultsaboutt h e relationshipbetweent w o vari ables.Thereby,t h e s e correlationsbetweendependentvariablea n d independentvariablewithc ontrollingvariablesareindicatedin thetable2.1below.

Macroeconomicuncertaintyb asedon the volatilityofrealgrossdomestic product

2 MU2–CPI Macroeconomicuncertaintybas edon the volatilityofconsumerpriceinde x

Operatingcash flows deflatedbytotalbook valueofassetsatt i m e (t–1) Positive

Intermso f firmclassification,i t i s expectedt h a t therei s a s t r o n g negativecorre lationbetweenthecapitalinvestmentandmacroeconomicuncertaintyvariablesregardingfirms withhighergrowthrateandlessornon–financialconstraint.Intherest caseoffirmswithlowergrowthrateandseverefinancialconstraint,therelationshipsarepredi ctedto be weaker orhavenosignificantimpact oneachother.

Robustnesscheck-sub-sample categories

In this study, I investigate the effects of macroeconomic uncertainty on corporate investment, focusing on how these effects vary across different firm categories I classify firms based on their growth potential and financial constraints, using indicators such as growth rate, size, and payout ratio Specifically, larger firms with high payout ratios are categorized as non-financial constraint enterprises, while smaller firms with low payout ratios are identified as financially constrained To analyze growth rates and financial constraints, I utilize median values to differentiate the samples, with a criterion of zero to separate the subsamples These indices are derived from financial statements.

Previousresearches

(2005)researcht h e impacto f macroeconomicun ce rt ai n ty oncashholdingsfornon– financialfirmstoinvestigatetheeffectsof macroeconomicvolatilityonn o n – financialfirms’c a s h holdingbehavior fromtheCOMPUSTATdatabaseoverthe 1 9 7 0 –2000period.Theysuggestthatariseinmacroeconomicvolatilitywillnarrowthecross– sectionaldistributionoffirms’cash–to– assetratioswhenemployinganaugmentedcashb u f f e r – s t o c k m o d e l Thereby,f o u r p r o x i e s f o r macroeconomicu n c e r t a i n t y a r e construc tedfromconditionalvarianceso f GDP,CPI,I P andS&P500i n d e x estimatedwith aGARCHmodel.

The study utilizes monthly proxy data to analyze real GDP values, employing the Denton technique (Baum, 2001) to convert quarterly statistics into monthly figures based on the Industrial Production Index (IPI) The authors associate these proxies with independent variables to conduct regression analyses for each classified enterprise group The model incorporates control variables, including the three-month LIBOR interest rate and the inflation index, to reflect the cost of private funds, enabling regressions for each proxy within each enterprise group To assess macroeconomic uncertainty, the model proposed by Baum et al (2005) is utilized.

WhereDispt(Cit/TAit)isameasureofthecross–sectionaldispersionoffirms’

2 cash–to–assetratioattimet , and𝜏 𝑡 standsfor themeasureofmacroeconomic uncertaintyattimetanddenotedasMUj,tinmystudy.Thereby,MUj,tarecapturedby theconditionalvarianceofrealGDP(realGDP)andtheconditionalvarianceofconsumerpriceind ex(CPI)attimet and theyaredenotedasMU1andMU2,respectively.Ԑt ist iserrorterm.

Asaresult,thereisaclearnegative correlationbetweenmacroeconomicu n c e r t a i n t y andthevarianceofthecross–sectionaldistributionofnon–financialfirms’cash– t o – assetratios.Inparticular,l a r g e f i r m s w i t h substantiale x p o s u r e t o m a c r o demandco nditionsrevealgreatersensitivity.Iti s f o u n d t o b e q u i t e sensitivet o macroeconomicu n c e r t a i n t y f o r firmsexperiencingrapidgrowth,firmsconsideredf i n a n c i a l l y constraine dandcapital– intensivefirms.Eventually,firmswithsizabledividendspaymentmanifestalowersensitivityc oncerningmacroimpactswhereascapital

BasedontheworkofGulenandIon(2015),theauthorsdemonstratethatpolicyu n c e r t a i n t y negativelyrelatestoinvestmentatfirmandindustry levelandthe impactis sig nificantineconomicmagnitude.Therebythesampleisobservedfrom1987to2013for1 0 , 2 7 8 enterprises.Theempiricalmodelof theauthors isdesignedasthe followingform:

This article indexes firms and calendar quarters, with 'l' representing the quarter lead between dependent and independent variables The firm fixed effects (αi’s) are included, while the QRT term incorporates calendar and fiscal quarter dummy variables to account for potential seasonality in capital investments Standard errors are clustered at both the firm and calendar quarter levels to address possible cross-sectional and serial correlation in the error term The ratio of capital expenditures to total assets (CAPX/TA) serves as the dependent variable, while independent variables include policy uncertainty (PU) and the operating cash flow to total asset ratio (CF/TA).

TA);Tobin'sQ(TQ);salesgrowth(SG).

Int h e m o d e l , t h e M t variablerepresentsmacroeconomicp o l i c y changes,includi ngchangesinGDPgrowthandchangesinelectionsduetochangesintheNationalA s s e m b l y orGovernment.Authorsaremadewithdummyvariablesfortheelection,theyearoftheelecti onwill be1andzerofortheremainingyears.

TheP U i s b a s e d o n t h e BBDi n d e x developedbyB a k e r , BloomandDavis(2 013).TheauthorscalculatetheBBDbasedonthreecomponents:informationonpolicyu n c e r t a i n t y (statisticscountsofthenumberofkeywordsrelatedtouncertainty,economy,etc.)

;the u n c e r t a i n t y aboutfuturechangesi n t h e taxcodewi ll expire inthefuture; andu n c e r t a i n t y aboutfuturefiscaland monetarypolicy.

Quantitativeresearchm e t h o d o l o g y is employedi n t h e analysis,t h e s t u d y r u n s regressionandt e s t s betweenindependentanddependentvariablesandbetweengeneralp o l i c y uncertaintyandnew– basedcomponentoftheBBDindex;modelregressionwitht h e overallcompositiono f t h e p o l i c y uncertaintyandf o r eachc o m p o n e n t constitutingunstablepolicyvariable.

During the crisis period from 2007 to 2009, approximately two-thirds of the 32% drop in corporate investments can be attributed to policy uncertainty This effect is not uniform across U.S companies; it varies significantly by sector, particularly affecting enterprises with higher investment irreversibility, more financial constraints, and those in less competitive industries Additionally, policy-related uncertainty leads to increased cash holdings and reduced net debt issuance Overall, these findings suggest that policy uncertainty may hinder economic growth by reducing corporate investment, which is further exacerbated by precautionary delays stemming from investment irreversibility and rising external borrowing costs.

Panagiotidis and Printzis (2016) demonstrate a significant correlation between macroeconomic uncertainty and investment decisions at the firm level in Greece, utilizing a dataset of nine indicators to assess uncertainty across domestic, international, and EU levels from January 1994 to August 2015 Their dynamic investment model, which incorporates aggregate data classified by firm size and sector, reveals a negative relationship between macroeconomic volatility and economic activity, particularly impacting firm investment in Greece Notably, this adverse effect is markedly stronger in sectors with high heterogeneity, including Health, Real Estate, Other Community, Social and Personal Service Activities, and Hotels.

&Restaurants sector.Concerningfirms i z e , small firmsbehavedifferently compared tolargefirmsbywhicha r e moresharply affectedbym a c r o e c o n o m i c v o l a t i l i t y i mpacts.Furthermore,iti s outstandingt h a t t h e

22 macro– u n c e r t a i n t y impacti s s i g n i f i c a n t l y m o r e pronouncedt h a n t h e firm– specificu n c e r t a i n t y impacts.

Undera differentapproacho f t h e relationsamongfinancialconstraints,assettangibili ty,andcorporateinvestment;itisfoundthatassettangibilityincreasesinvestment

– cashflowsensitivitiesregardingfinanciallyconstrainedfirmswhereastherearenosuchinfluen cesobservedforunconstrainedfirms.Inadditiontotheoreticalexpectations,firmsw i t h m o r e tangiblea s s e t s arel e s s l i k e l y t o b e f i n a n c i a l l y constrained.Moreover,t h e p o s i t i v e effecto f t a n g i b i l i t y o n constrainedcashf l o w sensitivitiesi s p r o o f f o r a cred itmultiplierinU.S.corporateinvestment.Besides,duetoahighlyprocyclicaldebtcapacity,t h e n i n c o m e shocksh a v e e s p e c i a l l y l a r g e impactso n constrainedf i r m s w i t h t a n g i b l e assets(AlmeidaandCampello,2007).

(1988)documentthatcorporateinvestmentisaffectedbyfinancialfactors.Theirapproachexpre sst h a t t h e characteristicso f firmsvariest h e connectionbetweeninvestmentandfinancing constraints.Consequently,itisdisplayedas u b s t a n t i a l l y s t r o n g e r s e n s i t i v i t y ofinvestmentconsideringc a s h f l o w a n d l i q u i d i t y i n enterprisesthatretainnearlyallo ftheirincomeandthefinancialconstraintsarisewiththecapitalmarketimperfection.

Anewtestoftheeffectoffinancialconstraintsoncorporatepoliciesisdevelopedthr oughmodelinga firm’sdemandfor liquidity(Almeida,Campello,andWeisbach,2005).Impactso f financialconstraintsarereveale dthrought h e cashf l o w s e n s i t i v i t y ofca sh D u r i n g thep er io d from1 9 7 1 t o 2

0 0 0 f o r a l ar ge sampleo f manufacturing firms,theauthorsempiricallyestimatethecashflowsensitivityofcashando b t a i n r o b u s t s u p p o r t fortheirtheory.As aresult,theyachievethatconstrainedenterprisesreveals u b s t a n t i a l l y p o s i t i v e cash– cashf l o w sensitivitieswhereasunconstrainedenterprisesdonot.Furthermore,theeconomists suggestthatfinanciallyconstrainedenterprisesgrowt h e i r p r o p e n s i t y t o retaincashaftern egativemacroeconomicshocks,whereasunconstrainedenterprisesdo not.

(2017)i n v e s t i g a t e t h e relationshipbetweenu n c e r t a i n t y measuredbys t o c k returnv o l a t i l i t y a n d t h e marketvalueo f c a s h holdingsi n NorthAmericaf o r t h e periodfrom1980to2015soastoconstructvariablesbasedontheinformationcontainedi n financialstatementsa

23 ndassumethatif thevitalitymagnitudesofuncertainty andthe valueofcashholdingsaregre aterforfinanciallyconstrainedfirms,firmswithlessagencyconflicts,andfirmswithmoregrowt hopportunities.Tobemoredetailed,theiroutcomes

23 eventuallyindicatet h a t a firmfacingh i g h e r u n c e r t a i n t y hasa h i g h e r valueo f cas h,reducinginvestmentsandholdingmorecashbeneficialtoshareholders Theimpactsa rereferredt o t h e increasedvalueo f t h e o p t i o n t o waitandseeaswellast h e aggravatedfinanc ialconstraintsandmitigatedagencyconflicts.Besides,theeffectsofuncertaintyinregardtoinc reasingthevalueofcashholdingsareconsistentlyobservedforfirm–level,t i m e – series,andresidual uncertaintymeasures.

Basedonasampleof914cross– bordermergersandacquisitionsfrom1994to2 0 1 1 , whent e s t i n g w h e t h e r foreigna c q u i s i t i o n s r e d u c e financialconstraints,enhanceinvestmenti n researcha n d developm ent( R & D ) andp r o d u c t i v i t y oft h e targetfirmsi n C h i n a Chen,H u a andBoateng( 2 0

1 6 ) e m p l o y investmentt o cash– flows e n s i t i v i t y toestimatefinancialconstraintsandtheirconsequencesindicatethatforeign acquisitionsareconsistentwithadecreaseoftargetfirms’financialconstraints,irrespectiveofth eownershiptypeofthetargetfirm.However,comparedtostate– ownedfirms,theextento f financialconstraintdecreasei s p r o n o u n c e d f o r n o n s t a t e – ownedenterprises.T h e researchalsodemonstratesevidencet h a t p r o d u c t i v i t y andinvestm ento f C h i n e s e targetfirmsinR&Dareenhancedbyforeignacquisitions.

A study by An, Chen, and Zhang (2016) investigates the impact of political uncertainty on corporate investment in China, utilizing hand-collected data from 277 cities regarding changes in government officials Their findings reveal that political turnover significantly reduces corporate investment, particularly when new officials are outsiders appointed by higher government levels The effect is more pronounced for state-owned enterprises, capital-intensive firms, and those considered locally significant Additionally, the researchers note that the volatility of corporate investment increases alongside political turnover.

Suggestedmodelsandhypotheses

Inresponsetoaresearchquestionoftheimpactofmacroeconomicuncertaintyo n corporateinvestment,Iproposearesearchmodelthatisbasedontwopreviousstudies,t o bemo redetailed,acombinationofvariablesfromtwomodels.Specifically,Iambasedo n thestudyofBaumetal.

(2005)toestimatetwoproxiesofmacroeconomicuncertainty(MU)containingrealgrossdome stic product(GDP),andconsumerpriceindex(CPI).

(2015)i s employedt o e x a m i n e t h e impacto f macroeconomicuncertaintyo n enterpriseinvest ment.

Thecontentsoftwomodelsarementionedinmoredetailsintheprevious literaturesabove.Specificempiricalmodelsandmethodsofmyresearchwillbepresentedi n Secti on3.

Fromtheabovetheoreticalandempiricalanalysis,therearetwohypothesesthatarem ainlyconcernedinmystudy.Thereby,the firsthypothesisis:

PanagiotidisandP r i n t z i s (2016)f i n d t h a t macroeconomicu n c e r t a i n t y af fectsn e g a t i v e l y investmentperformanceanditemergesthatsmallerfirmsaremoreneg ativelyaffectedcomparedtolarger ones Toachieveadvancedresearchoutcomes, I obser veto anotherangleo f s t u d y t o c l a r i f y the objectiveoft h e study.T h i s argumentleadst o t h e secondhypothesis.

 Hypothesis2 : T h e r e i s a s t r o n g n e g a t i v e r e l a t i o n s h i p betweenm a c r o e c o n o m i c u n c e r t a i n t y andcorporateinvestmentwithregardtofirmswithhig hergrowthrateandfirmsareless ornon–financialconstraints.

Analyticalframework

Tovisualizetheresearchobjectivesandempiricalmodels,itisessentialtomaket h e fr ameworkof studyonthewholeasfollows:

Inthispaper,therelationshipandimpactsofmacroeconomicuncertaintyontheinv estmento f enterprisesi n t h e s t o c k marketa r e e x a m i n e d O n t h e o t h e r s i d e , i t i s essentialto specifyhowthelevelofeffectsare forfirmswith ahigherandlowerdegreeofgrowthpotentialandforfirmswhicharemorefinanciallyconstraine dandnon–financialconstraint.

Them a i n variableusedt o m e a s u r e anenterprise'sinvestmenti s Investmentwhi chi s computedbytwo typesofwayscomprisingcapitalexpenditures,andmergersandacquisiti ons Besides,therea re twop r o x i e s t h a t representmacroeconomi c volatility i n c l u d i n g realgrossdomesticproduct(GDP)andconsumerpriceindex(CPI).

Inaddition,t h e m o d e l usescontrolvariablesconsistingo f salesg r o w t h , operatingc a s h flow,Tobin'sQ,nationalelection,t h e rateofgrossd o m e s t i c product growth(GDPgrowth)toinvestigatetheirimpactsintherelationbetweenmacroeconomicu n c e r t a i n t y andcorporateinvestment.

Data

ThecollecteddatacomefromsecondarydataandThompsonReutersW o r l d s c o p e Database.Thestudyusesquantitativemethods,basedondatafrom732firmsl i s t e d between

2 0 0 5 and2 0 1 5 o n t h e H o C h i M i n h C i t y Stock E x c h a n g e , HanoiS t o c k Exchange,an dUnlistedPublicCompanyMarket.

Forfirmlevel,variablesincludingtotalassets,cashflow,salesgrowth,Tobin’sQ an dnational election; t he se indicatorsarecollectedandcomputed fromannualstatemen tsandfinancialstatementso f listedcompaniesf o r eachyearf r o m t h e officialwebsitessuchasC afef.vn,Vietstock.vnandCophieu68.vn.Inmyanalysis,forcorporateinvestment,datac o m p r i s i n g CapitalExpendituresandM&Aa r e r e g a r d e d asp r o x i e s o f dependentvariable.

Intermso f macroeconomicdata,thereareG D P perquarter,consumerpricei n d e x (CPI)p e r m o n t h andannualizedd a t a o f GDPgrowthi n whichcollectedf r o m Internatio nalMonetaryFund(IMF).ForquarterlyGDPdata,applyingDentontechniquesconvertsquart erlydatatomonthlydata in order tomatchavailablemacro data.

In this study, I examine the behavior of large and small firms based on their growth potential and financial constraints, focusing on characteristics such as size and payout ratio Firms are categorized into high-growth and low-growth subsamples, with high-growth defined as having an average sales growth above the median for all firms, while low-growth firms fall below this median Additionally, firms are classified as financially constrained or unconstrained based on median size and differing payout ratios derived from their financial statements.

Empiricalmodel

Theresearchm o d e l i s developedfromt h e p r o p o s e d m o d e l o f GulenandIon(2 015)i n t h e literatureo f P o l i c y u n c e r t a i n t y a n d CorporateInvestmenti n conjunctionw i t h t h e m o d e l o f Baumetal.

(2005)w i t h t h e s t u d y o f t h e impactofm a c r o e c o n o m i c u n c e r t a i n t y o n n o n – financialf i r m s ' d e m a n d f o r liquidity.Specifically,t h e conditionalvariancederivedf r o mGARCHm o d e l , averagedt o annualfrequency,i s t h e n usedas

� measureofmacroeconomic uncertainty.Twovariablesrepresentingmacroeconomicu n c e r t a i n t y will thus bedenotedasfollows:

 MU1i s t h e macroeconomicu n c e r t a i n t y estimatedbyvolatil ityof realG D P and markedasMU1–GDP

Tot e s t t h e effecto f macroeconomicu n c e r t a i n t y o n corporatei n v e s t m e n t pres entedbycapitalexpendituresandM&A,IcombinewiththemodelofGulen(2015).Fromthatc ombination,mymaininvestmentspecificationtakesthe followingform:

The study identifies CAPEX, TA, and MADUMMY as the primary independent variables In this context, 'i' indexes the firms, 'j' represents the MU1 and MU2, and 't' denotes time, typically measured in years, indicating the lead between the dependent variable and macroeconomic uncertainty The αi’s are firm fixed effects, with the MU term being the key independent variable of interest Firm-level variables include Tobin's Q (TQ), which is calculated as the market-to-book value of assets at the year's start, along with operating cash flows (CF) and sales growth (SG) To account for macroeconomic conditions, GDP GROWTH is represented by the lagged yearly change in gross domestic product growth and the electoral cycle.

Ns t a n d s fornationalelection,knownasamacroeconomicpolicydummyvariable.Thereby,electiondummyequalsto1inelectionyear,andviceversa.Itisnoticeablethatinvestmentando peratingc a s h flows( C F ) h a v e t o b e dividedbytotalassets(TA)t o reducetheeffectoffirm magnitude.

Todiminishtheinfluenceofextremeoutliers,cashflowvariablehasbeenw i n s o r i z e d att h e 1 % a n d 9 9 % levelandallr e g r e s s i o n s havecontrolledf o r yearsfrom2 0 0 5 t o

Variablemeasurement

Dependentvariable

 CAPEX/TA:Ratioo f cashflowfrominvestinga c t i v i t i e s t o t h e beginningo f periodtotalassets.Theseindicesareannuallycollectedfromcashfl owstatementattheendofthefiscalyear.

 MADUMMY:M&Adummyvariablee q u a l s t o 1 f o r firmscarryingo u t M&Adeals,andviceversa.Annuallyavailabledataderivedmanuallyfrommainstreamsites.

Independentvariable

Botho f t h e s e p r o x i e s a r e estimatedbyAR C H ( G A R C H ) m o d e l asm e n t i o n e d beforein Section 2.

Controllingvariables

1,t h e indexrepresentst h e growtho f t h e enterprise.Theindexiscalculatedbytherati oofmarkettobookvalueofassets.M o r e specifically,Tobin’sQisexplainedbythe marketvalueofequityplustheb o o k valueofassetsminusbookvalueofequityplusd eferredtaxes,alldividedbyb o o k valueofassets.

TA:Theoperatingcashflowsoffirmiattimet.Thisindicatoriscomputedbyoperatinginc omebeforedepreciationminusinterest,taxes,andcommondividends,alldividedbytheb eginningof period totalassets.

 SG:Salesgrowthoff i r m i att i m e t Variablei s estimatedbyt h e p e r c e n t a g e inc reaseinsalesgrowthfrom oneyearto thenext.

 GDPGROWTH:Regressingw i t h a o n e – t i m e l a g d u e t o t h i s year'si n v e s t m e n t w i l l beinfluencedbylastyear'soperations ThepercentageincreaseinGDPfromo n e yearto thenext is ameasureofGDPgrowth.

 ELECTION:electiondummyequalsto 1 in electionyear,andviceversa.

Variablesforcategorizingsubsamples

 Size:Firms i z e i s calculatedbynaturall o g a r i t h m o f t h e totalassets.A n n u a l l y availabledataarederivedfromfinancialstatement,annualstatement.

 Payoutr a t i o : T h e valueo f dividendsandc o m m o n s t o c k repurchasesdividedbyope ratingincome.Annuallyavailabledatacomefromfinancialstatement,annualstatem ent.

 Growthrate:Thegrowthrateiscomputedbypercentagechangeoftheaverageofconsec utivethreeyearssalesgrowthoffirmfromoneyeartothenext.Annuallyavailableda taaretakenfromfinancialstatement,annualstatement.

Estimationmethod

Analyticalmethods wereimplementedthrought w o phasesf o r macro variables f romthemodel ofBaumetal.(2005) andthesynthesismodelfromGulenandIon(2015).

Accordingt o Baum'ss t u d y o f m a c r o variables,macroeconomicu n c e r t a i n t y i s t h e m o n t h l y d a t a H o w e v e r , myp r o x y f o r macroeconomicu n c e r t a i n t y isderi vedfromq u a r t e r l y realGDP.I g e n e r a t e d t h e m o n t h l y G D P seriesv i a t h e p r o p o r t i o n a l Dentonprocedureusingtheindexofindustrialproduction(whichisavailableatam onthlyfrequency)asaninterpolatingvariable.

Iperformtheconditionalvariancetimeseriesregressionwithdifferentialmodeli n t h e analysis.T h e c o n d i t i o n a l variancederivedfromtheA R C H ( G A R C H ) m o d e l , averagedtoan nualfrequency,isthenusedasmymeasureofmacroeconomicuncertainty.T h e resultfromthet imeseriesregressionrealizesthepredictedvalueofthevolatilityandt h e n performsthevolat ilevaluecombinationtomovethecorrespondingmonthlydatatot h e yearlydata.

ARCHmodelwasintroducedbyAnglein1982andtheGARCHmodelwasintroducedbyBollersl evin1986.ThegeneralisedARCH(GARCH)modelhasthef o l l o w i n g form: q p

IinitiallyfitageneralizedARCH(GARCH)modelinmyanalysistospecifytheconditi onalvarianceofrealGDPandCPIinthesecondmodelsince thesevariablesarerepresentedas proxies for uncertaintyaswellascapturingoveralleconomicactivity.

Myanalysisalsostudiesthedependenceofabinaryvariableunderotherindependent variables.Equation( 2 ) usest h e p a n e l p r o b i t regressionm o d e l f o r M & A b i n a r y distortionsoastoinvestigatetheimpactofmacroeconomicuncertaintyonM&Aactivities. Thepurposeoftheprobitmodelistoestimatewhethertheprobabilitywillfalli n t o firmswit handwithoutM&Aactivities.Furthermore,categorizingobservationsbasedo n t h e i r predictedprobabilities is atypeof binaryclassificationmodel.

This research article employs quantitative methods utilizing panel data for analysis It examines the robustness of results by applying three regression techniques: Pooling Regression, Fixed Effect Model, and Random Effect Model The Pooling Regression model aggregates all observations, serving as the simplest approach, while assuming that unobservable elements remain constant over time In contrast, the Fixed Effect Model posits that model parameters are fixed and individual-specific effects are correlated with independent variables Conversely, the Random Effects Model treats some model parameters as random variables, with individual-specific effects being uncorrelated with the independent variables If the fixed effects assumption is valid, the Fixed Effect Model demonstrates greater efficiency compared to the Random Effects Model, and vice versa.

Subsequently,i t i s criticalt o determinewhichregressionm e t h o d i s t h e m o s t sui tableonebytestingtheLagrangeMultipliertest(LMtest,BreuschandPagan,1980)andth eHausmantest(Hausman,1978).TheLagrangeMultipliertestmethod isusedtoselectthe appropriateregressionmodelbetweenthePoolingRegressionandtheRandomEffectModelw hereastheHausmantestmethodisemployedtocomparetheFixedEffectModelandtheRandomEffectModel.Fromtwotestresults,Ichoosethemostappropriateregressionmodel.

Thep a p e r usest h e econometricsoftwareands t a t i s t i c s STATA1 4 t o conductinv estmentm o d e l regression.T h e resultso f studyarecarriedo u t int w o phases:conditionalvarian ceestimation forMUvariables, andtheregressionofmacroeconomicu n c e r t a i n t

Measuringmacroeconomicuncertainty

Proxiesrepresentingf o r macroeconomicuncertainty(MU)arebasedonthes t u d y o fBaum(2005),withmonthlydataofCPIfrom2005to2015showingtimeseriesdata,andreal GDP dataarequarterlystatisticalandcomputedwith thefollowingsteps:

RealGDPvaluesa r e transferredfromq u a r t e r l y datat o m o n t h l y databyusing D entontechniquesasaninterpolatingvariable(Baum,2001).Techniquesbasedontimeseriesda taf o r atleasto n e year,w i t h a constraintt h a t l o w f r e q u e n c y ( G D P ) andhighf r e q u e n c y (IPI)dataarecloselyrelated.Thenextstepistointerpolatethebenchmarkingratesothatiti sclosesttotheproportionofthelowfrequencydataandthehighfrequencydata,andthe total deviationacrossthe period is zero.

Thevariablesstandingfor thestateofmacroeconomicuncertaintya r e implementedbya t i m e seriesm o d e l t h a t predic tst h e futurevalueofa financiala s s e t basedonanalysisofpastandpresentdata.Normallyecon omicandfinancialdatasuchasGDP,CPI,GNP,etc.a r e n o n – s t a t i o n a r y serieswhichhavea trendfactor.Ino r d e r t o createstationaryseries,itisessentialt oeliminatethetrendfactorthroughthedifferentialo r logarithmicprofitprocess.

Fuller(ADF)u n i t r o o t t e s t ( D i c k e y &Fuller,1 9 7 9 ) iscarriedoutonthedata.Theresults oftheAugmentedDickey–Fullerunitroott e s t f o r proxies ofmacroeconomicuncertaintyaredepictedintable4.1.

1%Critical 5%Critical 10%Critical Variable Stage p-Value TestStatistic

Ascanbeseen,p- valueofADFunitroottestsatfirstdifferenceforrealGDPandCPIa r e s t a t i s t i c a l l y si gnificantat1 % l e v e l T h i s impliest h a t realGDPandCPIp r o x i e s arestationaryatfirstd ifference.ThedetailedoutcomesarepresentedinAppendix2 andAppendix3.

ItisthencalculatedthevarianceestimatedfromtheGARCHmodel ofrealGDP,andt h e c o n s u m e r p r i c e i n d e x CPI.T h e A R C H m o d e l i s a specialcaseo f t h e GARCHformatwhentherearenopredictedvariancesinthelagperiodsintheconditionalvarianc eequation.Table4.2displaystheresultsofARCHequationwithtwoproxiesrepresentingma croeconomic uncertainty.

ThevariablerepresentingthemacroeconomicuncertaintyofrealGDPatthelaglength of1,implementingt h e timeseriesmodelwithAR(1),MA(1),ARCH(1),GARCH(1),hascoeffi cientin themainequationof0.0153 withsignificance levelof1%.

0.358 withsignificancelevel of 1%in themain model.

Fromtheresultsofthetimeseries,theresearchestimatesthepredictedvalueofoscilla tionforeachMUvariablebythepredictivefunction.Theprocesseventuallyexecutesthetscolla pfunctiontoconverttheoscillationvalueofthecorrespondingm o n t h l y data to the sumvalue(Baum,2003).

Thelinkbetweenmacroeconomicuncertaintyandcorporate investment

Summarystatistics

Table4.3presentsdescriptivestatisticsofvariablesusedinthesamplemodelof7 3 2 financialandn o n – financialcorporationsl i s t e d o n t h e H o C h i MinhC i t y S t o c k Exchange,HanoiStockEx change,andUnlistedPublicC o m p a n y M a r k e t The studyperiodsa r e u p t o 3 1 December,2 0 1 5 , w i t h observations,meanvalues,s t a n d a r d de viations,highestvaluesandlowestvalues.Researchdataarerequiredforthe11yearsfrom2005to2015becausetherearesomedistinctiveeventsofnationalelectionsin2006and2011aswel lasthe period ofeconomiccrisisbetween2008and2009.

Variable Obs Mean Std.Dev Min Max

Int u r n , eachvariablehas6 , 3 4 8 observations.Salesgrowthhas5 , 5 1 6 observati ons,Tobin'sQhas4,466observations,CAPEX/TAhas5,994observations,bothCF/

TAandS i z e have6 , 3 2 7 observations,P a y o u t ratiohas6 , 2 7 9 o b s e r v a t i o n s , andt h e ave rageof3consecutiveyearssalesgrowthhas4,153observations.Missingvaluesoccurbecauset h e enterpriseshaven o t yetd i s c l o s e d t h e i r financials t a t e m e n t s o r d i s c l o s e d i n c o m p l e t e financialstatements.

Thereare732enterprises(TICKER)listedasof 31/12/2015 withYEARvariablei s requiredfrom2005 to2015.

TA),themeanvaluei s about0 0 6 0 , t h e standarddeviationi s 0 1 8 5 , t h e m i n i m u m i s 0 f o r AGRcodei n financialandb a n k i n g servicesby2007andt h e m a x i m u m is 0 9 5 8 f o r ROS s t o c k codeactivatingin terms ofconstructionandinfrastructuresectorin 2014.

M&Adummyvariable(MADUMMY)equalsto1forfirmscarryingoutM&Adeal s,andvice versa.

RealGDPproxyo f macroeconomicu n c e r t a i n t y ( M U 1 G D P ) hasana v e r a g e oscillationo f about0 8 6 9 , a standarddeviationo f 0 5 7 9 , a m i n i m u m valueo f 0 4 2 2 i n 2 0 1 2 andamaximum of 2,204 in 2009.

MU2CPIs t a n d i n g f o r macroeconomicu n c e r t a i n t y hast h e m e a n valuearou nd1 0 3 7 4 , t h e standarddeviationo f 6 3 7 3 , t h e minimumvalueo f 2 5 2 8 in2 0 1 5 andt h e m a x i m u m o f 2 2 5 7 8 d u e tohighfluctuationsof 2008economic crisis.

Salesgrowth(SG)hasanaverageoscillationofabout0.905,anaveragestandarddeviati onof17.855,aminimumvalueof-

0.990belongingtoSRAintheITindustryin2 0 1 5 andthehighestvalueis1175,231byw h i c h firmhasTLGstockcodeinthemanufacturing andtradingof stationeryby2008.

Tobin'sQ(TOBINSQ)hasthemeanvalueofabout1.122,thestandarddeviationo f 0.6 87,thesmallest valueof0.228oftheBGMstockcodeintheminingandmineralprocessing industryin2015, andthe highestof14.007ownedbythe BMCstock inthemineralsecto rin 2007.

1.117concerningtheCVNstockcodein2 0 0 7 andamaximum valueof0.749withL10in theassemblyindustryby2013.

Thed u m m y variableELECTIONi s 0 and1 , t h e valuei s 1 f o r t h e yearo f elect ionsin 2006and2011,andviceversa.

GDPgrowth(GDPGROWTH)hasanaveragevariationo f 6 1 3 6 , a standarddeviati onof0.751,aminimumvalueof5.250in2012andamaximumvalueof8.440in2 0 0 5

Thefirmsize(SIZE)hasthemeanvalueofabout26.676,thestandarddeviationo f 1.5 08,thesmallestvalueof19.723oftheTLGstockcoderegardingmanufacturingandtradingofs t a t i o n e r y by2 0 0 7 , andt h e highestof3 2 6 6 1 f o r t h e VICi n t h e realestatebusinesssectorin2015.

Thepayoutr a t i o (PAYOUTRATIO)h a s anaverageoscillationo f 0 3 8 5 , a standardd e v i a t i o n o f 8 7 4 6 , a m i n i m u m valueo f 0 co ncerningtheAAAstockcodein 2007andamaximum valueof271.821with MDC in theassemblyindustryby2015.

Forthesalesgrowthof3consecutiveyears(SG3YRS),themeanvalueis about0.215,thestandarddeviationis 1.946,theminimumi s -0.969forPV2codeinfinancialservicesby2014andthemaximumis114.329forPXLstockcodeactivatingintermsofconstructionandinfrastructure sectorin 2010.

Correlationmatrix

CAPEXTA MADUMMY MU1GDP MU2CPI SG TOBINSQ CFTA ELECTION GDPGROWTH

Table4 4 providest h e correlationcoefficientsbetweenvariablesusedi n t h e m o d e l Fromt h e belowtable,t h e variablerepresentingt h e macroeconomicu n c e r t a i n t y MU1 GDPcorrelateswiththeCAPEX/

Variablesarehighlycorrelatedandshouldbe taken into accountMU2CPI and ELECTIONwithacorrelationof0.444;MU2CPIandGDPGROWTHwithacorrelationo f - 0.444;CFTAandTOBINSQwithacorrelationof0.411.Besides,therearesomequitehighcorrel ationsbetweenMU1GDPandELECTIONw i t h -0.275;M U 2 C P I andTOBINSQwith- 0.241;TOBINSQandGDPGROWTHw i t h 0 2 7 5 ; ELECTIONand

GDPGROWTHw i t h 0 2 6 3 Therefore,whenimplementingregression,i t i s neededt o c a r e f u l l y considerthecorrelationbetweenthesevariables.

Proxiesi n t h e Gulenmodel(2015)arem a c r o – relatedvariables,i n c l u d i n g GDPGROWTHandELECTION.Whenregressionismade,itispossibletoemployoneo f t h e two in thecasethat both ofthemarecorrelated toeachother.

Resultsforallfirms

Theregressionequationf o r i n v e s t m e n t i s c o n d u c t e d asthreem e t h o d s : P o o l e d OLS,FixedEffectandRandomEffectonStata14 Itisthen collectedthemost feasiblem o d e l inwhichregressionmethodisbestsuitedbyusingtwostatisticaltests,theLagrangianMul tiplier(BreushandPagan,1980)andtheHausmantest(Hausman,1978).T h e regressionequat ionisimplementedwith the

T A f o r eachM U a n d allindependentvariablesasdepictedinTable4.5inwhichvariablesareofS G(salesgrowth),Tobin'sQ,CF/

TA(cashflowt o totalassetsratio),ELECTION,a n d GDPGROWTH areadded.

Moreover,t h e outcomeso f column( 1 ) d e p i c t t h e P o o l i n g regressionMod elwhereast h e resultso f F i x e d EffectModela r e displayedi n column( 2 ) I c o n d u c t t h e regressionofRandom Effect Model for thecolumn(3).

Int e r m s o f t h e p r o b i t regressionm o d e l , i t i s t h e n s i m i l a r l y execu tedt o d o regressionofbinaryvariableMADUMMYforMUproxiesandindependentvaria blesof

SG,Tobin'sQ,CF/TA,ELECTION,andGDPGROWTHwiththestepsaresimilartotheabove processof CAPEX/TA.

TheregressionresultsbetweenrealGDPp r o x y andt h e capitale x p e n d i t u r e t o tota lassetsratioarepresentedinTable4.5forthreeregressionmethods.Asaresultoftheregression,t h e valueo f t h e coefficientM U 1 G D P i s i n t h e rangeo f - 0 1 0 8 t o -

Financialindicatorsi n c l u d i n g salesgrowth,Tobin'sQ andcashf l o w t o totalasset sratiohavethesameeffectoncapitalexpenditure.

% to0.00186ata5%significancelevel,meaning thattheinvestmentproportionwillincrea se from0.00162 to0.00186assalesgrowthrisesbyoneunit.

Tobin'sQcoefficientsaresignificantat1%whilethecoefficientsofCF/TA haven o statisticalsignificancein theFixedEffectModel.

Contrarytotheimpactofthefinancialindex,theELECTIONvariableisp o s i t i v e l y correlatedwithCAPEX/TAwith nostatisticalsignificance.

GDPgrowthchangesi n t h e spano f 0 0 4 7 1 and0 0 4 7 9 w i t h t h e significancel evelof 1%forallmethodsandhasapositiveimpactoncapitalexpendituresasexpected.

LookingattheoutcomesofthethreemethodsofPoolingRegression,theFixedEffec tandt h e RandomEffect;i t canb e realizedt h a t PoolingRegressionandRandomEffectresultsa rebetterthantheFixedEffectmodel.TheLagrangianMultiplier(BreuschandPagan,1 9 8 0 ) t e s t i s usedt o t e s t t h e suitabilityofP o o l e d OLSandRandomEffectm o d e l s Thecoefficien tChi 2( 0 1 ) 6.86,Prob>Chi 2= 0.0000.Thus,thenullhypothesisisrejected,whichsugges tsthattheimpactofindividualfirmsisdifferentfrom0 andthePooledOLSregressionmodeli sinconsistent Fromthatitispossible thatthe RandomEffectmodelproducesthebestresu lt.

Yb i n a r y variable m e a s u r i n g corporateinvestmenti n t h e p r o b i t m o d e l Thereby,t h e column( 1 ) and( 2 ) arei n t u r n examinedo f t h e effecto f macroeconomic uncertaintyonM&AactivitiesforallvariableswithmethodsofPoolingRegressionandt h e RandomEffect.

TAw i t h a 1 0 % significancel e v e l i n P o o l i n g OLSregression.W h i l e ELECTIONv ariablepositivelyaffectsto theproxyofcorporate investment.

TheonlyindependentvariablestaysitsfamiliarimpactonM&Aactivitiesisthegrowt ho f GDP.T h e coefficientso f t h i s i n d i c a t o r changefrom0 6 7 4 t o 0 7 3 4 i n t h e me aningofthatthecorporateinvestmentwillincreasefrom0.674to0.734unitswhentheGDPgrowt hincreasesoneunit.

CPI)withvariablesrepresentingtheinvestmentofenterprisesalongwithdifferentmethodsassi milarlyimplementedwith MU1–GDPdepictedinTable4.7.

CPIhasanegativeimpactonthefirm'sinvestment,tobe morespecific,M&Aactivities.The outcomesillustratethat themacroeconomicu n c e r t a i n t y o f theCPIi s i n t h e rangeo f - 0.00169t o -

0 0 0 1 4 5 whichmeanswhenthevolatilityo f MU2CPIi n c r e a s e s to1unit,thecorporatein vestmentdecreasesfrom 0.00145 to 0.00169 units.

Withrespecttotheoutcomesofsalesgrowth,itcanbeseenthatthecoefficientso f thi sindicatorchangeinthespanof0.00160at10%significanceleveland0.00184at5 % signifi cancelevel.Thismeansthecorporateinvestmentrisesfrom0.00160to0.00184u n i t s i f t h e salesgrowthincreasesoneunit.

Tobin'sQcoefficientsaresignificantat1%whilethecoefficientsofCF/TA haven o statisticalsignificancein theFixedEffectModel.

Contrarytotheimpactofthefinancialindex,theELECTIONvariableisn e g a t i v e l y correlatedwith CAPEX/TAwith astatisticalsignificancelevel of1%.

GDPgrowthvariesintherangeof0.0149 and0.0174at1%significancelevelf o r all methodsandhasapositiveimpactoncapitalexpendituresasanticipated.

Ingeneral,theresultsofMU2CPIarebettercomparedtoMU1GDPwhenmostare well– orientedase x p e c t a t i o n s w i t h highs i g n i f i c a n t l e v e l Inparticular,m o s t S G , TOBI NSQ,C F /

Nv a r i a b l e havea n e g a t i v e impacto n capitale x p e n d i t u r e w i t h a 1 % significancelevel.

Concerningt h e consequenceso f t h e threem e t h o d s o f P o o l i n g Regression,t h eFixedEffectandtheRandomEffect;itisalsosimilartoMU1GDP’seffectthatPooling Regress ionandRandomEffectresultsarebetterthantheFixedEffectmodel.The

P r o b > Chi 2= 0.0000 Thus, thenullhypothesisH0 isrejected,whichsuggeststhatt h e impactoffirmsis differentfrom0andtheR EM is moresuita blethan Pooled OLSregression.

(Source:calculationswithStata14) 4.2.3.2.2.MU2–CPIandmergersand acquisitions proxy

Table4.8indicatestheregressionresultsbetweenCPIp r o x y a n d theMADDUMY b i n a r y variable representingforcorporatei n v e s t m e n t i n t h e p r o b i t m o d e l Thereby,t h e column( 1 ) and( 2 ) arei n t u r n examinedo f t h e effecto f macroeconomicu n c e r t a i n t y onM&AactivitiesforallvariableswithmethodsofPoolingRegressionandt h e RandomEffect.

Asa result,t h e valueoft h e coefficientM U 2 C P I changesf r o m - 0 0 6 5 9 t o -

0 0 6 0 2 , presentingthatasmacroeconomicuncertainty ofCPIfluctuationrisesby1unit,t h e corporateinvestmentratiowilldecreasefrom0.0602 to0.0659units However,twofin ancialvariablesc o n s i s t i n g o f salesgrowthandT o b i n ’ s Q h a v e n o statisticalsignifican cea p a r t fromcashf l o w t o totalassetsratiow i t h a p o s i t i v e relationt o M&Aactivitiesi n P o o l i n g O L S regression.Besides,GDPGROWTHvariablehasa p o s i t i v e effectonM&A activitiesat5%significantlevelwhereasELECTIONvariablenegativelycorrelatesto theproxyofcorporate investmentwith asignificance levelof1%.

Resultsforfirmsclassification

Thestudycontinuestheregressionoftheeffectsofmacroeconomicuncertaintyo n corporatei n v e s t m e n t att h e s u b s a m p l e l e v e l T h e r e b y three m a j o r p r o x i e s are consideredt o classifyt h e differentgroups.Specifically,i t isneededto examinet h e behavioroflargeandsmallfirmsbasedonthegrowthpotentialandfinancialco nstraintsthrought h e differencesi n firms’characteristicssuchass i z e andpayoutr a t i o o f enter prises.Besides,theresearchexaminesthesecornerswhenobtainingresultsforP o o l i n g OL Sregressionw i t h t h e sufficientm o d e l o f f u l l independentsvariablesasane x a m p l e toc ompare.

Table4 9 reportst h e effecto f MU1GDPproxyo n capitale x p e n d i t u r e w i t h respectt o t h e growthp o t e n t i a l T h e r e b y t h e m e d i a n valueo f t h e averageo f t h e t h r e e consecutiveyearsofsalesgrowthisthecriteriatodistinguishdifferentsubsamplescont aininghighgrowthfirmsandlowgrowthfirms.Therebythecolumn(1),column(2)andcolum n(3)presenttheconsequencesofthehighgrowthfirms,lowgrowthfirmsandallfirms,namely.

Itcanbeawareofnoclearinfluenceoccurswheninvestigatingthebehavioroft w o s u b s a m p l e s i n termso f t he v o l a t i l i t y ofma cr oe co no m i cs o f realG D P o n corporat einvestmentd u e t o t h e resultso f insignificantlevel.Highgrowthandl o w growthfirms’resultsa reinturninsignificantly changeableintherangeof-0.0380and-

Moreover,bo th groupshaveno impacto f salesgrowtho n CA P E X i n contrastw i t h t h e effectsoft w o financiali n d i c a t o r s o f TOBINSQ,CF/

TA.T h e coefficientso f T o b i n ’ s Qareinthespanof0.0156to0.0185at5%and1%signifi cantlevelforthelowandhighgrowthrate,respectively.C F /

T A alsohasp os i t i v e outcomesi n t h e relationt o C A P E X whereasELECTIONisnegative lycorrelatedto corporateinvestment ata quite highsignificancelevel.

Inaddition,itisconsideredthatthelow growthfirmstakeplacethe impactofGD Pgrowtho n t h e proxyo f corporateinvestmentata significancel e v e l o f 1 % w h i l e thereis nothinghappenedconcerningthe othersubsample.

AsisshowninTable4.10abouttherelationshipbetweenmacroeconomicu n c e r t a i n t y andcapitale x p e n d i t u r e w i t h regardt o financialconstraints,column( 1 ) t o colum n(5)indicatetheoutcomesforeachsubsampleinwhicharenon– financialconstraints(bigsizeandhighpayoutratio)aswellasfinancialconstraints(smallsizeand l o w payoutratio)andtotal sampleforallfirmsobserved.

Itistypically notedthatthe meanvalueoffirmsizeandthevalue0ofpayoutratio arethecriteriontodivideallenterprisesintovarioussamplesoffirmswhicharelessandmorelikel yfinanciallyunconstrained.

Intermsoffirmsize,bigfirms’coefficientis- 0.0806at10%significanceleveli n relationbetweenMU1GDPandCAPEX/

TAwhereasthereisnostatisticalsignificanceoccurringi n s m a l l subsample.T h i s effectals otakesplaces i m i l a r l y f o r payoutratiosampleswhenthecoefficientisnegativeat-

Generally,mostvaluesofsalesgrowthhavenoimpactoncorporateinvestmentapart fromlowpayoutratiosample.Bycontrast,thefinancialindicatorsofTobin’sQarep o s i t i v e l y affectedtoCAPEX/

TAata1%significancelevelforallgroups.Tobemorespecific,thecorporateinvestmentis morestronglyinfluencedbyTobin’sQforfirmsizesampleofnon– financialconstraintswhiletheimpactisreverseinpayoutratiogroups.T h i s a l s o happenssimilarlyincashflowto totalassetsratio.

Myresearchi s continuedf o r t h e r e l a t i o n s h i p betweent h e v o l a t i l i t y o f macroeconomicsMU2CPIoncorporateinvestmentinthepatternofgrowthpotentialandind icatedin theTable4.11.

Salesgrowthcontinuestobeinsignificantforeachsamplewhereasthesignofo t h e r variablesarestatisticallysignificantaspredicted.Tobin’sQ,cashflow

48 tototalassetsandelectionhaveagreaterimpactontheproxyofcorporateinvestmentinthegro upof highgrowthasopposedt o t h e growtho f GDP.Inaddition,therei s a negativeeffectbetweenEL ECTIONandCAPEX/TAata1%significantlevelfor thehighgrowths u b s a m p l e andasignificantlevelof 5%for thelowgrowthfirms.

Table4 1 2 s h o w s t h e impacto f macroeconomicu n c e r t a i n t y M U 2 C P I o n t h e p r o x y ofcorporatei n v e s t m e n t f o r enterprisesw h i c h aren o n – financialconstraintsandfinancialconstraints.

0.00133atasignificancel e v e l o f 1 0 % o c c u r r i n g i n s m a l l s u b s a m p l e T h i s effecta l s o takesp l a c e s i m i l a r l y f o r p a y o u t r a t i o sampleswhent h e coefficienti s n e g a t i v e at-0.00182w i t h respecttonon– financial constraintsfirmsandthereisnocorrelationbetweenMU2CPIandCAPEX/TA ingroupoffinancialconstraints.

Overall,m o s t valuesofsalesgrowthh a v e n o i m p a c t o n corporatei n v e s t m e n t apartfromlowpayoutratiosample.Bycontrast,thefinancialindicatorsofTobin’sQarep o s i t i v e l y affectedtoCAPEX/

TAata1%significancelevelforallgroups.Tobemorespecific,thecorporateinvestmentis morestronglyinfluencedbyTobin’sQforfirmsizesampleofnon– financialconstraintswhicharesameasinpayoutratiogroups.

TAvariables,thereisalessstronglysignificantcorrelationi n n o n – financialconstraintst h a n f i n a n c i a l constraints.T h i s alsoh a p p e n s s i m i l a r l y in nationalelectionvariable.

Furthermore,I doregressionof therelationshipbetweenthevolatility ofmacro economicsonM&Aactivitiesandobtainthequalitativelysimilarresultsasforthecapitalex penditures.Forbrevity,theresultsarenotreportedinthisthesis.Inotherwords,i t i s m o r e s t a t i s t i c a l l y significantf o r sampleso f highgrowthfirmsandn o n – financialconstraints.Besides,t h e signso f t h e s e r e l a t i o n s amongdependentvariablean dindependentvariablesareprimarilyassameaspreviousexpectations.Theanalysisisnotm e n t i o n e d i n t h i s sectionandisreferredto theAppendixinstead.

Discussions

Fromtheresultspresentedabove,it is associatedtoshowthattheRandomEffectm o d e l obtainsthebestoutcomes.Ingeneral,mostva riablesgivethesameexpectationsast h e originalstudiesw i t h highstatisticalsignificance.Two variablesrepresentingmacroeconomicuncertaintyincludingrealGDPandconsumerpriceindex haveanegativeimpacto n corporatei n v e s t m e n t Regardingt h e p r o x i e s o f macroeco nomicu n c e r t a i n t y M U 1 –GDPandMU2–

Salesgrowthi s ani m p o r t a n t financiali n d i c a t o r t o helpenterprisesi n c r e a s e investment.T h e r e g r e s s i o n resultsarestatisticallysignificantatt h e totalsampleo f all enterpriseinthemarketbuthavelittleornostatisticalsignificanceinthesubsamplesofgro wthpotentialandfinancialconstraints,especiallyfortheM&Aactivities.

ItcanbeseenfromtheoutcomesthatTobin'sQhasthepositiveeffectoncapitale x p e n d i t u r e andm o s t oft h e m a r e significantathighl e v e l s f o r totals a m p l e asw e l l ass u b s a m p l e s offirms’characteristics.Thisindexrepresentsthestrengthofthestockmarket.Thehig hvalueTobin'sQmakesiteasyforfirmstoattractcapitalfrominvestorsthroughtheissuanceofs hares.However,thisindicatorgenerallyhasnoimpactonM&Aa c t i v i t y in all firmsandsubsamples ofgrowthpotential andfinancialconstraints.

Accordingtotheanalysis,anotherimportantfinancialindex,cashflowtototalass ets,hasthemostpositiveimpactatthequitehighsignificancelevelofcapitale x p e n d i t u r e andt h e l o w significancelevelo f M&Aactivitiesw i t h t h e highestlevelo f 10%.Thisindic atorexplainsthenetresultfor thebusinessactivitiesoftheenterprises,thenetaccumulatedearningsfortheactivitiestoreinvestf orthe nextperiod.

The election dummy variable demonstrates a significant negative impact on corporate investment in relation to the volatility of MU1 GDP affecting CAPEX However, the effects of elections on M&A outcomes contradict initial expectations, possibly due to businesses underestimating the implications of policy changes or anticipating favorable future management shifts Conversely, MU2 CPI adversely influences M&A, differing from the correlation observed with MU1 GDP Consequently, the positive electoral changes are minimal, as most outcomes highlight a negative relationship between elections and corporate investment.

Eventually,GDPgrowthgenerallyhasthesamepositiveeffectasexpectedinallp r o x i e s ofmacroeconomicuncertainty.Theresultsarealsogoodconsidering theimpacto f M UonCAPEXandMADUMMYineachsubsampleofgrowthpotentialandfinancialconstraints. Inthiscircumstance,GDPgrowthwithonelagtimeaffectstheinvestmentoft h e businessin apositiveway,makingenterprisesincrease investment.

Fromtheoutcomesachieved,whencomparingthetwogroupsoffirmsbasedont h e g rowthpotentialandfinancialconstraints,itcanbeconsideredthatthereisnoevidenceofstatistic alsignificancebetween thehighgrowthandlowgrowthfirmsintermso f MU1GDPproxywhereasfirmswithhighgrowt hismorestrongly affectedbyMU2CPIt h a n opposedsubsample.Inaddition,itisdeterminedthatbothproxiesof macroeconomicu n c e r t a i n t y havea greaterimpacto n CAPEX/

TA andMADUMMYvariablesregarding n o n – financialconstraintsenterprisescomparedtofinancialconstraintslikeanticipations.Enterprises withhighgrowthratesandnocapitalconstraintswilleasilycreateandattractm o r e opportuni tiesf o r investmentandexpansiono f t h e i r businesses.Hence,whent h e e c o n o m y isunst able,thesecompanieswillsuffermoreandmoreseriousrisksandinjuriest h a n others.

Overviewoutcomes

Inordertoassesstheimpactofmacroeconomicuncertaintyoncorporateinvestment, thestudyiscarriedoutconstructingdatasetoffinancialandnon– financialenterpriseslisted ontheH o ChiMinhStock Exchange(HOSE), HanoiStock E xchange(HNX),andUnlistedPublicCompanyMarket(UPCOM)inacaseofVietnamduring theperiodof2005and2015.Thepaperemployspaneldataregressioncombinedwithvariousemp iricalmodelstodeterminethisrelationship.

Mystudycovers t h e p e r i o d o f 1 1 yearsf r o m 2 0 0 5 t o 2 0 1 5 o n t h e p u r p o s e o f spanningdistinctiveeventscomprisingtheglobalcrisisby2008andthe2006and2011n ationalelectionso f VietnamCongresss o ast o j u d g e t h e l e v e l o f impacto f macroecono micvolatilityandthemanagementofstategovernancethroughelection.Besides,toincreasethen umberofobservationswithrespecttothevalueofinvestment,t y p i c a l l y capitalexpen ditureandM&Aactivities,f o r firmslistedo n t h e threes t o c k exchanges,it isneededtospreadtheresearchsampleasof2015.

Macroeconomic uncertainty manifests in various forms and levels, significantly influencing the volatility of economic variables My research introduces two new indices of macroeconomic uncertainty: the real gross domestic product (GDP) and the consumer price index (CPI), utilizing the ARCH (GARCH) model to compute their values based on Baum's methodology (2005) Coupled with Gulen's regression model (2015), the findings provide compelling evidence that increased macroeconomic volatility negatively impacts corporate investment in Vietnam, as indicated by both GDP and CPI proxies.

Throughtheempiricaloutcomesofresearch,thebadimpactofmacroeconomicv o l a t i l i t y onthecorporateinvestmentcausestoobstructtheinvestmentdecisionofenterprisesan dbeanevidencesupportingthetheoryoftheimpactofanymacroeconomics t a b i l i t y o n cor poratefinancialpolicy.Comparedt o t h e previousliteratures,t h i s conclusioni s consistentw i t h t h e r e a l i t y incountriesa r o u n d t h e world.Macroeconomicu n c e r t a i n t y h a s led tohighinflation,currentaccountdeficits,lowforeignexchangereserves,highforeigndebtandbud getdeficitsaswellasreductionofconsumptiongrowthwhicharea b u r d e n o n m o s t s m a l l a ndmediumenterprisesi n Vietnam.T h i s l e d t o a declineininvestment,toputenterprisesatrisk,loselargecontracts,shrinkproductionandu l t i m a t e l y gobankruptcy.

The study indicates a significant correlation between merger and acquisition (M&A) activity and macroeconomic uncertainty; however, M&A activities in Vietnam from 2005 to 2015 have not been substantially impacted by crisis periods By 2015, there was a notable emergence of high-value and high-volume mergers and acquisitions, particularly in the finance, banking, insurance, and real estate sectors Consequently, financial indicators and the socio-political situation in Vietnam have not profoundly influenced this sector within the research sample M&A is viewed as a promising area for future research, focusing on sustainable investment activities related to mergers and acquisitions in Vietnam.

Afurtherinvestigationsuggeststhatahighdegreeofthreefinancialindicatorsofsalesgro wth,Tobin’sQandcashflowt o t o t a l a s s etsratioi s a s s o c i a t e d w i t h m o r e corporateinvestment,especiallycapitalexpenditure.However,itisafewornoevidenc ef o r demonstratingtheeffectoftheseindicatorsonM&Aactivitiesduetotheinsignificantm agnitudeof this sectorinVietnam.

Theempiricalr e s u l t s s h o w t h e statisticalsignificanceo f t h e salesg r o w t h o n capitale x p e n d i t u r e f o r firmsi n Vietnam.Itexpressesanimportantc o n d i t i o n t o hel pbusinessesincreaseinvestmenttoexpandproductioninmanysectorsandspreadoutthes caleoffirms,marketshare,promotebusinessgrowthanddevelopnotonlyinthenativec o u n t r y but also in theinternationalmarket.

Inp a r t i c u l a r , To bi n’ s Q g e n e r a l l y leadst o t h e p o s i t i v e correlationw i t h ca pitale x p e n d i t u r e assameastheresultsofpasteconomists.

Thisindexrepresentsthestrengthoft h e s t o c k market,anditshighvaluemakesc o n v e n i e n t conditionsf o r entrepreneurst o attractcapitalfrominvestorsthroughthe issuanceofshares.

Theresultisinlinewiththefindingsobtainedbytheoriginalpaperthatnationalelection hasanegativeeffectoncapitalinvestment.Thisimpliesthatthenationalelectionsseemtomarkt heradicalchangeofpoliticalandeconomicviewsandalsocreatet h e expectationthatwillbeasi gnificantchangeinmacroeconomicmanagementissuesint h e economy.Hence,thatmaybeth ereasonwhytheelectionscausemuchuproarontheinvestmentofenterprises.

Thep o s i t i v e impacti s f o u n d i n t h e relationbetweent h e growtho f G D P andco rporateinvestment.T h e o u t c o m e s areconsistentw i t h t h e originalresearcht h a t t h e re lationshipbetweeninvestmentandGDPgrowthismovingandtransforming.Investmentandgrow thofteninteractin a positiveway,meaningthathighGDPgrowthis ahighvalueo f investment.ThisconclusionisconsistentwithOglietti(2007),A b e l l o (2010)a ndVillegas–

Zermeủo( 2 0 1 2 ) w h o c o n d u c t econometricstudiesi n ArgentinaandM e x i c o anddemonst ratethatEconomicGrowthis thebiggestattractiongeneratinginvestment.

Inaddition,t h e studyfi n d s t h a t t h e effectso f macroeconomicu n c e r t a i n t y i n regardtodecreasingthevalueofcorporatei n v e s t m e n t areconsistentlyobservedforhighe rgrowthpotentialenterprisesandmorefinanciallyunconstrainedenterprises.Tobem o r e s pecific,thedegreeoffinancialconstraintsisstronglyrelyingonthesizeaswellast h e payoutra tiooffirms.Althoughtheempiricalanalysisachieveddoesnotdemonstratep r e c i s e l y t h e i n f l u e n c e o f t h i s M U 1 –

GDPo n capitale x p e n d i t u r e w h e n coveringt h e patternofgrowthpotential,itisclearly determinedthisnegativerelationintherestcaseso f M U 2 –

CPIf o r t w o measuresofcorporateinvestment.Theseo u t c o m e s d e p i c t a dynamicp i c t u r e o f t h e investmentbehavioro f Vietnameseenterpriseswhenconfrontedw i t h t h e volatilityofmacroeconomics.

Tos u m u p , i n t h e periodfrom2 0 0 5 t o 2 0 1 5 , t h e Vietnamesee c o n o m y h a s experiencedchangesintwophases.Intheperiodfrom2005–

Vietnam's economic situation from 2010 has been marked by low growth, high inflation, and instability, primarily driven by external shocks The economy began to decline in 2008, with the global financial crisis significantly impacting exports, which dropped by 6.8%, and foreign investment halving to 14.9% compared to the time of joining the WTO Although there was an improvement in growth in 2010 due to demand stimulation through increased public investment, rising inflation diminished purchasing power over the next two years, leading to a sharp decrease in consumption Consequently, economic growth slowed from 2011 to 2015.

Theimpactofmacroeconomicuncertaintyisacommonandunavoidableeffect forallbusinessesbecauseitiscyclicalbuthasdifferenteffectsforvarioussizedenterprisesord ifferentmanagementpracticesofjointventures.Theseresultsofmy analysishaveclearimplicationsfortheconductofmacroeconomicpolicyofgovernancesi n ge neralandc o r p o r a t e decisionso f managersi n particulari n V i e t n a m T h u s , p o l i c y m akersandentrepreneursshouldtake intoaccounttheconclusionsofthisresearchsince iti s theessentialandpracticalevidenceinordertoanalyzeaswellasexpectthedirectionandmag nitudeofmacroeconomicvolatilityonVietnamesesmallandmediumsizedenterprisesandtheni mplementthemostplausiblefiscalandmonetarypoliciesaswellast h e adjustmentofmanage ment,shorttermandlongtermobjectivesinaplentyofdetailedsituationsofsocio– politicaleconomyin a nation.

Researchlimitations

InadditiontoproxiesformacroeconomicuncertaintysuchasGDPandCPI,thepaper expectst o i n c l u d e additionalmacrov a r i a b l e s f o r measurementsuchasIPI,t h e market returnaswellasadditionalindependentvariablesthatmayaffectcorporateinvestmentssuchasfl uctuations ininterestrates,exchangeraterates,etc.

Furthermore,considerationoftheimpactofmacroeconomicinstability oninvestm entf o r eachi n d u s t r y ands e c t o r p l a y s animportantr o l e i n t h e applicationo f polici es,guidelinesandgoalsf o r differentcharacteristicso f enterprisesandindustries.T h i s resea rchis expectedto be agapforfutureresearcherstoaccessandimprovebetter.

To effectively navigate economic volatility, businesses must analyze the impacts of crises both before and after they occur This understanding is crucial for developing strategies to anticipate and respond to uncertainty A comprehensive study over an extended period is necessary to observe macroeconomic fluctuations and their influence on the economic cycle Economist Fred Harrison, director of the Land Research Trust, has been warning about these trends since 1997 In April 2005, he discussed with British Prime Minister Tony Blair the signs of an impending crisis, emphasizing that the macroeconomic cycle spans 18 years and is disrupted only by significant global events, such as a world war.

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CF/TA Net income before extraordinary items plusdepreciationexpense,alldividedbythe total assets

Growthpotential Thepercentagei n c r e a s e i n salesgrowthfromone yearto thenext

MADUMMY RegardingM&Ad u m m i e s , sett o 1 f o r valueand missingvalue,and0otherwise

Nationalelection Electiond u m m y equals1 f o r electionyear,a n d 0 otherwise

Payoutratio The value of dividends and common stockrepurchasesdividedbyoperatingincome

Salesgrowth Thepercentagei n c r e a s e i n salesgrowthfromone yearto the next