Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á. Bất định chính sách kinh tế của Trung Quốc và quyết định đầu tư, nắm giữ tiền mặt trong công ty thuộc Đông Nam Á.MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY IMPACT OF ECONOMIC POLICIES UNCERTAINTY IN CHINA ON CORPORATE INVESTMENTS AND CASH HOLDINGS IN SOUTHEAST ASIA Major Finance.
MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY - IMPACT OF ECONOMIC POLICIES UNCERTAINTY IN CHINA ON CORPORATE INVESTMENTS AND CASH HOLDINGS IN SOUTHEAST ASIA Major: Finance – Banking Code: 9340201 SUMMARY OF PH.D THESIS Ho Chi Minh City, 2022 The thesis is carried out at: University of Economics Ho Chi Minh City Academic supervisors: Reviewer : Reviewer 2: Reviewer 3: The thesis will be defended at the Doctorate Thesis Committee of Examiners of the University of Economics Ho Chi Minh City at………… on ……… The thesis can be referred at the library: Chapter 1: INTRODUCTION 1.1 Research background Over the past decade, China has emerged as an important Southeast Asian (SEA) partner in trade and investment Southeast Asian economies have significantly benefited from China's strong growth, high commodity prices, and expanding regional production networks driven by strong demand from China (Ah, 2017) In 2009, China surpassed the United States, Japan and the EU to become Southeast Asia's largest trading partner The trade balance of Southeast Asia has kept a trend of deepening deficits with China since the Asean-China free trade area took effect in 2011 China's FDI investment in Southeast Asia impressed by its fast growth rate and is currently second only to the EU, the United States and Japan In particular, countries with strong partnerships with China include: Vietnam which is the country with the largest share of trade in the region, Singapore which is the leading destination of Chinese FDI The group of six countries - Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam - accounting for 94% of trade transactions and 85% of FDI investment, is a key group of countries in China's partnership in Southeast Asia After the global financial crisis, uncertainty in general and economic policy uncertainty in particular became the concern of the press, scholars and policy makers According to the International Monetary Fund country report (IFM, 2017), uncertainty is the main factor leading to the weakening of the global economy China's economic policy attracts attention today not only because of its achievements that have made China's economy the second largest power after the United States, but also because of the potential uncertainties behind its excessive growth (Ah, 2017) Southeast Asia - a region located in the South - with close trade and investment relations with the Chinese economy and considered to have benefited significantly from China's rise in recent times (Ah, 2017) attracted the attention of the author of the thesis in terms of whether China's economic balance sheet is similar to bad news for investment by Southeast Asian companies, or is it an opportunity? China's economy is still growing stronger and stronger, reaching out to influence the rest of the world and bringing with it potential uncertainties in economic policy In addition, Southeast Asia is an area with close relations with China and is increasingly interested in the world economic map Because of these reasons, research on China's economic balance sheet and its impact on companies in Southeast Asia is an issue that needs attention in the current context 1.2 Reasearch gaps As noted by the author of the thesis, recent studies on the effects of financial statements on enterprises focusing on the topics of investment and cash are quite popular The studies are mainly carried out within a country, and focus on countries with great influence such as the United States and China Research on the economic balance of large countries affecting investment decisions in companies in one or a group of neighboring countries is an issue that has not been mentioned commonly Stemming from the above research gap and because of the importance of the Chinese economy to Southeast Asia, including Vietnam, the thesis identifies the first research problem of this thesis as the influence of China's economic policy uncertainty on corporate investment in Southeast Asia Given that Southeast Asia is an alliance with close economic ties to China, China's economic policy uncertainty can also extend to influence the financial decisions of Southeast Asian companies If China's economic policy uncertainty has an impact on corporate investment in Southeast Asia as mentioned in the first research problem, it can also affect the cash holdings of companies This is also an issue that has not been considered in previous studies Therefore, the second research problem of the thesis is the impact of economic policy uncertainty from China on the cash holding decision in companies in Southeast Asia 1.3 Research objectives and research questions The research objective of the thesis is the influence of China's economic policy uncertainty on corporate financial decisions in Southeast Asia, specifically investment decisions and cash holdings decisions To accomplish the above research objectives, in each issue, the research thesis will answer the following specific questions: First, how does China economic policy uncertainty affect corporate cash-holding / investment decisions in Southeast Asia? Second, does China economic policy uncertainty have the same effect on corporate cash-holding / investment decisions in the study countries? Third, does China's economic policy uncertainty have different effects on corporate cash-holding / investment decisions in firms with different idiosyncrasies? (where the unique characteristics of the company are considered including: net property, plant, equipment divided by total assets, internal financial and Tobin’s Q in the investment model; dividend payout and net income divided by total assets in the cash holding model) Fourth, how does China's economic policy uncertainty affect the relationship between investment and cash holdings in company in Southeast Asia? 1.4 Contribution of the thesis First, to the knowledge of the author, this is the first study to examine the effect of economic policy uncertainty of a large country on investment and cash holdings in companies belonging to a group of countries in the same area Therefore, the thesis is expected to contribute to research area related to the dominant role of large economies in the financial decisions of businesses in small economies Second, in the context that economic policy uncertainty is widely concerned, the research results of the thesis contribute empirical evidence about China's influence on Southeast Asia This conclusion of the thesis strengthens the warning that the world needs to pay attention to policy actions from China Third, empirical results on the impact of China's economic policy uncertainty on investment decisions, cash holdings and the relationship between cash holdings and investments in Southeast Asian firms help to enrich treasure trove of empirical research on the impact of business environment factors on firm's cash holdings and investments This result implies one more significant factor to consider in future studies on cash holding policy and investment policy In addition, the thesis uses the WUI index (Ahir et al., 2018), to measure economic policy uncertainty as a universal measurement method, which has been implemented in 143 countries around the world This opens up the potential for this index to be used in international studies of economic policy realism Chapter 2: LITERATURE Economic policy uncertainty affects corporate investment as argued by real options theory, financial friction and the bad news principle The majority of scholars and empirical evidence suggest a negative relationship between economic policy uncertainty and corporate investment Economic policy uncertainty affects firms to increase cash holdings as argued by theories based on hedging motives of cash holdings, but economic policy uncertainty also affects firms to reduce cash holdings according to agency theory Some scholars point out a heterogeneous relationship between economic policy uncertainty and cash holding such as Gao & Grinstein (2014), Wright (2015) or He, Ma, & Zhang (2020) 2.1 Economic policy uncertainty and its impact on the economy Demir & Ersan (2017) define economic policy uncertainty as a concept that refers to the uncertainty about policy actions in the economic sector, in which decision makers will take and uncertain about its impact now and in the future Economic policy uncertainty is a type of risk that increases risks for both businesses and individuals, causing them to delay spending and investment Economic policy uncertainty affects the economy at the macro level, market, enterprise and spillover effects among countries The empirical results show that economic policy uncertainty increases the unemployment rate, reduces investment and spending, causing the output of the economy to decrease Economic policy uncertainty leads to lower market performance and lower profits During the period of high economic policy uncertainty, M&A activities took place more slowly, the company implemented a more cautious policy, invested less, slowed down the capital mobilization process and used more debt EPU and WUI are two economic policy uncertainty measures developed by Baker et al (2016) and Ahir et al (2018) These two measures are becoming increasingly used in studies of economic policy uncertainty globally This thesis uses EPU and WUI to measure economic policy uncertainty in the studied countries 2.2 Theoretical framework for the impact of economic policy uncertainty on corporate investment Real options theory states that if the investment is irreversible, the uncertainty increases the value of the option to delay and the firm delays the investment until some or all of the potential uncertainties are resolved Due to the irreversible nature of the investment or sunk costs, companies consider the profit differential between current and future investments With a higher degree of uncertainty, more benefits are expected from an investment in the future, whereby the higher the value of the put option leads the firm to reduce its current investment However, in some specific cases (the increase/decrease in the value of other options in the project outweighs the value of the option to delay) uncertainty does not necessarily lead to investment delay Research of Bernanke (1983), Schwartz & Brenner (1985), Titman (1985), McDonald & Siegel (1986), Pindyck (1988), Rodrik (1991) are experimental results that record the negative relationship between uncertainty and investment based on the argument of real options theory Witnessing the increase in asset price volatility and credit interest rate differentials during the financial crisis of 2007-2009, Christiano et al (2014) pointed to financial friction as an additional channel through which fluctuations stability can affect the macro economy Increasing uncertainty in economic policy forces the spread of credit interest rates to increase to offset risks for banks In that context, an increase in uncertainty will increase the cost of borrowing and reduce investment spending Uncertainty increases the cost of external capital (Gilchrist & Zakrajšek, 2011) or the cost of equity capital (Pástor & Veronesi, 2012) and thereby leads to a lower investment rate Researching the origin of the investment cycle, Bernanke (1983) formulated the "bad news principle" which refers to the interaction between the irreversibility of investment, the uncertainty of future earnings and investment deferral option The bad news principle states: “Given the current return, the willingness to invest in the current period depends only on the severity of bad news that may arrive Just how good is the potential future good news for the investment does not matter at all” (Bernanke, 1983, p 91) Accordingly, increased uncertainty will cause a company to delay investment if delaying investment brings higher benefits than early investment Deferring investment causes the company to lose profits in the meantime, but in return for "later and more" profits by saving the cost of reversing the investment 12 impact on the Japanese stock market through China-related companies in Japan 13 Chapter 3: RESEARCH MODEL AND METHODS 3.1 Research models Invi,t = αi + β1Wui_chnt-1 + β2Salei,t + β3Tobin’qi,t-1 + (3.1) β4Cashflowi,t + β5Firmsizei,t + β6Levi,t-1 + β7Wuij,t-1 + β8Gdpgj,t + εi,t Where Invi,t is corporate investment measured as capital expenditures divided by total assets at the beginning period Wui_chnt-1 measures China's economic policy uncertainty in t-1 Salei,t is the revenue in year t which is the control variable for the growth potential of company i Tobin’qi,t-1 is the variable controlling the investment opportunity of company i in year t-1 Cashflowi,t is the cash flow in year t of company i representing the financing of the investment Firmsizei,t is the firm size of company i in year t, to control for financial constraints Levi,t-1 is the ratio of debt in year t divided by total assets in year t-1 Wuij,t-1 measures the economic policy uncertainty of country j where firm i is located used to control the economic policy uncertainty of the host country for corporate investment Gdpgj,t is the growth in gross domestic product of country j year t, to control for the macroeconomic situation in the research model for firms in many countries Invi,t = αi + β1Wui_chnt-1 + β2Salei,t + β3Tobin’qi,t-1 + (3.2) β4Cashflowi,t + β5Firmsizei,t + β6Levi,t-1 + β7Wuij,t-1 + β8Gdpgj,t + β9Xi,t + β10(Xi,t * Wui_chnt-1)+ εi,t In addition to the variables already included in the model (3.1), X i,t represent the irreversibility of investment, internal capital and growth 14 opportunities, respectively, being replaced by: the ratio of net property, plant, equipment divided by total assets, internal financial and Tobin’s Q Cashi,t = αi + β1Wui_chnt-1 + β2Firmsizei,t + β3Mtbi,t + β4Nwci,t (3.3) + β5Levi,t + β6Invi,t + β7Divi,t + β8Roai,t + β9Wuij,t + β10Gdgpj,t + εi,t Where Cashi,t is the cash holding ratio of company i in year t Wui_chnt-1 is China's economic policy uncertainty in year t-1 Firmsizei,t is the size of company i in year t Mtbi,t is the ratio of the market price divided by the book price in year t of company i Nwci,t is the ratio of net operating assets divided by total assets for year t of company i Levi,t is the debt ratio in year t Invi,t is the investment in year t of company i Divi,t is the dividend payout divided by the total net income for year t Roai,t is the ratio of net income divided by total assets of company i Wuij,t is the economic policy uncertainty of country j where company i is located Và Gdpgj,t is the growth in gross domestic product of country j in year t Cashi,t = αi + β1Wui_chnt-1 + β2Firmsizei,t + β3Mtbi,t + β4Nwci,t (3.4) + β5Levi,t + β6Invi,t + β7Divi,t + β8Roai,t + β9Wuij,t + β10Gdgpj,t + β11(Zi,t * Wui_chnt) + εi,t In addition to the variables already in the model (3.3), the variable Zi,t is replaced by net income to total assets (Roa) and dividend payout ratio to total net income (Div) Zi,t * Wui_chnt is the interaction variable between the company's Z characteristics and China's 15 economic policy uncertainty to examine the mechanism by which economic policy uncertainty affects corporate cash Cashi,t = αi + β1Wui_chnt-1 + β2Firmsizei,t + β3Mtbi,t + β4Nwci,t (3.5) + β5Levi,t + β6Invi,t + β7Divi,t + β8Roai,t + β9Wuij,t + β10Gdgpj,t + β11(Invi,t*Wui_chnt) + εi,t 3.2 Research Methods To study the impact of China's economic policy uncertainty on corporate investment and cash holding decisions in Southeast Asia, the thesis uses a panel data regression model (Carruth et al., 2000) There are some methods used to estimate linear static table models for stationary order of origin, but the most popular are fixed effects model (FEM) and random effects model (REM) Hausman test (Hausman, 1978) is used to choose between FEM and REM The tests performed by the thesis author to ensure the suitability of the FE model include: regression coefficient test, variable variance test, Wooldridge test for first order autocorrelation In this thesis, the author uses the FE model with the addition of time dummy variables (years) to help control macroeconomic shocks occurring during the research period and minimize bias due to the problem of missing variable error In addition, a cluster model at the firm level is useful for looking at similar fluctuations within each firm, limiting the problem of residual variance in the model To assess the robustness of the regression results, the first way, the thesis uses alternative methods to measure the uncertainty of China's 16 economic policy The second way, the author uses alternative estimation methods including detrend method and GLS method 3.3 Measuring China's Economic Policy Uncertainty The thesis measures China's economic policy uncertainty by 03 interchangeable indexes including: (1) China's WUI index (denoted as Wui_chn), (2) China's EPU index based on The South China Morning Post (denoted as Epu_scmp), (3) China's EPU index is based on two mainland newspapers, People's Daily and Quang Minh Daily (denoted by Epu_ml) China's Wui_chnt index year t is calculated from the dataset of Ahir et al (2018) according to the formula: Total number of uncertainty words and its variations in China's EIU report for year t Wui_chnt x 1.000 = Total words in China's EIU report in year t China's Epu_scmpt index in year t is calculated by averaging the Epu_scmp of the months in that year Epu_scmp data for the months of the year is taken from the dataset of Baker et al (2013) Baker et al (2013) measure China's Epu_scmp index by taking the frequency of articles mentioning economic policy uncertainty in the South China Morning Post (SCMP) China's Epu_mlt index in year t is obtained by averaging the Epu_ml of the months in that year Epu_ml data for the months of the year are obtained from the dataset of Davis, Liu, & Sheng (2019) Davis, Liu, 17 & Sheng (2019) measures China's monthly Epu_ml index based on two mainland newspapers, the People's Daily and the Guangming Daily Based on news data sources, the Wui_chn index is said to be more objective when it is based on the EIU report - an internationally recognized, periodical publication for 143 countries around the world cobble Epu_scmp and Epu_ml based on Hong Kong and Mainland newspapers are believed to be more or less influenced by Chinese politics In this study, the author uses the Wui_chn index as the main measure for China's economic policy uncertainty, the Epu_scmp and Epu_ml indexes as alternative measures, used to test the stability of the economy Research results when using different measurement methods for China's economic policy uncertainty 3.4 Research data The research sample includes 3,236 companies from six Southeast Asian countries including Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam in the enterprise database of Thomson Reuters - Datastream The data used to calculate the economic policy uncertainty of China and Southeast Asian countries (WUI) are taken from the data source of the global uncertainty index of Ahir et al (2018) The data used to calculate Epu_scmp for China were obtained from Baker et al., 2013) and Epu_ml for China was obtained from Davis, Liu & Sheng (2019) Data on gross domestic product (GDP) growth is obtained from the database of the International Monetary Fund - IMF 18 The sampling period is from 1996 to 2018 according to the availability of data on economic policy uncertainty ... Malaysia and China when studying China''s influence on the Malaysian market Huang & Kuo (2015) note that Hong Kong and Taiwan stock markets are significantly influenced by Mainland China Nishimura... internal financial and Tobin’s Q in the investment model; dividend payout and net income divided by total assets in the cash holding model) Fourth, how does China''s economic policy uncertainty... Witnessing the increase in asset price volatility and credit interest rate differentials during the financial crisis of 2007-2009, Christiano et al (2014) pointed to financial friction as an additional