The mediating effect of corporate investment on the relationship between cashflow volatility and firm value of listed non financial firms in ho chi minh stock exchange

THE STATEBANK OF VIETNAM MINISTRY OF EDUCATION & TRAINING BANKING UNIVERSITY OF HO CHI MINH CITY - BACHELOR’S DISSERTATION THE MEDIATING EFFECT OF CORPORATE INVESTMENT ON THE RELATIONSHIP BETWEEN CASHFLOW VOLATILITY AND FIRM VALUE OF LISTED NON-FINANCIAL FIRMS IN HO CHI MINH STOCK EXCHANGE SPECIALIZED: FINANCE & BANKING Author: KIEU CONG BAO QUYEN Class: DH35TC07 Cohort: 2019-2023 Academic advisor: VO THIEN TRANG MSc Ho Chi Minh City, August 2023 THE STATEBANK OF VIETNAM MINISTRY OF EDUCATION & TRAINING BANKING UNIVERSITY OF HO CHI MINH CITY - BACHELOR’S DISSERTATION THE MEDIATING EFFECT OF CORPORATE INVESTMENT ON THE RELATIONSHIP BETWEEN CASHFLOW VOLATILITY AND FIRM VALUE OF LISTED NON-FINANCIAL FIRMS IN HO CHI MINH STOCK EXCHANGE SPECIALIZED: FINANCE & BANKING Author: KIEU CONG BAO QUYEN Class: DH35TC07 Cohort: 2019-2023 Academic advisor: VO THIEN TRANG MSc Ho Chi Minh City, August 2023 DECLARATION I declare that the bachelor dissertation "The Mediating effect of corporate investment on the Relationship between cashflow volatility and firm value of Listed Non-financial Firms in Ho Chi Minh Stock Exchange" is the result of my research, with the enthusiastic guidance of my academic advisor, MSc VO THIEN TRANG, to graduate from the University with a Bachelor's degree in Finance from Ho Chi Minh University of Banking The dissertation has never been published in any journal, nor has it appeared in any other studies The research is the fruit of my effort, and the findings are trustworthy and accurate The content presented by other people in the article is fully cited, and the sources are clearly shown in the reference section The author is fully responsible for the truthfulness of the data and the content presented in the dissertation Ho Chi Minh City, August , 2023 Student KIEU CONG BAO QUYEN i ACKNOWLEDGEMENTS After three months of doing the dissertation, I have gained knowledge and received lots of dedication, love, and sympathy from the people surrounding me I understand that my achievement is the result not solely of my efforts but also of the support and guidance of so many people Therefore, this is a great opportunity to send sincere thanks and express my gratitude First, I would like to express my sincere thanks to Ho Chi Minh University of Banking for providing me with an opportunity to take on the research and complete it Furthermore, I also thank all the lecturers who gave me knowledge and practical experiences during my four years at the university Especially, I would like to thank MSc VO THIEN TRANG, my academic advisor and dissertation instructor, for all the love, support, tremendous help, enthusiasm, and extensive knowledge she has given her students Last but not least, I want to send my beloved family a great special thanks Without them, this dissertation would have been pretermitted and could not have reached its present point No words can describe how grateful I am to my parents, my smaller brother, and especially my older sister, who was always by my side to help and encourage me during that time You guys have sacrificed a lot in both time and effort for me Your prayers have been the motivation to help me achieve where I am now At the same time, I also want to thank my friends who helped, stood by, and encouraged me to strive to achieve my goals throughout my university life Thank you KIEU CONG BAO QUYEN ii ABSTRACT Abstract: The dissertation aims to find mediating effect of corporate investment on the relationship between cashflow fluctuations and enterprise value of non-financial companies listed on the Ho Chi Minh City Stock Exchange The study applies the mediation research model of Baron and Kenny (1986) which has four steps along with the specific requirements for each step to achieve this goal The research uses a data set including 300 non-financial firms listed on Ho Chi Minh Stock Exchange from 2013 to 2022, with 1500 firm-year observations in total However, the precise number in each model can vary due to the characteristics of the model applied Also, the study employs a proper step-by-step process with System-GMM and REM with clustered standard errors as final methods for conclusions The findings show that corporate investment mediates the link between cashflow volatility and firm value Moreover, they provide the answer for sub-research questions which demonstrate that cashflow volatility has negative effects on corporate investment and firm value while corporate investment raises firm value This means that during an unpredictable period, companies with volatile cashflow reduce spending on investment activities leading to a decrease in business value Also, based on the outcomes, the study emphasizes the importance of investment activities, warns about the negative impact of cashflow fluctuations on the business value, and point out the responsibility of policymakers in stabilizing the macro situation as well as the quality of managing cashflow, operating costs, and risk control of enterprises These actions help to control the factors that can cause cashflow fluctuations and promote investment, which significantly impacts firm value and performance At the same time, the author believes that study’s outcomes can also provide empirical evidences about the correlation between corporate investment, cash flow volatility and firm value in developing countries and small economies, especially for Vietnamese enterprises Keywords: cashflow volatility, corporate investments, firm value, System-GMM, REM with clustered standard errors, Vietnam iii ABSTRACT (VIETNAMESE) Tóm tắt: Mục tiêu khóa luận xác định vai trò trung gian đầu tư doanh nghiệp quan hệ biến động dòng tiền giá trị doanh nghiệp công ty phi tài niêm yết Sở Giao dịch Chứng khốn Thành phố Hồ Chí Minh Bài nghiên cứu áp dụng mơ hình nghiên cứu biến trung gian Baron Kenny (1986) thực bước với yêu cầu cụ thể riêng cho bước để thực mục tiêu nghiên cứu Dữ liệu nghiên cứu bao gồm 300 cơng ty phi tài niêm yết Sở Giao dịch Chứng khốn Thành phố Hồ Chí Minh từ năm 2013 đến năm 2022 với 1500 quan sát Tuy nhiên, số quan sát mơ hình thay đổi tùy thuộc vào đặc điểm mô hình áp dụng Đồng thời, viết sử dụng quy trình nghiên cứu để tìm cách phương pháp hồi quy phù hợp, System-GMM REM with clustered standard errors phương pháp sử dụng cuối để phân tích đưa kết luận Kết tìm cho thấy đầu tư doanh nghiệp đóng vai trị trung gian quan hệ biến động dịng tiền giá trị doanh nghiệp Ngồi ra, kết nghiên cứu trả lời cho câu hỏi nghiên cứu chi tiết chứng minh cho mối quan hệ sau: tác động tiêu cực biến động dòng tiền lên đầu tư doanh nghiệp, tác động tiêu cực biến động dòng tiền lên giá trị cơng ty, tác động tích cực đầu tư lên giá trị cơng ty Điều có nghĩa giai đoạn biến động, việc giảm chi tiêu cho hoạt động đầu tư dẫn đến sụt giảm giá trị doanh nghiệp Dựa kết tìm được, nghiên cứu nhấn mạnh tầm quan trọng hoạt động đầu tư tác động tiêu cực biến động dòng tiền giá trị doanh nghiệp việc tối đa hóa giá trị hạn chế rủi ro cơng ty Từ đó, tác giả muốn nhấn mạnh trách nhiệm nhà tạo lập sách việc ổn định tình hình vĩ mơ nhấn mạnh chất lượng hoạt động quản lý dịng tiền, chi phí vận hành rủi ro công ty Đồng thời, kết nghiên cứu cung cấp thêm chứng thực nghiệm mối tương quan đầu tư doanh nghiệp, biến động dòng tiền giá trị doanh nghiệp nước phát triển kinh tế nhỏ, doanh nghiệp Việt Nam Từ khóa: biến động dòng tiền, đầu tư doanh nghiệp, giá trị doanh nghiệp, SystemGMM, REM with clustered standard errors, Vietnam iv Abbreviations LIST OF ABBREVIATIONS Definition FEM Fixed-effects model REM Random-effects model System-GMM System-Generalized Method of Moments CFV Cashflow volatility FV Firm value NPV Net present value HOSE Ho Chi Minh Stock Exchange INV Corporate investment v TABLE OF CONTENT DECLARATION i ACKNOWLEDGEMENTS ii ABSTRACT iii ABSTRACT (VIETNAMESE) iv LIST OF ABBREVIATIONS v TABLE OF CONTENT vi LIST OF TABLES ix LIST OF EQUATIONS AND FIGURES x CHAPTER INTRODUCTION 1.1 INTRODUCTION AND BACKGROUND 1.2 RESEARCH GAP IDENTIFICATION AND NEW CONTRIBUTIONS 1.3 RESEARCH OBJECTIVES 1.4 RESEARCH QUESTIONS 1.5 THE SCOPE OF THE STUDY 1.6 RESEARCH DATA AND METHODOLOGY 1.6.1 Research data 1.6.2 Methodology 1.7 RESEARCH STRUCTURE CHAPTER LITERATURE REVIEW 2.1 THEORETICAL FRAMEWORK 2.1.1 Pecking order theory 2.1.2 Underinvestment theory 2.1.3 Free cashflow theory .11 2.2 DEFINITION anđ measurement 12 2.2.1 Cashflow volatility 12 2.2.2 Corporate investment 14 2.2.3 Firm value 14 2.3 THE PREVIOUS RESEARCHES 15 2.3.1 Previous researches about the relationship between cashflow volatility and firm value 22 2.3.2 Previous researches about the relationship between cashflow volatility and corporate investment .23 2.3.3 Previous researches about the relationship between corporate investment and firm value 25 vi 2.3.4 Previous researches about the mediating effect of corporate investment on the relationship between cashflow volatility and firm value 26 2.4 HYPOTHESIS FOR MODELS .27 CHAPTER RESEARCH METHODOLOGIES 29 3.1 SAMPLE, DATA AND VARIABLES 29 3.1.1 Sample and data 29 3.1.2 Variables 29 3.2 RESEARCH MODELS 32 3.2.1 Step - Examining the link between cashflow volatility (CFV) and firm value (FV) .32 3.2.2 Step - Investigate the link between cashflow volatility (CFV) and corporate investment (INV) .33 3.2.3 Step - Examining the link between corporate investment (INV) and firm value (FV) 34 3.2.4 Step - Investigate the influence of cashflow volatility (CFV) - independent variable and corporate investment (INV) - mediator variable on firm value (FV) - response variable 34 3.3 RESEARCH METHODS 35 3.3.1 Descriptive statistics and Pearson correlation analysis .35 3.3.2 Estimation methods 35 3.3.3 Research process .38 CHAPTER EMPERICAL RESULTS 40 4.1 DESCRIPTIVE STATISTICS .40 4.2 PEARSON CORRELATION ANALYSIS - CORRELATION MATRIX 43 4.3 REGRESSION ANALYSIS BY FEM AND REM 44 4.3.1 The regression results of 4-step mediation detecting models by FEM .45 4.3.2 The regression results of 4-step mediation detecting models by REM 46 4.4 TEST FOR CONSISTENCY AND UNBIASEDNESS 48 4.5 REM WITH CLUSTERED STANDARD ERRORS, SYSTEM-GMM RESULTS AND ANALYSIS .50 4.5.1 System-GMM for Step - Model .50 4.5.2 REM with clustered standard errors for Step - Model .53 4.5.3 System-GMM for Step - Model .54 4.5.4 System-GMM for Step - Model .56 CHAPTER CONCLUSIONS AND POLICY IMPLICATIONS 60 5.1 RESEARCH FINDINGS 60 5.1.1 Research findings 60 5.1.2 Research contributions 62 vii 5.2 IMPLICATIONS 63 5.3 LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH .64 CONCLUSION 65 REFERENCES APPENDIX viii Appendix 13 Hausman test for models Step - Model Step - Model Step - Model Step - Model Appendix 14 Heteroskedasticity test for models Step - Model Step - Model Step - Model Step - Model Appendix 15 Autocorrelation test for models Step - Model Step - Model Step - Model Step - Model Appendix 16 Endogeneity test for models Step - Model Step - Model Step - Model Step - Model Appendix 17 System-GMM method for Model 1, Model 3, Model Step - Model Step - Model Step - Model Appendix 18 REM with clustered standard errors for Model