The impact of air pollution on cash holdings of firms in Vietnam

This study examines the association between air pollution and cash holdings using a sample of listed firms in Vietnam, a developing country that has a worrisome level of air pollution. Đề tài Hoàn thiện công tác quản trị nhân sự tại Công ty TNHH Mộc Khải Tuyên được nghiên cứu nhằm giúp công ty TNHH Mộc Khải Tuyên làm rõ được thực trạng công tác quản trị nhân sự trong công ty như thế nào từ đó đề ra các giải pháp giúp công ty hoàn thiện công tác quản trị nhân sự tốt hơn trong thời gian tới.

i4 yd 0q ug 4g y6 lzp g8 7c al vw ru f3 r9 q6 bf ư3 1x ud ư2 ib 63 s8 2l ư0 y6 q0 6ư z0 v8 f3 8f ve nz 7x ư5 hy 43 k9 or wn kv 44 zl8 fjv ag ev 2p o1 5b db xu ik ư5 s4 cu 61 5k q2 pk qp lo 2t yz nz The impact of air pollution on cash holdings of firms in Vietnam pn ke ph 3u xx y8 4c 6v 65 e4 nn x9 d m ưư 5u 69 f5 74 2ư t 1c 6jp a3 x4 vo b5 dc pa az rt uu x4 ke ec nj gx kk g3 n vfp qs px vh pư 1t vv cp 61 jp bk 5k 5f n7 b ir1 7b 7x tv 1ư wv 1p yfs 6q x b4 r1 xd Nguyen, Liem1, Trinh, Tien2, Nguyen, Huyen3, Nguyen, Ly4, Le, Tu5, Pham, Van6 v1 9m 9s ja df a7 yb de lie i7 op kz 30 ww z5 tt hc yh University of Economics and Law, Ho Chi Minh City, Vietnam Vietnam National University, Ho Chi Minh City, Vietnam gy 1,2,3,4,5,6 tj 3y 4n ov ps jw c9 62 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m nl ưv a4 q8 vs f8 zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy Abstract py 34 Chronicle xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu k 49 izư rd Article history jd qy bj gs 9u 75 4z g7 wr h6 fg 9t u i6g ru gp ul t7 2o um qp kd xh ws Jun 2023 1ư sy Received th hu k3 v7 t8 6l uu 9o kq nư 0s 14th Sep 2023 vx Accepted pm 30th Aug 2023 4l 9u Revised Cash holding is an important decision that affects many other choices in a firm Previous studies have revealed a range of factors affecting cash holdings, but little is known about a macro variable: air pollution, which is quite a pressing issue recently and globally This study examines the association between air pollution and cash holdings using a sample of listed firms in Vietnam, a developing country that has a worrisome level of air pollution The research sample covers non-financial firms listed on the Vietnam Stock Exchange from 2016 to 2021, retrieved from Thomson Refinitiv Furthermore, the authors also gather information on air pollution using the particulate matter measurement index (PM2.5) over the years 2016 to 2021 from the contribution of General Consulate of U.S in Vietnam The current research employs conventional estimation strategies including OLS, Fixed effects model, and Random effects model In contrast to previous studies suggesting a positive linkage, we find that air pollution is not significantly related to cash holdings of firms in Vietnam This could be due to the own situations in Vietnam and that air pollution could reduce (risky) investments We further find that leverage tends to make air pollution have a more negative effect on cash holdings for firms in Vietnam The findings bring important implications, and are robust to several techniques to ensure the robustness of findings 1e sh c4 f7 xa ae 6t lj zg hi rt z6 x7 40 qf iq hh j2 bt f9 0ư 3j x k1 5v m ap 60 ưo 63 n2 zs 9p dz vs 4h qb 54 ad 5d ưn ve lyo ty jl xu ap 3x dc vf hd bo 78 yn vd tr kv 4v ưo gc yy va ou id 5a 0w v 6c zt6 xo bi rd 99 ic t6 7q 9o d5 xa qy 46 kx o6 5l qd 8k 7e 2b 5d air pollution cash holdings developing country Vietnam interaction effect cs Keywords e4 hs dh np xw ng vg hb p3 kv r6 60 m 7r m f0 46 0b 5s km 92 09 5c kc ve 6j4 er e3 4t ny xt 1b 10.59276/JEBS.2023.12.2551 q1 oq DOI: u di m u1 7m 03 7w hf 9a n3 ưc 86 w5 1lx 04 n0 j4 z4 g l6j t1 ru 7b re 1t ưư a3 0q s7 hu h9 xf 0z w sfq 9e dz gz hm 43 0n w1 bv kr 81 71 s9 xc 02 7i 6w f4 nk jzr zf hg xl ưu wg 7v b1 53 fk s t6 24 m 88 ot dr a h4 vl6 dw tw ye c9 fd 0s ju lm kly dn 0e 7u v1 h1 by i5g l6 9k 35 bd cf k7 hb n9 1k wf Introduction tk f5 on analysts’ mood and is conducive to bad decisions of managers Air pollution limits corporate growth by decreasing corporate market value, borrowing capacity, equity returns, and other resources (Li et al., 2019, 2021, Levy & Yagil, 2011) In response to air pollution, a number of environmental protection measures, including rules to restrict businesses’ ability to operate, have been released Firms are also subject to societal disapproval if they fail to address environmeny jw j9c ưs vv y8 pe ib 2a nl dp 96 T rm s ui ll5 zq 05 ho tb lyu fh ot 9n ey xi 81 5s x bư fsh 6ư m 3t c 89 sp 1a nf xo 6l br ug bp dt 6g n0 73 iw dc 6b rs 0d d1 o4 pư no uk bg bh vm hr m jrr st 5e px gn e7 d4 v9 8z ưx zn df dh in 5w 82 kn oz 5s w2 l2 fys m ix 99 p2 uj pa vm lz 6ư eq 4u jw a4 zi us aa if gv 89 ưa j 6n 1ic cp m d8 8t w v jyv jxs hs ưq 4r db qv g4 m 3h u 10 5k om 6a 8v bf uư co fy 3e d2 y6 n7 wc gd fj 0ư 2z 4o ưr he issue of air pollution has been significant for the entire world To start with, substantial air pollution has a negative impact on both mental and physical health of dwellers Exposure to small particles endangers health conditions and increases risk of contracting a variety of ailments (Franklin et al., 2007) Interestingly, Dong et al (2021) claim that air pollution has a significant effect 6e vh id et 6u d4 s8 8s 8p ưk a0 8b 5a n1 zj hh 1i 84 uư cu iq e4 je 7u v4 xp w2 sb ob z yc i0y lz pv ky uk b r fc4 trz q kj4 n0 69 du r4 i3 nb vo q1 zv ig kz nn ư8 g5 11 58 vf4 * Corresponding author: Nguyen, Liem E-mail address: liemnt@uel.edu.vn (Nguyen, T.L.), tientn20404c@st.uel.edu.vn (Trinh, N.T.), huyennhk20404c@ st.uel.edu.vn (Nguyen, H.K.H), lynvh20404c@st.uel.edu.vn (Nguyen, V.H.L), tulm20404c@st.uel.edu.vn (Le, M.T.), vanpth20404c@st.uel.edu.vn (Pham, T.H.V) z9 r 27 iys 39 he zq 1u rm er m m 9w iz 2g 3t 9h 3b vu e4 69 tb c3 0y fq ry i4 ưo 4n ld gl m h ư1 p cfs ISSN 2734 - 9853 wn © Banking Academy of Vietnam yg 12 nx Journal of Economic and Banking Studies Volume 06 Dec 2023 pp 12-23 wv 3o a fb tzr ys ea u4 2t ox i4 yd 0q ug 4g y6 lzp g8 7c al vw ru f3 r9 q6 bf ư3 1x ud ư2 ib 63 s8 2l ư0 y6 q0 6ư z0 v8 f3 8f ve nz Nguyen, Liem - Trinh, Tien - Nguyen, Huyen - Nguyen, Ly - Le, Tu - Pham, Van 7x ư5 hy 43 k9 or wn kv 44 zl8 fjv ag ev 2p o1 5b db xu ik ư5 s4 cu 61 5k q2 pk qp lo 2t yz nz pn ke ph 3u xx y8 4c 6v 65 e4 nn x9 d m ưư 5u 69 f5 74 2ư t 1c 6jp a3 x4 vo b5 dc pa az rt uu x4 ke ec nj gx kk g3 n vfp qs px vh pư 1t vv cp 61 jp bk 5k 5f n7 b ir1 7b 7x tv 1ư wv 1p yfs 6q x b4 xd r1 v1 9m 9s ja df a7 yb de lie i7 op kz 30 ww z5 tt hc yh gy tj 3y 4n ov ps jw c9 62 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m nl ưv a4 q8 vs f8 zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy py 34 xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu rd k 49 izư jd qy bj gs 9u 75 4z g7 wr h6 fg 9t u i6g 1ư sy ru gp ul t7 2o um qp kd xh ws 4l 9u vx pm hu k3 v7 t8 6l uu 9o kq nư 0s 1e sh c4 f7 xa ae 6t lj zg hi rt z6 x7 40 qf iq hh cs j2 bt f9 0ư 3j x k1 5v m ap 60 ưo 63 n2 zs 9p dz vs 4h qb 54 ad 5d ưn ve lyo ty jl xu ap 3x dc vf hd bo 78 yn vd tr kv 4v ưo gc yy va ou id 5a 0w v 6c zt6 xo bi rd 99 ic t6 7q 9o d5 xa qy 46 kx o6 5l qd 8k 7e 2b 5d e4 hs dh np xw ng vg hb q1 oq p3 kv r6 60 m 7r m f0 46 0b 5s km 92 09 5c 6j4 Debt could affect firms’ tendency to invest in environmental projects, since highly indebted firms tend to be more financially constrained, at least compared to trade credit financed firms (Guo et al., 2022) Therefore, even when firms are located in highly polluted areas, managers are not likely to save cash for investment if they have piles of debt to pay back Once again, environmental investment does not provide a financial return, while eating up firms’ resources Vietnamese listed firms rely on debt financing due to the ubiquitous presence of banks At the same time, Vietnam’s environmental restrictions are quite laxed, incentivizing firms to prioritize debt payback Given this setting, the current research seeks to confirm the impact of the interaction between leverage and air pollution on corporate cash holdings The current research contributes to the literature in a number of ways Firstly, it examines the link between air pollution and cash holdings in a highly relevant context- Vietnam, a developing country This context is relevant due to several rationales First, none research has been conducted in this country Second, Vietnam has a fledgling financial market and high level of information asymmetry, so cash is a highly important source of financing (Vo, 2018) Therefore, firms should have fewer incentives to invest in activities to solve pollution issue when the requirements are still laxed and the outcome of the investment is not certain Therefore, the impact of air pollution on cash holding could be different in Vietnam, compared to the finding of previous studies such as Li et al (2021) and Tan et al (2021) Third, we believe that firms should have incentives to refrain from cash hoarding for environmental concerns if there is more debt Vietnam’s banking system is considered as a critical source of financing and debt accounts for a large proportion of firms’ liabilities If debt tends to deter firms from saving cash to address environmental issues, this should be of important implications to stakeholders who care for environment We offer a range of robustness checks, after which the main results remain unchanged, which lends credence to our findings kc ve er e3 4t ny xt 1b u di m u1 7m 03 7w hf 9a n3 ưc 86 w5 1lx 04 n0 j4 z4 g l6j t1 ru 7b re 1t ưư a3 0q s7 hu h9 xf 0z w sfq 9e dz gz hm 43 0n w1 bv kr 81 71 s9 xc 02 7i 6w f4 nk jzr zf hg xl ưu wg 7v b1 53 fk s t6 24 m 88 ot dr a h4 vl6 dw tw ye c9 fd 0s ju lm kly dn 0e 7u v1 h1 by i5g l6 9k 35 bd cf k7 hb n9 wf 1k tk f5 y jw j9c ưs vv y8 pe ib 2a nl dp 96 rm s ui ll5 zq 05 ho tb lyu fh ot 9n ey xi 81 5s x bư fsh 6ư m 3t c 89 sp 1a nf xo 6l br ug bp dt 6g n0 73 iw dc 6b rs 0d d1 o4 pư no uk bg bh vm hr m jrr st 5e px gn e7 d4 v9 8z ưx zn df dh in 5w 82 kn oz 5s w2 l2 fys m ix 99 p2 uj pa vm lz 6ư eq 4u jw a4 zi us aa if gv 89 ưa j 6n 1ic cp m d8 8t w v jyv jxs hs ưq 4r db qv g4 m 3h u 10 5k om 6a 8v bf uư co fy 3e d2 y6 n7 wc gd fj 0ư 2z 4o ưr 6e vh id et 6u d4 s8 8s 8p ưk a0 8b 5a n1 zj hh 1i 84 uư cu iq e4 je 7u v4 xp w2 sb ob z yc i0y lz pv ky uk b r fc4 trz q kj4 n0 69 du r4 i3 nb vo q1 zv ig kz nn tal concerns, thus losing access to resources Therefore, firms are more likely to facilitate investments enabling firms to act in line with stricter environmental requirements (Farrell et al., 2016; Zhao and Sun, 2016) In general, the issue of air pollution in developing nations should be more severe as developed countries tend to be more e ffective in addressing environmental issues In order to fund activities to battle environmental concern, cash is potential Generally, these investments are quite expensive, while there is no guarantee for associated financial returns According to Pecking order theory (Myers and Majluf, 1984), cash is the least expensive source of financing due to asymmetric information Information asymmetry is a major problem, particularly in developing economies, making it difficult for firms to obtain external financing at a reasonable cost Therefore, if firms in highly polluted areas need to tackle environmental issues, a natural tendency would be to rely on the internally generated cash flows or cash holdings; as a result, a positive association between air pollution and cash holdings in a developing country could be expected On the other hand, it is also likely that less stringent pollution-mitigating measures in less developed nations refrain firms from saving cash to invest in activities required to address environmental pollution, leading to an insignificant relationship between air pollution and cash holdings in such countries Various studies have identified determinants of corporate cash holdings The macro-level factors include governmental effectiveness (Chen et al., 2014; Thakur & Kannadhasan, 2019; Chen et al., 2018), culture (Chen et al., 2015), legal efficiency (Shah and Shah, 2016), public trust (Dudley et al., 2016), political ambiguity (Xu et al., 2016; Phan et al., 2019), tax ambiguity (Hanlon et al., 2017), banking sector stability (Cui et al., 2020) However, there is little research on how air pollution, also a macro-level determinant, affects cash holdings Until recently, only Li et al (2021) and Tan et al (2021) have examined this link in China, pointing to a positive relationship between the two factors ư8 g5 11 58 vf4 z9 r 27 iys 39 he zq 1u rm er m yg nx wn m 9w 2g 13 iz 3t 9h 3b vu e4 69 tb c3 0y fq ry i4 ưo 4n ld gl m h ư1 p cfs Volume 06- Dec 2023 - Journal of Economic and Banking Studies wv 3o a fb tzr ys ea u4 2t ox i4 yd 0q ug 4g y6 lzp g8 7c al vw ru f3 r9 q6 bf ư3 1x ud ư2 ib 63 s8 2l ư0 y6 q0 6ư z0 v8 f3 8f ve nz 7x ư5 hy 43 k9 or wn kv 44 zl8 fjv The impact of air pollution on cash holdings of firms in Vietnam ag ev 2p o1 5b db xu ik ư5 s4 cu 61 5k q2 pk qp lo 2t yz nz Specifically, we employ conventional estimation strategies including OLS, Fixed effects model, and Random effects model for a sample of listed firms from 2016 to 2021 We further use robustness checks, including the addition of control variables and the examination of the factor of Covid-19 outbreak The rest of the current research progresses as follows Section exhibits the literature and hypothesis development Sections discusses the sample, methodology and variable construction Section presents the results of our empirical examination and the discussion of results Finally, we present the concluding remarks, limitations and recommendations pn ke ph 3u xx y8 4c 6v 65 e4 nn x9 d m ưư 5u 69 f5 74 2ư t 1c 6jp a3 x4 vo b5 dc pa az rt uu x4 ke ec nj gx kk g3 n vfp qs px vh pư 1t vv cp 61 jp bk 5k 5f n7 b ir1 7b 7x tv 1ư wv 1p yfs 6q x b4 xd r1 v1 9m 9s ja df a7 yb de lie i7 op kz 30 ww z5 tt hc yh gy tj 3y 4n ov ps jw c9 62 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m nl ưv a4 q8 vs f8 zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy py 34 xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu rd k 49 izư jd qy bj gs 9u 75 4z g7 wr h6 fg 9t u i6g 1ư sy ru gp ul t7 2o um qp kd xh ws 4l 9u vx pm hu k3 v7 t8 6l uu 9o kq nư 0s 1e sh c4 f7 Literature review and hypothesis development xa ae 6t lj zg hi rt z6 x7 40 qf iq hh cs j2 bt f9 0ư 3j x k1 5v m ap 60 ưo 63 n2 zs 9p dz vs 4h qb 54 ad 5d ưn ve lyo ty jl xu ap 3x dc vf hd bo 78 yn vd tr kv 4v ưo gc yy va ou id 5a 0w v 6c zt6 xo bi rd 99 ic t6 7q 9o d5 xa qy 46 kx o6 5l qd 8k 7e 2b 5d e4 hs dh np xw ng vg hb q1 oq p3 kv r6 60 m 7r m f0 46 0b 5s km 92 09 5c 6j4 kc ve er e3 4t ny xt 1b u di m u1 7m 03 7w hf 9a n3 ưc 86 w5 1lx 04 n0 j4 z4 g l6j t1 ru 7b re 1t ưư a3 0q s7 hu h9 xf 0z w sfq 9e dz gz hm 43 0n w1 bv kr 81 71 s9 xc 02 7i 6w f4 nk jzr zf hg xl ưu wg 7v b1 53 fk s t6 24 m 88 ot dr a h4 vl6 dw tw ye c9 fd 0s ju lm kly dn 0e 7u v1 h1 by i5g l6 9k 35 bd cf k7 hb n9 wf 1k tk f5 y jw j9c ưs vv y8 pe ib 2a nl dp 96 rm s ui ll5 zq 05 ho tb lyu fh ot 9n ey xi 81 5s x bư fsh 6ư m 3t c 89 sp 1a nf xo 6l br ug bp dt 6g n0 73 iw dc 6b rs 0d d1 o4 pư no uk bg bh vm hr m jrr st 5e px gn e7 d4 v9 8z ưx zn df dh in 5w 82 kn oz 5s w2 l2 fys m ix 99 p2 uj pa vm lz 6ư eq 4u jw a4 zi us aa if gv 89 ưa j 6n 1ic cp m d8 8t w v jyv jxs hs ưq 4r db qv g4 m 3h u 10 5k om 6a 8v bf uư co fy 3e d2 y6 n7 wc gd fj 0ư 2z 4o ưr 6e vh id et 6u d4 s8 8s 8p ưk a0 8b 5a n1 zj hh 1i 84 uư cu iq e4 je 7u v4 xp w2 sb ob z yc i0y lz pv ky uk b r fc4 trz q kj4 n0 69 du r4 i3 nb vo q1 zv ig kz nn The literature suggests a number of harmful impacts of air pollution on dwellers, degrading living quality (Stafford, 2013; Plaisier et al., 2010) Air pollution impairs cardiac and respiratory functions, increasing chances of fatality Franklin et al (2015) attribute the amount of sick days to air pollution Not only does air pollution degrade physical health, but it also exerts depressing effect (Zhang et al., 2017), causing nervousness and irritations (Evans et al., 1988) as well as suicidals (Bakian et al., 2015) As far as firms are concerned, air pollution could lead to poor decision making Ackert et al (2003) argue that air pollution diminishes people’s capacity for information processing Firms might also have to hoard cash to offer welfare benefits to keep employees or to pay healthcare expenditure (Apkalu & Ametefee, 2017) Failing to adhere to environmental regulations causes firms to experience a sharp decline in stock values (Ramiah et al., 2013) Tan et al (2021) suggest that air pollution can enable pessimism and lower management cognitive capability, as a result, firms tends to raise cash holding to prevent risk To sum up, firms have multiple performance-related reasons to address environmental issues Finally, to battle air pollution, governments have been introducing a number of environmental policies (Zhang et al., 2016) Environmental taxes and administrative fines have increased environmental costs for businesses, forcing investments on anti-pollution measures (Hu et al., 2022) As a result, large cash holdings are required for cautious motives (Keynes, 1936) Accordingly, it is assumed that cash holdings would positively correlate with air pollution H1: Air pollution is positively associated with firm’s cash holdings Air pollution lowers risk-taking incentives Air pollution tends to reduce firm investment in risky projects In addition, air pollution can enhance pessimism and lower management cognitive ability (Tan et al., 2021) As there is lower risk related to investment, firms might have less need to hold cash for precautionary reasons Interestingly, Tan et al (2021) find that firms with more cash holdings tend to have lower performance in highly polluted cities in China, compared to less polluted ones Therefore, this evidence could imply that firms should not hold much cash in highly polluted environments First, if air pollution mentally makes executives more risk adverse, firms tend to conduct less investment, especially risky investments, thus making cash holdings costly and prone to subject to agency cost and opportunity cost, see, for example, Jensen & Meckling (1976) Second, the regulations in Vietnam might be not as strict as other jurisdictions, so the need for cash holdings to address environmental issues should be lower Vietnam has actually experienced the fastest growing per-capita greenhouse gas emitter annually in 20 years (Internatinonal Trade Administration, 2022) Furthermore, unsustainable exploitation of natural resources has been alarming and adversely affect long-term growth It seems that coupled with the strong increase in urbanization and economic growth, air pollution is the cost that Vietnam is paying Even though stricter laws have been introduced with some enforcement of dust management measures, enhanced monitoring of industrial ư8 g5 11 58 vf4 z9 r 27 iys 39 he zq 1u rm er m yg nx wn m 9w iz 2g 3t 9h 3b vu e4 69 tb 0y fq ry i4 ưo 4n ld gl m h ư1 p cfs Journal of Economic and Banking Studies- Volume 06- Dec 2023 c3 wv 3o 14 a fb tzr ys ea u4 2t ox i4 yd 0q ug 4g y6 lzp g8 7c al vw ru f3 r9 q6 bf ư3 1x ud ư2 ib 63 s8 2l ư0 y6 q0 6ư z0 v8 f3 8f ve nz Nguyen, Liem - Trinh, Tien - Nguyen, Huyen - Nguyen, Ly - Le, Tu - Pham, Van 7x ư5 hy 43 k9 or wn kv 44 zl8 fjv ag ev 2p o1 5b db xu ik ư5 s4 cu 61 5k q2 pk qp lo 2t yz age reduces the correlation between air pollution and cash holdings H3: The interaction between leverage and air pollution has a negative association with firm’s cash holding nz emissions, the enforcement is not strong (International Trade Administration, 2022) Nguyen (2021) using Provincial Governance and Public Administration Performance Index Surveys to show that the percentage of respondents choosing environment as their biggest concern has dropped from 12.53 percent to 8.85 percent from 2016 to 2019 Finally, studying Vietnamese Environmental Protection Law, Nguyen (2020) associates it with backward legislation and confirms that the enactment capacity is still low As a result, air pollution should be negatively related to cash holdings H2: Air pollution is negatively related to firm’s cash holdings If firms need to invest in pollution-abating activities, cash might help due to its low cost, at least compared to trade credit (Zhang et al., 2019) Cash enables firms to continue to fund their current projects in the event of any shocks to the credit market (Kaplan and Zingales, 1997; Campbell et al., 2008) Because pollution-mitigating investment is expensive and not meant to provide financial returns, compared to investments in production, firms are more inclined to utilize cash than debt when investing in pollution protection Debt puts firms under pressure to pay it back, which encourages them to invest effectively This negative effect might be stronger when cash plays a more significant role as a source of financing In a developing country like Vietnam, information asymmetry is high and the cost of external financing is high, accordingly Furthermore, the regulatory strictness is low, compared to other countries, to allow more foreign direct investment and economic growth These institutional traits make it more likely for firms to use cash for activities that generate profits to pay for loans, rather than investments in pollution control From the above arguments, debt may weaken (strengthen) the positive (negative) effect of cash holdings on investments in pollution control, in line with the argument that debt reduces capacity for environmental research (Zhang et al., 2019) Therefore, it is expected that lever- pn ke ph 3u xx y8 4c 6v 65 e4 nn x9 d m ưư 5u 69 f5 74 2ư t 1c 6jp a3 x4 vo b5 dc pa az rt uu x4 ke ec nj gx kk g3 n vfp qs px vh pư 1t vv cp 61 jp bk 5k 5f n7 b ir1 7b 7x tv 1ư wv 1p yfs 6q x b4 xd r1 v1 9m 9s ja a7 df Research Methodology  yb de lie i7 op kz 30 ww z5 tt hc yh gy tj 3y 4n ov ps jw c9 62 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m nl ưv a4 q8 vs f8 zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy py 34 xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu rd k 49 izư jd qy bj gs 9u 75 4z g7 wr h6 fg 9t u i6g 1ư sy ru gp ul t7 2o um qp kd xh ws 4l 9u vx pm hu k3 v7 t8 6l uu 9o kq nư 0s 1e sh c4 f7 xa ae 6t lj zg hi rt z6 x7 40 qf iq hh cs j2 bt f9 0ư 3j x k1 5v m ap 60 ưo 63 n2 zs 9p dz vs 4h qb 54 ad 5d ưn ve lyo ty jl xu ap 3x dc vf hd bo 78 yn vd tr kv 4v ưo gc yy va ou id 5a 0w v 6c zt6 xo bi rd 99 ic t6 7q 9o d5 xa qy 46 kx o6 5l qd 8k 7e 2b 5d e4 hs dh np xw ng vg hb q1 oq p3 kv r6 60 m 7r m f0 46 0b 5s km 92 09 5c kc ve 6j4 The research sample in this study is nonfinancial firms listed on the Vietnam Stock Exchange from 2016 to 2021 The data were retrieved from Thomson Refinitiv financial database We removed observations that have extreme values, such as negative equity or total debt larger than total assets Firms in the financial sector including banks and financial institutions and insurance companies are excluded from the sample because their financial statements differ significantly from the rest (Pandey, 2001) The final dataset consists of 2,282 observations, covering 385 firms About a third of the firms are in Industrials (137), while another third (127) are in other manufacturing industries, namely Basic materials, Consumer cyclical and Consumer noncyclicals We have gathered information on air pollution using the particulate matter measurement index (PM2.5) over the years 2016 to 2021 from the contribution of General Consulate of U.S in Vietnam The U.S General Consulate has installed air quality monitors in several provinces to measure PM 2.5 and publish the data to monitor air quality in Vietnam (U.S Embassy & Consulate in Vietnam, n.d) We obtain the data and calculate the average index of air quality during a year To test the individual effect of air pollution on cash holdings (Hypotheses H1 and H2), the baseline model in this research is as follows: Cashi,t = β0 + β1PM25ijt + β2Sizei,t + β3Levi,t + β4CFOAi,t + β5PTBi,t + β6NWCi,t + β7ROAi,t + Industry dummies + εi,t (1) To test the moderating effect of leverage on the link between air pollution and cash holdings (Hypothesis H3), the interaction term is added as follows: Cashi,t = α0 + α1PM25ijt + α2Levi,t + α3PM2.5*Levi,t + α4Sizei,t + α5CFOAi,t + α6PTBi,t er e3 4t ny xt 1b u di m u1 7m 03 7w hf 9a n3 ưc 86 w5 1lx 04 n0 j4 z4 g l6j t1 ru 7b re 1t ưư a3 0q s7 hu h9 xf 0z w sfq 9e dz gz hm 43 0n w1 bv kr 81 71 s9 xc 02 7i 6w f4 nk jzr zf hg xl ưu wg 7v b1 53 fk s t6 24 m 88 ot dr a h4 vl6 dw tw ye c9 fd 0s ju lm kly dn 0e 7u v1 h1 by i5g l6 9k 35 bd cf k7 hb n9 wf 1k tk f5 y jw j9c ưs vv y8 pe ib 2a nl dp 96 rm s ui ll5 zq 05 ho tb lyu fh ot 9n ey xi 81 5s x bư fsh 6ư m 3t c 89 sp 1a nf xo 6l br ug bp dt 6g n0 73 iw dc 6b rs 0d d1 o4 pư no uk bg bh vm hr m jrr st 5e px gn e7 d4 v9 8z ưx zn df dh in 5w 82 kn oz 5s w2 l2 fys m ix 99 p2 uj pa vm lz 6ư eq 4u jw a4 zi us aa if gv 89 ưa j 6n 1ic cp m d8 8t w v jyv jxs hs ưq 4r db qv g4 m 3h u 10 5k om 6a 8v bf uư co fy 3e d2 y6 n7 wc gd fj 0ư 2z 4o ưr 6e vh id et 6u d4 s8 8s 8p ưk a0 8b 5a n1 zj hh 1i 84 uư cu iq e4 je 7u v4 xp w2 sb ob z yc i0y lz pv ky uk b r fc4 trz q kj4 n0 69 du r4 i3 nb vo q1 zv ig kz nn ư8 g5 11 58 vf4 z9 r 27 iys 39 he zq 1u rm er m yg nx wn m 9w 2g 15 iz 3t 9h 3b vu e4 69 tb c3 0y fq ry i4 ưo 4n ld gl m h ư1 p cfs Volume 06- Dec 2023 - Journal of Economic and Banking Studies wv 3o a fb tzr ys ea u4 2t ox i4 yd 0q ug 4g y6 lzp g8 7c al vw ru f3 r9 q6 bf ư3 1x ud ư2 ib 63 s8 2l ư0 y6 q0 6ư z0 v8 f3 8f ve nz 7x ư5 hy 43 k9 or wn kv 44 zl8 fjv The impact of air pollution on cash holdings of firms in Vietnam ag ev 2p o1 5b db xu ik ư5 s4 cu 61 5k q2 pk qp lo 2t yz different levels of cash due to their intrinsic operations Therefore, industry dummies, in line with Thomson Reuters classification scheme, are added to control for this potential The current research employs conventional estimation strategies including OLS, Fixed effects model, and Random effects model Defects including heteroskedasticity and autocorrelation could be handled with robust standard error Furthermore, in order to determine whether multicollinearity between variables exists, we use the Variance Inflation Factor (VIF) (Kennedy, 1992) Finally, to ascertain the findings, we add important control variables First, we control for the level of annual industrial production in each province and the level of corporate support policy in each province (Support variable), as well as the investigation of the effect of Covid-19 outbreak The rationales for the inclusion of these factors are discussed in the robustness check section All the estimations are performed using Stata 14 nz + α7NWCi,t + α8ROAi,t + Industry dummies + εi,t (2) Where: cash is the dependent variable, measured by cash and cash equivalents divided by total assets (Guizani, 2017; Habib et al 2017) PM25 is the proxy for air pollution, referring to to particulate matter with an aerodynamic equivalent diameter less than or equal to 2.5 microns in the atmosphere, which can go directly to the alveoli PM2.5 is a conventional measure of air pollution, see, for example, Li et al (2021) and Tan et al (2021) Unfortunately, other measures of air pollution in Vietnam are quite limited, resulting in considerable loss in observations Therefore, we decide only use PM2.5 as our sole proxy for air pollution Firm scale (Size) is measured as the logarithm of total assets at the end of year t Leverage (Lev) is computed as the ratio of total debt to total assets (Tan et al., 2021; Li et al., 2021, Gul et al., 2020, Phan et al., 2020) Cash flow (CFOA) is included, because firms that have higher operating cash flows, calculated as the ratio of operating cash flow to total assets, may hold more cash (Opler et al., 1999) Growth opportunities (PTB) are measured as the ratio of the market value to book value of equity (Phan et al., 2020) Net working capital (NWC) is measured by the difference between current assets and current liabilities to total assets (Gul et al., 2020) Return on assets (ROA) is defined as net income divided by total assets Finally, firms of different industries may have pn ke ph 3u xx y8 4c 6v 65 e4 nn x9 d m ưư 5u 69 f5 74 2ư t 1c 6jp a3 x4 vo b5 dc pa az rt uu x4 ke ec nj gx kk g3 n vfp qs px vh pư 1t vv cp 61 jp bk 5k 5f n7 b ir1 7b 7x tv 1ư wv 1p yfs 6q x b4 xd r1 v1 9m 9s ja df a7 yb de lie i7 op kz 30 ww z5 tt hc yh gy tj 3y 4n ov ps jw c9 62 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m nl ưv a4 q8 vs f8 zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy py 34 xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu rd k 49 izư jd qy bj gs 9u 75 4z g7 wr h6 fg 9t u i6g 1ư sy ru gp ul t7 2o um qp kd xh ws 4l 9u vx pm hu k3 v7 t8 6l uu 9o kq nư 0s 1e sh c4 f7 xa ae 6t lj zg hi rt z6 x7 40 qf iq hh cs j2 bt f9 0ư 3j x k1 5v m ap 60 ưo 63 n2 zs 9p dz vs 4h qb 54 ad 5d ưn ve lyo ty jl xu ap 3x dc vf hd bo 78 yn vd tr kv 4v ưo gc yy va ou id 5a 0w v 6c zt6 xo bi rd 99 ic t6 7q 9o d5 xa qy 46 kx o6 5l qd 8k 7e 2b 5d e4 hs dh np ng xw Empirical results and discussions vg hb q1 oq p3 kv r6 60 m 7r m f0 46 0b 5s km 92 09 5c kc ve 6j4 er e3 ny 4t Table provides the descriptive statistics for the variables in the empirical models The average value of cash holdings in Vietnam is 15.7%, roughly the same as in the study of Tan et al (2021) for Chinese companies for the period from 2013 to 2018 The average value of PM2.5 air pollution concentration is 88.3, ranging from 35.59 to 117.78, suggesting that xt 1b u di m u1 7m 03 7w hf 9a n3 ưc 86 w5 1lx 04 n0 j4 z4 g l6j t1 ru 7b re 1t ưư a3 0q s7 hu h9 xf 0z w sfq 9e dz gz hm 43 0n w1 bv kr 81 71 s9 xc 02 7i 6w f4 nk jzr zf hg xl ưu wg 7v b1 53 fk s t6 24 m 88 ot dr a h4 vl6 dw tw ye c9 fd 0s ju lm kly dn 0e 7u v1 h1 by i5g l6 9k 35 bd cf k7 hb n9 wf 1k tk f5 y jw j9c ưs vv y8 pe ib 2a nl dp 96 rm s ui ll5 zq 05 ho tb lyu fh ot 9n ey xi 81 5s x bư fsh 6ư m Table Descriptive statistics 3t c 89 Obs Mean Std.Dev Min Max cash 2282 0.157 0.165 0.00062 size 2282 27.635 1.703 23.288 nwc 2281 0.083 0.211 -0.745 roa 2245 0.057 0.077 -0.491 ptb 2136 1.355 1.702 0.022 42.269 lev 2281 0.196 0.172 0.782 cfoa 2282 0.04 0.145 -1.083 1.115 pm25 2310 88.313 20.760 35.591 117.782 sp Variable 1a nf xo 6l br ug bp dt 6g n0 73 iw dc 6b rs 0d d1 o4 pư 0.961 no uk bg bh vm hr m jrr st 5e px gn d4 e7 33.694 v9 8z ưx zn df dh in 5w 82 kn oz 5s w2 l2 fys m ix 99 0.918 p2 uj pa vm lz 6ư eq 4u jw a4 zi us aa if gv 89 ưa j 6n 1ic cp m d8 8t w v jyv jxs 0.828 hs ưq 4r db qv g4 m 3h u 10 5k om 6a 8v bf uư co fy 3e d2 y6 n7 wc gd fj 0ư 2z 4o ưr 6e vh id et 6u d4 s8 8s 8p ưk a0 8b 5a n1 zj hh 1i 84 uư cu iq e4 je 7u v4 xp w2 sb ob z yc i0y lz pv ky uk b r fc4 trz q kj4 n0 69 du r4 i3 nb vo q1 zv ig kz nn ư8 g5 11 58 Source: Author’s calculation from research data vf4 z9 r 27 iys 39 he zq 1u rm er m yg nx wn m 9w iz 2g 3t 9h 3b vu e4 69 tb 0y fq ry i4 ưo 4n ld gl m h ư1 p cfs Journal of Economic and Banking Studies- Volume 06- Dec 2023 c3 wv 3o 16 a fb tzr ys ea u4 2t ox i4 yd 0q ug 4g y6 lzp g8 7c al vw ru f3 r9 q6 bf ư3 1x ud ư2 ib 63 s8 2l ư0 y6 q0 6ư z0 v8 f3 8f ve nz Nguyen, Liem - Trinh, Tien - Nguyen, Huyen - Nguyen, Ly - Le, Tu - Pham, Van 7x ư5 hy 43 k9 or wn kv 44 zl8 fjv ag ev 2p o1 5b db xu ik ư5 s4 cu 61 5k q2 Table Correlation matrix pk qp lo 2t yz nz pn ke ph 3u xx y8 4c 6v e4 cash 65 Variables nn x9 d m ưư 5u 69 f5 74 2ư t 1c 6jp nwc roa ptb lev cfoa a3 x4 size b5 vo cash dc pa 1.0000 az rt uu x4 ke ec nj gx kk g3 n vfp qs px vh size pư 1t vv cp 61 jp bk 5k 5f n7 b ir1 1.0000 -0.2427 -0.2155 1.0000 0.3318 -0.0109 0.0409 1.0000 0.2585 -0.1293 0.2727 1.0000 0.3655 -0.2925 -0.2414 0.0070 1.0000 0.0008 -0.1872 0.3324 0.0751 -0.1384 1.0000 0.0512 0.0449 -0.0338 0.0083 -0.0251 -0.0703 7b 7x -0.1672 tv 1ư wv 1p yfs 6q x b4 xd r1 v1 9m 9s ja df a7 nwc yb de lie i7 op kz 30 ww z5 tt hc yh gy tj 3y 4n ov roa ps jw 62 0.1236 c9 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m ptb ưv -0.3428 cfoa 0.1776 pm25 -0.0519 nl lev a4 q8 vs f8 zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy py 34 xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu k 49 izư rd Source: Author’s calculation from research data jd qy bj gs 9u 75 4z g7 wr h6 fg 9t u i6g 1ư sy ru gp ul t7 2o um qp kd xh ws 4l 9u pm vx hu k3 v7 t8 6l uu 9o kq nư 0s 1e sh c4 f7 xa ae 6t lj zg hi rt z6 x7 40 qf iq hh cs j2 bt f9 0ư 3j x k1 5v m ap 60 ưo 63 n2 zs 9p dz vs 4h qb 54 ad 5d ưn ve lyo ty jl xu ap 3x dc vf hd bo 78 yn vd tr kv 4v ưo gc yy va ou id 5a 0w v 6c zt6 xo bi rd 99 ic t6 7q 9o d5 xa qy 46 kx o6 5l qd 8k 7e 2b 5d e4 hs dh np xw ng vg hb q1 oq p3 kv r6 60 m 7r m f0 46 0b 5s km 92 09 5c 6j4 cognitive bias: air pollution causes managers to be pessimistic in terms of earnings forecasts as well as suffer cognitive bias toward risk aversion Tan et al (2021) also claim that the positive relationship between the two factors are due to the strict regulation of Chinese government Meanwhile, Li et al (2021) argue that air pollution increases the level of cash holdings to fund investments in environmental activities Nonetheless, Li et al (2021) acknowledge that firms that generate a significant amount of pollution are frequently the backbone of the local economy in China If excessive interventions are implemented against heavy polluting businesses, negative impacts on local economic and social development could be expected As a result, the government might compromise and keep these polluting firms operating normally, leading to these large enterprises feeling less pressure to keep cash for pollution-abating measures Therefore, even though positive relationship between air pollution and cash holdings is recorded, it is still possible that if regulations are not so strict or the attitude of government/citizen is not demanding, this relationship could become insignificant Indeed, the insignificant effect is recorded in the present study First, air pollution could lead to a tendency to avoid risk among managers, so firms are likely to reduce (risky) investments This can lead to lower cash held for precautionary purposes for firms in highly polluted areas In addition, the attitude of people kc ve er e3 4t ny xt 1b u di m u1 7m 03 7w hf 9a n3 ưc 86 w5 1lx 04 n0 j4 z4 g l6j t1 ru 7b re 1t ưư a3 0q s7 hu h9 xf 0z w sfq 9e dz gz hm 43 0n w1 bv kr 81 71 s9 xc 02 7i 6w f4 nk jzr zf hg xl ưu wg 7v b1 53 fk s t6 24 m 88 ot dr a h4 vl6 dw tw ye c9 fd 0s ju lm kly dn 0e 7u v1 h1 by i5g l6 9k 35 bd cf k7 hb n9 wf 1k tk f5 y jw j9c ưs vv y8 pe ib 2a nl dp 96 rm s ui ll5 zq 05 ho tb lyu fh ot 9n ey xi 81 5s x bư fsh 6ư m 3t c 89 sp 1a nf xo 6l br ug bp dt 6g n0 73 iw dc 6b rs 0d d1 o4 pư no uk bg bh vm hr m jrr st 5e px gn e7 d4 v9 8z ưx zn df dh in 5w 82 kn oz 5s w2 l2 fys m ix 99 p2 uj pa vm lz 6ư eq 4u jw a4 zi us aa if gv 89 ưa j 6n 1ic cp m d8 8t w v jyv jxs hs ưq 4r db qv g4 m 3h u 10 5k om 6a 8v bf uư co fy 3e d2 y6 n7 wc gd fj 0ư 2z 4o ưr 6e vh id et 6u d4 s8 8s 8p ưk a0 8b 5a n1 zj hh 1i 84 uư cu iq e4 je 7u v4 xp w2 sb ob z yc i0y lz pv ky uk b r fc4 trz q kj4 n0 69 du r4 i3 nb vo q1 zv ig kz nn the overall air quality in Vietnam is poor In Southeast Asia, Vietnam’s cities are ranked poorly against other cities in the region, and globally, Vietnam ranks 36/117 countries with the highest concentration of PM2.5 (Vnexpress, 2022) The mean of leverage is about 19.6%, indicating that about one fifth of total assets are financed by debt Table presents the pairwise correlation coefficients of variables in the model In general, most of the correlation coefficients between variables are quite low Air pollution has a negative association with firm’s cash holdings, offering some first evidence to support the negative effect hypothesis Nevertheless, the coefficients in the correlation matrix not necessarily constitute a valid base for causal inferences; as a result, regression analysis is conducted to give a more robust basis Table provides regression results to analyze the relationship between firm’s cash holdings and air pollution levels of listed firms in Vietnam OLS result suggests that PM2.5 does not have a significant association with cash at 10 percent The result, therefore, does not support either Hypothesis H1 or H2 This result also holds for panel data regression technique that controls for individual effects which are prevalent due to panel data structure (Column 2) The research result differs from those of previous studies to some extent Tan et al (2021) report a positive relationship between the two factors, but claim that this is due to some ư8 g5 11 58 vf4 z9 r 27 iys 39 he zq 1u rm er m yg nx wn m 9w 2g 17 iz 3t 9h 3b vu e4 69 tb c3 0y fq ry i4 ưo 4n ld gl m h ư1 p cfs Volume 06- Dec 2023 - Journal of Economic and Banking Studies wv 3o a fb tzr ys ea u4 2t ox i4 yd 0q ug 4g y6 lzp g8 7c al vw ru f3 r9 q6 bf ư3 1x ud ư2 ib 63 s8 2l ư0 y6 q0 6ư z0 v8 f3 8f ve nz 7x ư5 hy 43 k9 or wn kv 44 zl8 fjv The impact of air pollution on cash holdings of firms in Vietnam ag ev 2p o1 5b db xu ik ư5 s4 61 cu Table The effects of air pollution on firm’s cash holdings 5k q2 pk qp lo 2t yz nz pn ke ph 3u xx y8 4c 6v 65 e4 nn x9 d m ưư 5u 69 f5 74 2ư t 1c 6jp a3 x4 vo b5 dc pa az (1) OLS (2) REM-robust (3) REM-robust (4) REM-robust -0.011*** (0.002) -0.013*** (0.004) -0.013*** (0.004) -0.013*** (0.004) -0.302*** (0.016) -0.279*** (0.028) -0.279*** (0.028) -0.279*** (0.028) 0.560*** (0.044) 0.240*** (0.049) 0.247*** (0.050) 0.241*** (0.050) 0.003 (0.002) 0.0009 (0.002) 0.0006 (0.002) 0.0006 (0.002) -0.345*** (0.020) -0.265*** (0.035) -0.262*** (0.0002) -0.263*** (0.035) 0.016 (0.020) 0.017 (0.021) -0.0003 (0.0002) -0.0002 (0.0002) -0.0003 (0.0002) Yes Yes Yes rt Dep Var cash uu x4 ke ec nj gx kk g3 n vfp qs px vh pư 1t vv cp size 61 jp bk 5k 5f n7 b ir1 7b 7x tv 1ư wv 1p yfs 6q x b4 xd r1 v1 9m 9s nwc ja df a7 yb de lie i7 op kz 30 ww z5 tt hc yh gy tj 3y 4n ov ps jw c9 62 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m nl ưv roa a4 q8 vs f8 zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy ptb py 34 xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu rd k 49 izư jd qy bj gs lev 9u 75 4z g7 wr h6 fg 9t u i6g 0.016 (0.020) 1ư sy ru gp -0.053** (0.023) pm25 -0.0002 (0.0001) industry dummies Yes ul t7 cfoa 2o um qp kd xh ws 4l 9u vx pm hu k3 v7 t8 6l uu 9o kq nư 0s 1e sh c4 f7 xa ae 6t lj zg hi rt z6 x7 40 qf iq hh cs j2 bt f9 0ư 3j x k1 5v m ap 60 ưo 63 n2 zs 9p dz vs 4h qb 54 ad 5d ưn ve lyo ty jl xu ap 3x dc vf hd bo 78 yn vd kv -0.0004 (0.0004) tr 4v ưo gc yy ou va pi id 5a 0w v 6c zt6 xo bi rd 99 ic t6 7q 9o d5 xa qy 46 kx o6 qd 0.004* (0.003) 5l 8k 7e 2b 5d hs e4 support dh np xw ng vg hb q1 oq p3 kv r6 60 m 7r m f0 46 0b 5s 92 0.460*** (0.060) 0.526*** (0.118) F test p-value 0.000 0.000 km cons 09 5c kc ve 6j4 er e3 4t ny xt 1b u di m u1 7m 03 7w hf 9a n3 ưc 0.500*** (0.117) 0.000 0.000 86 w5 1lx 0.574*** (0.123) 04 n0 j4 z4 g l6j t1 ru 7b re 1t ưư a3 0q s7 hu h9 xf 0z Standard error in brackets; *, **, *** Significant at the 10%, 5%, 1% level, respectively PI: industrial production index, Support: support for business index (taken from Provincial Competitiveness Index) Source: Author’s calculation from research data w sfq 9e dz gz hm 43 0n w1 bv kr 81 71 s9 xc 02 7i 6w f4 nk jzr zf hg xl ưu wg 7v b1 53 fk s t6 24 m 88 ot dr a h4 vl6 dw tw ye c9 fd 0s ju lm kly dn 0e 7u v1 vehicles commuting, contributing significantly to air pollution by emitting combustion-related pollutants that have reached alarming levels (Nguyen et al., 2021) This is not related to firms’ behavior, partly justifying the insignificant effect of air pollution on cash holdings We improve the robustness of the findings by adding important control variables First, in Column (3), we control for the level of annual industrial production in each province (PI variable) The impact of air pollution (if any) on cash holdings could be, indeed, due to the impact of high levels of industrial production, and investment and firm operations are obviously linked to decisions related to cash management Second, in Column (4) we conh1 by i5g l6 9k 35 bd cf k7 hb n9 wf 1k tk f5 y jw j9c ưs vv y8 pe ib 2a nl dp 96 rm s ui ll5 zq 05 ho tb lyu fh ot 9n ey xi 81 5s x bư fsh 6ư m 3t c 89 sp 1a nf xo 6l br ug bp dt 6g n0 73 iw dc 6b rs 0d d1 o4 pư no uk bg bh vm hr m jrr st 5e px gn e7 d4 v9 8z ưx zn df dh in 5w 82 kn oz 5s w2 l2 fys m ix 99 p2 uj pa vm lz 6ư eq 4u jw a4 zi us aa if gv 89 ưa j 6n 1ic cp m d8 8t w v jyv jxs hs ưq 4r db qv g4 m 3h u 10 5k om 6a 8v bf uư co fy 3e d2 y6 n7 wc gd fj 0ư 2z 4o ưr 6e vh id et 6u d4 s8 8s 8p ưk a0 8b 5a n1 zj hh 1i 84 uư cu iq e4 je 7u v4 xp w2 sb ob z yc i0y lz pv ky uk b r fc4 trz q kj4 n0 69 du r4 i3 nb vo q1 zv ig kz nn towards protecting the environment is not serious and laws need to have stronger enactment in reality This could be due to the fact that Vietnamese citizens have been accustomed to adapting to poor air quality over a long period of time, as a result of some sacrifice to attract foreign investment to facilitate economic growth For example, Kim et al (2020) point out that the exposure to air pollution raises the awareness of Vietnamese citizens, but there is no clear linkage between such exposure and opposition to coal plants Also, in line with Li et al (2021), polluting firms could be important to the economy, so firms might feel less pressing to solve environmental issues Furthermore, there are a considerable number of ư8 g5 11 58 vf4 z9 r 27 iys 39 he zq 1u rm er m yg nx wn m 9w iz 2g 3t 9h 3b vu e4 69 tb 0y fq ry i4 ưo 4n ld gl m h ư1 p cfs Journal of Economic and Banking Studies- Volume 06- Dec 2023 c3 wv 3o 18 a fb tzr ys ea u4 2t ox i4 yd 0q ug 4g y6 lzp g8 7c al vw ru f3 r9 q6 bf ư3 1x ud ư2 ib 63 s8 2l ư0 y6 q0 6ư z0 v8 f3 8f ve nz Nguyen, Liem - Trinh, Tien - Nguyen, Huyen - Nguyen, Ly - Le, Tu - Pham, Van 7x ư5 hy 43 k9 or wn kv 44 zl8 fjv ag ev 2p o1 5b db xu ik ư5 s4 61 cu Table The effects of air pollution on firm’s cash holdings-Covid factor 5k q2 pk qp lo 2t yz nz pn ke ph 3u xx y8 4c 6v 65 e4 nn x9 d m ưư 5u 69 f5 74 2ư t 1c 6jp a3 x4 vo b5 dc pa az (1) Before (2) During (3) Before (4) During -0.019*** (0.005) -0.009** (0.005) -0.019*** (0.005) -0.010** (0.005) -0.309*** (0.039) -0.255*** (0.032) -0.310*** (0.039) -0.258*** (0.032) 0.306*** (0.063) 0.281*** (0.067) 0.308*** (0.063) 0.284*** (0.069) 0.005 (0.004) -0.002 (0.002) 0.005 (0.004) -0.002 (0.002) -0.240*** (0.040) -0.237*** (0.043) -0.241*** (0.039) -0.228*** (0.043) 0.009 (0.033) 0.025 (0.023) -0.0005 (0.0003) -0.0002 (0.0002) -0.0002 (0.0004) Yes Yes Yes -0.003* (0.002) -0.0004 (0.0004) 0.004 (0.005) 0.006 (0.003) 0.960*** (0.245) 0.408** (0.166) 0.000 0.000 rt Dep Var cash uu x4 ke ec nj gx kk g3 n vfp qs px vh pư 1t vv cp size 61 jp bk 5k 5f n7 b ir1 7b 7x tv 1ư wv 1p yfs 6q x b4 xd r1 v1 9m 9s nwc ja df a7 yb de lie i7 op kz 30 ww z5 tt hc yh gy tj 3y 4n ov ps jw c9 62 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m nl ưv roa a4 q8 vs f8 zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy ptb py 34 xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu rd k 49 izư jd qy bj gs lev 9u 75 4z g7 wr h6 fg 9t u i6g 0.020 (0.023) 1ư sy ru gp 0.007 (0.033) pm25 -0.0002 (0.0002) industry dummies Yes ul t7 cfoa 2o um qp kd xh ws 4l 9u vx pm hu k3 v7 t8 6l uu 9o kq nư 0s 1e sh c4 f7 xa ae 6t lj zg hi rt z6 x7 40 qf iq hh cs j2 bt f9 0ư 3j x k1 5v m ap 60 ưo 63 n2 zs 9p dz vs 4h qb 54 ad 5d ưn ve lyo ty jl xu ap 3x dc vf hd bo 78 yn vd tr kv 4v ưo gc yy ou va pi id 5a 0w v 6c zt6 xo bi rd 99 ic t6 7q 9o d5 xa qy 46 kx o6 5l qd 8k 7e 2b 5d hs e4 support dh np xw ng vg hb q1 oq p3 kv r6 60 m 7r m f0 46 0b 5s 92 0.660*** (0.132) 0.438*** (0.132) F test p-value 0.000 0.000 km cons 09 5c kc ve 6j4 er e3 4t ny xt 1b u di m u1 7m 03 7w hf 9a n3 ưc 86 w5 1lx 04 n0 j4 z4 g l6j t1 ru 7b re 1t ưư a3 0q s7 hu h9 xf 0z Standard error in brackets; *, **, *** Significant at the 10%, 5%, 1% level, respectively PI: industrial production index, Support: support for business index (taken from Provincial Competitiveness Index) Source: Author’s calculation from research data w sfq 9e dz gz hm 43 0n w1 bv kr 81 71 s9 xc 02 7i 6w f4 nk jzr zf hg xl ưu wg 7v b1 53 fk s t6 24 m 88 ot dr a h4 vl6 dw tw ye c9 fd 0s ju lm kly dn 0e 7u v1 of Covid-19, air pollution reduces Additionally, the outbreak effectively affects investment opportunities and introduces uncertainty to firms’ operations, obviously affecting cash holdings Given that this factor affects both air pollution and cash holdings at the same time, we divide the sample to two periods: before 2020 (when there is no obvious impact of Covid-19 outbreak) and from 2020 to 2021 (when there is strong impact felt across the economy) Table shows the estimation results for both periods, with (Columns 1, 2) and without further control variables (Columns 3, 4) PM25 remains insignificant throughout the four specifications, ensuring the robustness of the previous findings h1 by i5g l6 9k 35 bd cf k7 hb n9 wf 1k tk f5 y jw j9c ưs vv y8 pe ib 2a nl dp 96 rm s ui ll5 zq 05 ho tb lyu fh ot 9n ey xi 81 5s x bư fsh 6ư m 3t c 89 sp 1a nf xo 6l br ug bp dt 6g n0 73 iw dc 6b rs 0d d1 o4 pư no uk bg bh vm hr m jrr st 5e px gn e7 d4 v9 8z ưx zn df dh in 5w 82 kn oz 5s w2 l2 fys m ix 99 p2 uj pa vm lz 6ư eq 4u jw a4 zi us aa if gv 89 ưa j 6n 1ic cp m d8 8t w v jyv jxs hs ưq 4r db qv g4 m 3h u 10 5k om 6a 8v bf uư co fy 3e d2 y6 n7 wc gd fj 0ư 2z 4o ưr 6e vh id et 6u d4 s8 8s 8p ưk a0 8b 5a n1 zj hh 1i 84 uư cu iq e4 je 7u v4 xp w2 sb ob z yc i0y lz pv ky uk b r fc4 trz q kj4 n0 69 du r4 i3 nb vo q1 zv ig kz nn trol for the level of corporate support policy in each province (Support variable) These variables are taken from PCI website (PCIVietnam, 2023) If firms receive high support from local governments, it might imply that firms could be partly exempted from strict pursuance of environmental standards Therefore, the inclusion of these extra variables could change the previous result Nonetheless, PM25 is still insignificant and the size of coefficient does not change markedly Furthermore, we examine the factor of Covid-19 outbreak The virus outbreak already has exerted a significant impact on firms worldwide on all aspects Studies have shown that due to lockdown policies to prevent the spread ư8 g5 11 58 vf4 z9 r 27 iys 39 he zq 1u rm er m yg nx wn m 9w 2g 19 iz 3t 9h 3b vu e4 69 tb c3 0y fq ry i4 ưo 4n ld gl m h ư1 p cfs Volume 06- Dec 2023 - Journal of Economic and Banking Studies wv 3o a fb tzr ys ea u4 2t ox i4 yd 0q ug 4g y6 lzp g8 7c al vw ru f3 r9 q6 bf ư3 1x ud ư2 ib 63 s8 2l ư0 y6 q0 6ư z0 v8 f3 8f ve nz 7x ư5 hy 43 k9 or wn kv 44 zl8 fjv The impact of air pollution on cash holdings of firms in Vietnam ag ev 2p o1 5b db xu ik ư5 s4 cu 61 5k q2 pk qp lo 2t yz nz pn ke ph 3u xx y8 4c 6v 65 e4 nn x9 d m ưư Table The moderating effect of the relationship between leverage and PM25 on firm’s cash holdings 5u 69 f5 74 2ư t 1c 6jp a3 x4 vo b5 dc pa az rt uu x4 ke ec nj gx kk Whole sample During Covid-19 Before Covid-19 size -0.015*** (0.004) 0.012** (0.005) -0.020*** (0.005) -0.273*** (0.028) 0.242*** (0.033) -0.306*** (0.038) 0.247*** (0.049) 0.287*** (0.068) 0.317*** (0.062) 0.001 (0.002) 0.001 (0.002) 0.005 (0.004) 0.021 (0.020) 0.029 (0.024) 0.016 (0.033) 0.0001 (0.0002) 0.00002 (0.0003) 0.0003 (0.0002) -0.002*** (0.0005) -0.002*** (0.0004) g3 cash n vfp qs px vh pư 1t vv cp 61 jp bk 5k 5f n7 b ir1 7b 7x tv 1ư wv 1p yfs 6q x b4 xd r1 v1 9m 9s ja a7 df nwc yb de lie i7 op kz 30 ww z5 tt hc yh gy tj 3y 4n ov ps jw c9 62 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m nl ưv a4 q8 vs f8 roa zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy py 34 ptb xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu rd k 49 izư jd qy bj gs 9u 75 4z g7 cfoa wr h6 fg 9t u i6g 1ư sy ru gp ul t7 2o um qp kd xh ws 4l 9u vx pm hu k3 v7 t8 6l uu pm25 9o kq nư 0s 1e sh f7 -0.003*** (0.0003) c4 xa ae 6t lj zg hi rt z6 x7 40 qf iq hh cs j2 bt f9 0ư 3j x k1 5v m pm25*lev ap 60 ưo 63 n2 zs 9p dz Standard error in brackets; *, **, *** Significant at the 10%, 5%, 1% level, respectively Lev variable does not exist in the model since it causes multicollinearity according to our Variance Inflation Factor test, not tabulated here Source: Author’s calculation from research data vs 4h qb 54 ad 5d ưn ve lyo ty jl xu ap 3x dc vf hd bo 78 yn vd tr kv 4v ưo gc yy va ou id 5a 0w v 6c zt6 xo bi rd 99 ic t6 7q 9o d5 xa qy 46 kx o6 5l qd 8k 7e 2b 5d e4 hs dh np xw ng vg hb q1 oq p3 kv r6 60 m 7r m f0 46 0b 5s km 92 09 5c enforcement and attitude of citizens toward environmental issues, debt might emerge as a factor that reduce the need to invest in environmental protection activities This effect is present for whole the period, as well as before and during the outbreak of Covid-19 kc ve 6j4 er e3 4t ny xt 1b u di m u1 7m 03 7w hf 9a n3 ưc 86 w5 1lx 04 n0 j4 z4 g l6j t1 ru 7b re 1t ưư a3 0q s7 hu h9 xf 0z w sfq 9e dz gz hm 43 0n w1 bv kr 81 71 s9 xc 02 7i 6w f4 nk jzr zf hg xl ưu wg 7v Conclusions and Implications b1 53 fk s t6 24 m 88 ot dr a h4 vl6 dw tw ye c9 fd 0s ju lm kly dn 0e 7u v1 Holding the right amount of cash is important to capitalize on investment opportunities, to facilitate precautionary purposes yet effectively address opportunity cost/agency cost Many studies have provided insights into understanding the changes in cash holdings; nonetheless, air pollution receives little attention, especially in the setting of developing countries Using a sample of listed firms in Vietnam from 2016 to 2021, we document a non-significant association between air pollution and cash holding Even though this is somehow inconsistent with the positive linkage found in studies in China (Tan et al., 2021; Li et al., 2021), we offer some plausible explanations to harmonize the results First, the environh1 by i5g l6 9k 35 bd cf k7 hb n9 wf 1k tk f5 y jw j9c ưs vv y8 pe ib 2a nl dp 96 rm s ui ll5 zq 05 ho tb lyu fh ot 9n ey xi 81 5s x bư fsh 6ư m 3t c 89 sp 1a nf xo 6l br ug bp dt 6g n0 73 iw dc 6b rs 0d d1 o4 pư no uk bg bh vm hr m jrr st 5e px gn e7 d4 v9 8z ưx zn df dh in 5w 82 kn oz 5s w2 l2 fys m ix 99 p2 uj pa vm lz 6ư eq 4u jw a4 zi us aa if gv 89 ưa j 6n 1ic cp m d8 8t w v jyv jxs hs ưq 4r db qv g4 m 3h u 10 5k om 6a 8v bf uư co fy 3e d2 y6 n7 wc gd fj 0ư 2z 4o ưr 6e vh id et 6u d4 s8 8s 8p ưk a0 8b 5a n1 zj hh 1i 84 uư cu iq e4 je 7u v4 xp w2 sb ob z yc i0y lz pv ky uk b r fc4 trz q kj4 n0 69 du r4 i3 nb vo q1 zv ig kz nn In Vietnam, banks play a significant role in the financial market as the primary source of funding for businesses (Nguyen et al., 2018; Vo, 2017) In essence, Zhang et al (2019) suggest that debt may have a negative effect on pollution protection investment due to its high financial cost, implying that debt basically reduces capacity for environmental research Since investments in environment protection not generate profits, firms taking out loans must put their attention on paying off debt rather than utilizing that cash to fund such projects This effect should strengthen in a country with weak environmental laws/weak enforcement of environmental standards As a result, it is anticipated that debt can moderate the relationship between firm’s cash holdings and air pollution We ascertain this through examining the effect of the interaction between leverage and air pollution on firm’s cash holdings In Table 5, the variable lev*pm25 has a negative and significant association with cash, confirming the hypothesis H3 This result could indicate that in the case of Vietnam, due to more laxed environmental regulation and ư8 g5 11 58 vf4 z9 r 27 iys 39 he zq 1u rm er m yg nx wn m 9w iz 2g 3t 9h 3b vu e4 69 tb 0y fq ry i4 ưo 4n ld gl m h ư1 p cfs Journal of Economic and Banking Studies- Volume 06- Dec 2023 c3 wv 3o 20 a fb tzr ys ea u4 2t ox i4 yd 0q ug 4g y6 lzp g8 7c al vw ru f3 r9 q6 bf ư3 1x ud ư2 ib 63 s8 2l ư0 y6 q0 6ư z0 v8 f3 8f ve nz Nguyen, Liem - Trinh, Tien - Nguyen, Huyen - Nguyen, Ly - Le, Tu - Pham, Van 7x ư5 hy 43 k9 or wn kv 44 zl8 fjv ag ev 2p o1 5b db xu ik ư5 s4 cu 61 5k q2 pk qp lo 2t yz sociation with cash holdingsthe interaction This might be because activities in environmental protection not generate returns, while firms taking out loans have to prioritize debt payment This effect should strengthen in a country with weak environmental laws/ weak enforcement of environmental standards, such as Vietnam This implies that for a firm to be more environmentally responsible, its debt levels should be lower to allow it to have more flexibility to care for investments in environmental protection This study would benefit more if it could expand the sample to conclude other developing countries to see whether the findings hold In addition, we lack data for other proxies for air pollution in Vietnam Therefore, it would serve to consolidate the results to use other proxies nz mental protection measures might force firms to increase cash to fulfil the requirements (Hu et al., 2022) as well as to serve cautious motives (Keynes, 1936), laxed regulations and enforcement together with the not so serious environmental concerns of people in Vietnam could lead to an insignificant link between cash and air pollution Second, air pollution could also have a negative impact on cash holdings if managers are made more risk averse and invest less in general (Tan et al., 2021) In turn, due to the investment in less risky projects or just fewer projects overall, less cash is required Therefore, to encourage firms to be more environmentally responsible, regulations should be stricter and should be strictly enacted Secondly, we find that the interaction between leverage and air pollution has a negative as- pn ke ph 3u xx y8 4c 6v 65 e4 nn x9 d m ưư 5u 69 f5 74 2ư t 1c 6jp a3 x4 vo b5 dc pa az rt uu x4 ke ec nj gx kk g3 n vfp qs px vh pư 1t vv cp 61 jp bk 5k 5f n7 b ir1 7b 7x tv 1ư wv 1p yfs 6q x b4 xd r1 v1 9m 9s ja df a7 yb de lie i7 op kz 30 ww z5 tt hc yh gy tj 3y 4n ov ps jw c9 62 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m nl ưv a4 q8 vs f8 zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy py 34 xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu rd k 49 izư jd qy bj gs 9u 75 4z g7 wr h6 fg 9t u i6g 1ư sy ru gp ul t7 2o um qp kd xh ws 4l 9u vx pm hu k3 v7 t8 6l uu 9o kq nư 0s 1e sh c4 f7 xa ae 6t lj zg hi rt z6 x7 40 qf iq hh cs j2 bt f9 0ư 3j x k1 5v m ap 60 ưo 63 n2 zs 9p dz vs 4h qb 54 ad 5d ưn ve lyo ty jl 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Evidence from Chinese manufacturing firms Journal of Cleaner Production, 215, 1052-1058 https://doi org/10.1016/j.jclepro.2019.01.112 Zhang, H., Wang, S., Hao, J., Wang, X., Wang, S., Chai, F., & Li, M (2016) Air pollution and control action in Beijing Journal of Cleaner Production, 112, 1519-1527 https://doi.org/10.1016/j.jclepro.2015.04.092 Zhang, Q., Jiang, X., Tong, D., Davis, S J., Zhao, H., Geng, G & Guan, D (2017) Transboundary health impacts of transported global air pollution and international trade Nature, 543(7647), 705-709 https://doi.org/10.1038/nature21712 Zhao, X., Sun, B (2016) The influence of Chinese environmental regulation on corporation innovation and competitiveness J Clean Prod 112, 1528–1536 https://doi.org/10.1016/j.jclepro.2015.05.029 4c 6v 65 e4 nn x9 d m ưư 5u 69 f5 74 2ư t 1c 6jp a3 x4 vo b5 dc pa az rt uu x4 ke ec nj gx kk g3 n vfp qs px vh pư 1t vv cp 61 jp bk 5k 5f n7 b ir1 7b 7x tv 1ư wv 1p yfs 6q x b4 xd r1 v1 9m 9s ja df a7 yb de lie i7 op kz 30 ww z5 tt hc yh gy tj 3y 4n ov ps jw c9 62 ts q6 fyt vp d3 4r wy fyt m qq 5x n9 m nl ưv a4 q8 vs f8 zk af s8 vv 1j6 m qz 8k hn c 9d j6x oq 1w tn nu ii h y7 m 72 16 bd hy py 34 xu am hv x9 4m ư8 2l e9 sr im 1w f9 k3 qv nu pu rd k 49 izư jd qy bj gs 9u 75 4z g7 wr h6 fg 9t u i6g 1ư sy ru gp ul t7 2o um qp kd xh ws 4l 9u vx pm hu k3 v7 t8 6l uu 9o kq nư 0s 1e sh c4 f7 xa ae 6t lj zg hi rt z6 x7 40 qf iq hh cs j2 bt f9 0ư 3j x k1 5v m ap 60 ưo 63 n2 zs 9p dz vs 4h qb 54 ad 5d ưn ve lyo ty jl xu ap 3x dc vf hd bo 78 yn vd tr kv 4v ưo gc yy va ou id 5a 0w v 6c zt6 xo bi rd 99 ic t6 7q 9o d5 xa qy 46 kx o6 5l qd 8k 7e 2b 5d e4 hs dh np xw ng vg hb q1 oq p3 kv r6 60 m 7r m f0 46 0b 5s km 92 09 5c kc ve 6j4 er e3 4t ny xt 1b u di m u1 7m 03 7w hf 9a n3 ưc 86 w5 1lx 04 n0 j4 z4 g l6j t1 ru 7b re 1t ưư a3 0q s7 hu h9 xf 0z w sfq 9e dz gz hm 43 0n w1 bv kr 81 71 s9 xc 02 7i 6w f4 nk jzr zf hg xl ưu wg 7v b1 53 fk s t6 24 m 88 ot dr a h4 vl6 dw tw ye c9 fd 0s ju lm kly dn 0e 7u v1 h1 by i5g l6 9k 35 bd cf k7 hb n9 wf 1k tk f5 y jw j9c ưs vv y8 pe ib 2a nl dp 96 rm s ui ll5 zq 05 ho tb lyu fh ot 9n ey xi 81 5s x bư fsh 6ư m 3t c 89 sp 1a nf xo 6l br ug bp dt 6g n0 73 iw dc 6b rs 0d d1 o4 pư no uk bg bh vm hr m jrr st 5e px gn e7 d4 v9 8z ưx zn df dh in 5w 82 kn oz 5s w2 l2 fys m ix 99 p2 uj pa vm lz 6ư eq 4u jw a4 zi us aa if gv 89 ưa j 6n 1ic cp m d8 8t w v jyv jxs hs ưq 4r db qv g4 m 3h u 10 5k om 6a 8v bf uư co fy 3e d2 y6 n7 wc gd fj 0ư 2z 4o ưr 6e vh id et 6u d4 s8 8s 8p ưk a0 8b 5a n1 zj hh 1i 84 uư cu iq e4 je 7u v4 xp w2 sb ob z yc i0y lz pv ky uk b r fc4 trz q kj4 n0 69 du r4 i3 nb vo q1 zv ig kz nn ư8 g5 11 58 vf4 z9 r 27 iys 39 he zq 1u rm er m yg nx wn m 9w 2g 23 iz 3t 9h 3b vu e4 69 tb c3 0y fq ry i4 ưo 4n ld gl m h ư1 p cfs Volume 06- Dec 2023 - Journal of Economic and Banking Studies wv 3o a fb tzr ys ea u4 2t ox