Impact of inflation and operating cycle on cash holding in vietnam

A corporate cash-holding strategy is a trade-off between the costs and benefits of holding cash. At the macrolevel, firms are inclined to adjust and optimize their cash-holding strategies in response to changes in purchasing power due to inflation. At the microlevel, the operating cycle, which indicates the speed and turnover of corporate cash flow, also influences the corporate cash-holding strategy. Firms flexibly adjust their cash-holding strategies in response to changes in the internal and external environment, which is referred to as the cash adjustment strategy. We examine these predicted relationships using a sample of listed firms in HOSE and HNX’s stock market over the 2011–2015 period. The empirical results indicate a significant positive association between cash holdings and the CPI to cash holding of trade sector in Vietnam.