State-Owned Holding Company and Value of Cash Holdings in Vietnam

Abstract

Ownership structure, which specifies the owners of the firm, is crucial to corporate governance as it one of the foundation explanation sources of agency conflicts. Roles and impacts of different corporate owners on corporate governance have been studied worldwide, but are not as popular for the role of a State-Owned Holding Company (SOH) as a model of state capital investment agency. This study examines the role of SOH in the management and governance of listed companies with state capital in Vietnam through cash holdings models. SOH-linked companies (SLCs) are found to hold more cash and the shareholders appreciate the cash hold by the SLCs as robust to the firms’ characteristics. SOH ownership significantly increases the value of cash holding, and the better value of cash holdings in SLCs is supposed to be a result coming from good corporate governance. This study contributes to the literature of ownership structure and corporate governance and provides evidence for SOH as a positive ownership and monitoring mechanism in improving corporate governance and firm performance in companies with state-owned capital in Vietnam.