Transformations  in
Business & Economics

MONETARY POLICY, CASH HOLDING AND CORPORATE INVESTMENT IN VIETNAM
Thi Thanh Nhan Do, Thi Ngoc Dung Pham, Gia Huy Tong, Tuan Kiet Nguyen

ABSTRACT: This research examines the influence of monetary policy on cash holding and corporate investment using data from 684 non-financial firms in Vietnam from 2009 to 2021. The results show that expansionary monetary policy increases corporate investment. In addition, expanding monetary policy reduces the amount of cash held by firms due to precautionary motives and low transaction costs. This research provides further evidence of the heterogeneous impact of expansionary monetary policy across groups of firms with and without financial constraints, state-owned enterprises, and private enterprises. Empirical evidence of the research shows that financially unconstrained and state-owned enterprises invest more than other firms. These findings help the governments in emerging countries search for new policies related to monetary finance and business investment to boost the economy.

KEYWORDS:  monetary policy, cash holding, corporate investment, state-owned enterprises.

JEL classification:  E52, G31, G11, G32.