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State ownership and value of cash: new evidence from an emerging market

Quoc Trung Tran (Foreign Trade University, Ho Chi Minh City Campus, Ho Chi Minh City, Vietnam)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 13 July 2021

Issue publication date: 14 November 2023




The purpose of this paper is to examine how state ownership influences value of cash in an institutional environment supporting soft-budget constraint.


This study employs an interaction between state ownership and excess cash to examine how state ownership affects value of cash holdings based on Fama and French’s (1998) valuation model.


With a research data of 3,294 observations from 548 firms over the period 2009–2016, the authors find that state ownership is positively related to market value of cash. Moreover, this relationship is weaker in financially constrained firms.


Although prior studies document a consistently negative effect of state ownership on market value of cash holdings, the authors argue that this effect may still be opposite. When managers of high state ownership firms rely on soft-budget constraint and save less cash, outside investors with this information disadvantage may focus more on precautionary motive and transaction motive than agency costs of cash holdings. As a result, value of cash holdings in high state ownership firms is higher. This paper contributes to the literature on corporate liquidity policy in emerging markets with new evidence on the role of state ownership in market value of cash holdings.



Tran, Q.T. (2023), "State ownership and value of cash: new evidence from an emerging market", International Journal of Emerging Markets, Vol. 18 No. 9, pp. 2326-2342.



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