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This study aims to investigate the influence of macro-financial conditions on firm-level capital allocation as a micro-transmission mechanism of monetary policy in Vietnam.

The authors employ a dynamic model of investment based on the Euler equation approach that allows for financial frictions. The financial conditions are proxied by a composite index of the current states of financial variables, including interest rates, exchange rates, stock prices, and credit demand – which captures short-term shocks in monetary transmission channels. Corporate financing constraints, as a reflection of financial frictions, are measured by the sensitivity of investment to internal funds, which are extensively examined in terms of both negative and positive cash flows.

In the presence of a non-monotonic (or U-shaped) investment–cash flow relation, the empirical evidence from Vietnamese listed firms indicates that financial conditions affect investment behavior for only firms with negative cash flows, in the sense that better financial conditions alleviate the level of “negative” financing constraints (i.e. the sensitivity of investment to negative cash flow). This effect is greater for larger firms and more likely pronounced for firms without state ownership.

This study contributes to the literature on corporate financing constraints in a manner of considering the macroeconomic dimension, specifically exploring the asymmetric impacts of financial conditions on the investment sensitivity to cash flow.

The purpose of this paper is to study the influence of investor sentiment on the supply of trade credit, and further explores the difference of the effect of investor sentiment on the supply of trade credit in the environment of strong market competition and weak market competition.

The authors use panel estimation techniques to examine the impact of investor sentiment in the Chinese securities market on the supply of corporate trade credit.

This paper finds that investor sentiment has positive impact on trade credit through three channels of motivation, willingness and ability. At the same time, this paper finds that investor sentiment has stronger impact on enterprises in strong market competition than enterprises in weak market competition.

This paper expands the research on the influence of virtual economy on the real economy, analyzes the difference of the influence of investor sentiment on the supply of trade credit under different market competition conditions.

The paper perfects the mechanism of trade credit decision-making at this stage, and provides more evidence for the virtual economy to act on the real economy.

This paper provides a theoretical basis for the government functional departments to use the investor sentiment to play a positive role in trade credit to improve the market competition and guide the development of China’s capital market in the direction of rationalization and health.

In combination with market competition environment and industry characteristics, this paper investigates external irrational factors and studies how investor sentiment affects trade credit supply.