• The Journal of Asian Finance, Economics and Business
• /
• v.8 no.8
• /
• pp.137-148
• /
• 2021

The study investigates the existence of an optimal level of cash and the firm characteristics influencing the decision to hold cash, and the adjusting speed of the cash holdings to the target level. It highlights the heterogeneity of cash adjustment speed in the Vietnam market. The research employs the 417 samples of Vietnamese non - financial listed firms in the period of 2010 to 2019. The study uses the Pool OLS model, Fixed effect model (FEM), Random effect model (REM), and GMM model. According to the research findings, there is an optimal amount of cash at which the firm's value is maximized in Vietnamese listed firms, and the majority of the firms in the sample retain cash over the target level. Furthermore, the study demonstrates that firms actively modify their cash holdings to the optimal level with an adjustment speed of less than one owing to adjustment cost constraints. This speed varies between groupings of enterprises with different characteristics, underlining the heterogeneity of the adjustment speed even more. Small deviation firms adjust more rapidly than large deviation firms. Large free cash flow (FCF) firms adjust more readily than small FCF firms, and fiscal deficit firms modify more rapidly than firms with a financial surplus.

• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.16 no.10
• /
• pp.7118-7125
• /
• 2015

This study examined one of the concerned or even imperative issues in the field of contemporary finance related to approaching an optimal level of cash holdings for the firms belonging to the chaebols in the Korean domestic capital markets. However, the subject may not have been drawn much attention so far, even if there are still ongoing and active debates among the interest parties at the macro- or micro-level. Two primary hypotheses were postulated to be empirically tested. On the results of the first hypothesis test for the existence of an optimal cash reserves for the sample firms, two estimation techniques were performed in terms of a quadratic regression equation and a relationship between a firm's value and the residuals derived from the static panel date model. As a primary financial implication of the study which may contribute to the practitioners and the academics in finance, the optimal level of cash holdings can be estimated by controlling for the a priori significant components for the sample firms towards maximizing firm value.

• Journal of Institute of Control, Robotics and Systems
• /
• v.11 no.11
• /
• pp.956-962
• /
• 2005

This paper presents an integrated analysis of production and financing decisions. We assume that a cash storage unit is installed to manage the cash flows related with production activities such as raw material procurement, process operating setup, Inventory holding cost and finished product sales. Temporarily financial investments are allowed for more profit. The production plant is modeled by the Batch-Storage Network with Recycle Streams in Yi and Reklaitis (2003). The objective function of the optimization is minimizing the opportunity costs of annualized capital investment and cash/material inventory while maximizing stockholder's benefit. No depletion of all the material and cash storage units is major constraints of the optimization. A novel production and inventory analysis formulation, the PSW(Periodic Square Wave) model, provides useful expressions for the upper/lower bounds and average level of the cash and material inventory holdups. The expressions for the Kuhn-Tucker conditions of the optimization problem can be reduced to two subproblems and analytical lot sizing equations under a mild assumption about the cash flow pattern of stockholder's dividend. The first subproblem is a separable concave minimization network flow problem whose solution yields the average material flow rates through the networks. The second subproblem determines the decisions about financial Investment. Finally, production and financial transaction lot sizes and startup times can be determined by analytical expressions as far as the average flow rates are calculated. The optimal production lot and storage sizes considering financial factors are smaller than those without such consideration. An illustrative example is presented to demonstrate the results obtainable using this approach.

• International conference on construction engineering and project management
• /
• 2013.01a
• /
• pp.243-251
• /
• 2013

Cash management is a major concern for all contractors in the construction industry. It is arguable that cash is the most critical resource of all. A contractor needs to secure sufficient funds to navigate the project to the end, while keeping an eye on maximizing profits along the way. Past research attempted to address such topic via developing models to tackle the time-cost tradeoff problem, cash flow forecasting, and cash flow management. Yet, little was done to integrate the three aspects of cash management together. This paper, as such, presents a comprehensive model that integrates the time-cost tradeoff problem, cash flow management, and cash flow forecasting. First, the model determines the project optimal completion time by considering the different alternative construction methods available for executing project activities. Second, it investigates different funding alternatives and proposes a project-level cash management plan. Two funding alternatives are considered; they are borrowing and company own financing. The model was built as a combinatorial optimization model that utilizes ant colony search capabilities. The model also utilizes Microsoft Project software and spreadsheets to maintain an environment that incorporates activities, their durations, and other project data, in order to estimate project completion time and cost. Ant Colony Optimization algorithm was coded as a Macro program using VBA. Finally, an example project was used to test the developed model, where it acted reliably in maximizing the contractor's profit in the test project.

• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.18 no.2
• /
• pp.149-157
• /
• 2017

This study investigated one of the contemporary financial issues that is still being debated among governmental policy makers, corporate managers, and investors in the domestic capital market. We attempted to identify the most optimal level of cash holdings for firms during the most updated fiscal years (from 2011 to 2015). The study utilized empirical methodologies, such as ANCOVA and RANCOVA, with respect to the 'inter-' and 'intra-industry' analyses for KOSPI-listed firms. Regarding the first hypothesis testing for inter-industry influence, we revealed with statistical significance that there were differences; however, there were only 3 pronounced industries among the 25 industries sampled in this study. Regarding the second hypothesis, only a few (i.e. two) industries showed no statistically significant intra-industry influence. Based on our results, most KOSPI-listed firms still seem to be searching for their optimal levels of cash reserves. Hence, we can anticipate that the value maximization as a corporate goal can be achieved after adjusting the current levels of their cash holdings according to the optimal points.

• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.17 no.4
• /
• pp.255-263
• /
• 2016

This study conducted empirical tests on contemporary finance theories for corporate cash holdings, such as trade-off, pecking order, and agency theory. There is ongoing debate on the possibility of excess cash savings by domestic firms, including chaebols in the Korean capital markets. Thus, it may be worthy to identify any financial characteristics based on each aforementioned theory as an extension of previous studies on similar subjects. Two primary hypotheses were postulated and tested, and the following empirical results were obtained. First, principal component analysis (PCA) provides evidence that nine out of the twenty explanatory variables showed a significant influence on the level of corporate cash holdings, such as cash conversion cycle in trade-off theory and leverage in pecking order theory. Second, the chaebol firms that decreased cash holdings after global financial turmoil may be affected by financial factors that include investment opportunities and foreign ownership according to the PCA. The results may reinforce the outcomes derived from previous research on corporate cash holdings. Based on the robust results, large firms in advanced or emerging capital markets could approach the optimal level of the cash reserves.

• Journal of the Korean Operations Research and Management Science Society
• /
• v.34 no.2
• /
• pp.1-13
• /
• 2009

In this paper, we develop theoretical game models to determine the level of government subsidies for banks to provide policy loans to Innovative SMEs(small and medium sized enterprises) through banks, which otherwise would not finance them for the sake of their own profitability. For this, we compare net cash flows of each bank using different strategies against high risk innovative SMEs. A bank can decide whether to provide them loans or not In each period. Following Kim(2003)'s Infinite horizon model on the soft budget constraint, we introduce a situation in which banks compete against each other for higher net long-term payoffs from their loans to innovative SMEs and non-innovative SMEs. From the models, we show that competition among banks in general leads to a tighter decision against innovative SMEs, as a Nash equilibrium. It is not because the government bank is simply loose in providing loans, but because competition among commercial banks for fewer riskier borrowers results in tighter loan decisions against innovative SMEs. Thus, the competitive market for policy loans to innovative SMEs fails to reach the socially optimal level of loans for innovative SMMs. Commercial banks in the competitive market may require additional supports from the government to make up for the differences in their payoffs to support innovative SMEs, possibly much riskier due to moral hazards and poor discounted cash flows. The monopolistic government bank might also request such supports from the government to fund otherwise unqualified SMEs. We calculate an optimal level of governmental support for banks to guarantee funding such high-risk innovative SMEs over periods without deviating from their optimal Nash equilibrium policies.

• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.18 no.1
• /
• pp.679-687
• /
• 2017

This study examines financial factors affecting cash holdings of firms in the domestic capital markets. Specifically, this study focuses on regional firms with headquarters in Chungcheong province, the Republic of Korea, which features little previous research concentrating on the firms in the particular region. Three primary hypotheses were empirically tested utilizing robust econometric models, including static panel data, Tobit regression, and logistic models.Results reveal only five explanatory variables, including DSO, LIQUID, LEVERAGE, PMARGIN, and SIZE, showed statistically significant effects on the level of cash holdings among the nine variables studied. In addition two IDVs, LEVERAGE and FOS, showed significant differentiated effects between firms with headquarters in North and South Chungcheong regions. With continued debate among interested parties on the optimal level of cash reserves, the study provides a new vision for the optimal cash reserves for firms with headquarters in Chungcheong Province, where unprecedented socio-economic factors are driven.

• The Journal of Asian Finance, Economics and Business
• /
• v.3 no.2
• /
• pp.13-20
• /
• 2016

Firms can use working capital management which is one of the essential determinants to influence their profitability. The main theme of present study is to investigate the relationship between working capital management and profitability of Tobacco Industry of Pakistan. This study is based on secondary data collected from financial statements of selected companies of Tobacco Industry of Pakistan for the period of 2005-2014. For data analysis, both descriptive and inferential statistics were used. Correlation analysis is used to check the relationship between the variables, while multiple regression analysis is used to examine the effects of working capital management on profitability of firms. The result reveals that there is a strong negative relationship between variables of working capital management and profitability of Tobacco Industry of Pakistan. This means that as the cash conversion cycle increases, it will lead to declining of firm profitability and managers can create a positive value for shareholders by reducing the cash conversion cycle at optimal level. The study concludes that managers can create value for shareholders by managing the working capital well designed and implemented, and by keeping each components of it at optimal level.

• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.16 no.6
• /
• pp.3870-3881
• /
• 2015

This study examined one of the contemporary issues on debate to identify any significant financial determinants on the cash holdings of the cheabol firms in the Korean domestic capital markets. Several important findings on the financial characteristics affecting the cash holdings were evidenced by utilizing various methodologies for statistical estimations. Financial or managerial implications with discussion were provided for the pronounced factors such as CASHFLOW, MVBV, REINVEST, and AGENCY. Assuming that the chaebol firms were overall subject to the financial constrains, they may increase or stockpile cash reserves as internal capital for future investment opportunities or repayment of existing debt, rather than external financing burdened by a high cost of capital. Given the on-going controversy on the optimal level of corporate cash holdings coupled with any foreseeable capital transfer among the associated nations through the investment vehicles such the FTAs (Free Trade Agreements) or TPP (Trans-Pacific Pacts), any empirical findings of the study may shed new light on identifying financial determinants which may significantly affect the level of cash holdings for the business conglomerates, the 'chaebol' firms, in the Korean capital markets.