1 PHD SYNOPSIS THESIS: THE EFFECTS OF CASH FLOW, SYSTEMATIC RISK IDIOSYNCRATIC RISK, AND STOCK LIQUIDITY ON FIRMS’ INVESTMENT DECISIONS IN VIET NAM Koontz and Weihrich (2010) said that, the decision is a process of selecting one of the actions given The decision is the core of a plan and a plan can not be said to exist unless there is a decision In corporate finance, there are many decisions such as investment decisions, financing decisions, production decisions Among those decisions, investment decisions is one of the important decisions, because it is closely linked with the financing plan, production plan, plans to buy raw materials Because of important features of investment decisions, it has attracted many studies which analyse the effect of financial factors on investment Up to now, a wide range of theoretical foundation of research study about the relationship between investment and financial factors Studies have indicated some financial factors affecting on investment decisions, such as the effect of internal cash flow on investment, uncertainty on investment However, not many studies have shown the relationship between firm investment and stock liquidity Therefore, I summarizes the empirical study about the impact of internal cash flow, systematic risk, idiosyncratic risk and stock liquidity to firm investment and introduce related theoretical background to explain the link of this research From the empirical results, I found research gaps in these study to guide research for my PhD thesis CHAPTER 1: LITERATURE REVIEW 1.1 The research related to cash flow and investment: - For full data, cash flow is positively related to firm investment (Fazzari et al., 1988; Kaplan and Zingales, 1997; Bhagat et al., 2005; Bloom et al., 2007; Firth et al., 2012…) However, the effect of cashflow on investment of financially distressed firms is ambiguous: some research suggest a positive relationship between cash flow and investment, others suggest a negative relationship (Bhagat et al., 2005; Almeida and Campello, 2007; Cleary et al., 2007) - The excess investment-cash flow sensitivity to financing constraints, there are two conflicting conclusions At the one hand, firm as most financially constrained, investment is more sensitivities to cash flow than firms as less financially constrained (Fazzari et al., 1988; Hoshi et al., 1991; Alti, 2003; Bhagat et al., 2005…) At the other hand, firms as that appear less financially constrained exhibit signicantly greater sensitivities than firms that appear more financially constrained (Kaplan and Zingales, 1997; Cleary, 1999; Moyen, 2004; Hovakimian and Titman, 2006; Cleary et al., 2007… ) Levels of investment-cash flow sensitivity are different from each other, and depend on respect that proxy for financial constraints - The effect of cash flow on investment of government controlled firms versus privately controlled companies was found in studies in China These studies provide evidence that government controlled listed firms have greater investment–cash flow sensitivities than privately controlled listed companies (Firth et al., 2012) It is explained that besides profit targets, government controlled firms have to achieve multiple socio-economic objectives of the Government Moreover, the agency cost of stateowned firms is higher than that of non state-owned firms (Huang et al., 2011), state-owned firms are more willing to invest in accordance with policies (Wang cộng sự, 2014) 1.2 The research related to uncertainty and investment: - The sign of the effect of uncertainty on investment depend on respect that proxy for uncertainty However, the negative effects of uncertainty on investment was found more than positive effects from empirical researchs, especially in the real options theory (Leahy and Whited, 1996; Catherine Pattillo, 1998; Guiso and Parigi, 1999; Bond and Cummins, 2004; Bulan, 2005; Bloom et al., 2007; Panousi and Papanikolaou, 2012…) - Stulz (1999), Ghosal and Loungani (2000), Panousi and Papanikolaou (2012), Koetse et al., (2006) found that, there is a difference between the sign and the level of the effect of uncertainty on investment of financially constrained firms This difference can arise from respect that proxy for financial constraints or uncertainty and financial characteristics of firm - Xu et al., (2010), Wang et al., (2014), argued that the effect of uncertainty on investment of government controlled firms and privately controlled companies are difference between the sign and level 1.3 The research related to stock liquidity and investment:: - Becker-Blease and Paul (2006), Muñoz Francisco (2013) concluded that, there are a positive relationship between liquidity and investment, because firms with higher liquidity can take advantage of external financing When financing of investment is conditional on the rise, investment will increase - Muñoz Francisco (2013) found that, positive effect is greater for firms with bigger financial constraints This is consistent with the fact that increasing liquidity can encourage investment, as it improves the conditions for external financing - When it comes to the effect of stock liquidity on investment of government controlled firms, I have not found empirical evidence before However, related studies such as the study of Firth, Lin and Wong (2008), Lesmond et al., (2008), Lipson and Mortal (2009), Muñoz (2013) take me expect that investment of government controlled firms will be less sensitivities to cash flow than investment of private controlled firms CHAPTER 2: RESEARCH METHODS 2.1 Research models  Dependent variable (I/K): is defined as investment (I) in net fixed assets (K) in year  Main independent variable: - Internal cash flow ratio (CF/K): Internal cash flow is estimated as net profit plus depreciation From the results of previous empirical studies, I expect regression coefficient of CF/K to be significantly positive - Systematic risk (Sysrisk): is estimated the following CAPM model (Ri,t - Rf,t)= β0 + β*(Rm,t – Rf,t)+ εit - Idiosyncratic risk (Idiorisk): deviation of the residuals from (1) model Idiorisk = √𝑉𝑎𝑟(𝜀𝑖,𝑡 ) (1) is defined as the standard - Stock liquidity (Liquid): is defined as ∑𝑄 Traded Shares𝑡 𝐿𝑖𝑞𝑢𝑖𝑑 = 𝑡=1 𝐷𝑄 ∗ Total Shares The estimation period is one year I predict that the effect of stock liquidity on investment is positive  Control variables: - Q: is measured as the sum of market value of tradable shares, book value of nontradable shares, and liabilities, divided by book value of total assets Basing on empirical studies, I expect regression coefficient of Q to be significantly positive - Lev: is the ratio of total liabilities to total assets Data which I am studying, has overinvestment firms more than underinvestment firms, hence I expect the positive regression coefficient when estimating model - Sale: The proportion of change in sales from year t to year t−1 I predict the effect of sale on investment is positive - Size: The natural logarithm of beginning book total assets I expect a positive relation between size with firm investment - Return: is the stock price return of a firm The estimation period is one year Return is measured as the difference between the closing price and opening price at day t, divided by opening price I expect a positive relation between Return with firm investment - Age: The natural logarithm of the number of years since establishment of stock company I expect a negative relation between Age with firm investment  Dummy variables and interactive variables - DumGov: Dummy variable, coded for firm-years that have a government institution as the controlling shareholder and otherwise - RateGov: The proportion of shares owned by state shareholders - Interactive variables as CFDumGov, SysDumGov, IdioDumGov, LiquidDumGov, CFRateGov, SysDumGov, IdioRateGov, LiquidRateGov 2.2 Financial constraint Firms 2.2.1 Choosing representatives to determine the financially constraint firms Due to financially constraints are not directly measurable, it is represented by many different factors It can be represented by a factor or a composite index, but that proxy must reflect the ability to access external finance of firm For my thesis, I choose KZ index (1997) by Kaplan Zingales, to determine the financial constraint firms 2.2.2 Identify the financially constraint firms KZ index (1997) by Kaplan Zingales as equation (2): KZ (1997) = 0,283*M/B + 3,139*Debt/TA – 39,368*DIV/NFA – 1,315* CashHoldings/NFA – 1,002* CF/NFA (2) Which, CF is internal cash flow, is defined as net profit plus depreciation; NFA is Net Fixed Asset; M/B is measured as the market value total assets divided by book value of total assets; DEBT is total liabilities; DIV is dividend; CashHoldings is cash and cash equivalents KZ index has been used to identify firms that are more likely to face financially constraints Higher levels of KZ index indicate higher likelihood that a firm is financially constrained 2.3 Identify government controlled firms To make sure that a decision is adopted by one shareholder, the shareholder must own 51% of shares with voting rights However, under regulations corporate law with a percentage of shareholders voting shares less than 51% still capable of governing a decision Specifically, if a decision is adopted at the 1st meeting of shareholders, it required number of shareholders representing at least 65% X65% = 42.25% of the total votes of all shareholders attending the meeting In the case of the second meeting occurred, just the percentage of shares of 33.15% (= 51% X 65% ) is required to accept a decision of the shareholders meeting When a shareholder holding 33.15% of shares with voting rights, they should calculate to make the second meeting aims to adopt a decision So, the first I am based on the percentage 33.15% to determine the goverment controlled firms The firm has proportion of shares owned by state shareholders greater than or equal 33.15%, it is defined as firms with the control of the state The firm has proportion of shares owned by state shareholders less than 33.15%, it is determined that the firm does not have the control of the state With defining government control firms as above, I use DumGov variable representing the control of the State DumGov is dummy variable, code for firm-years that have a government controlling shareholder and otherwise More certainly, I use the extra ratio 42.25% and 51% to determine the government controlled firms 2.4 Model research Model research as equation (3): 𝑰 ( ) = 𝜶𝟎 + 𝜶𝟏 𝑪𝑭/𝑲𝒊𝒕 + 𝜶𝟐 𝑺𝒚𝒔𝒓𝒊𝒔𝒌𝒊𝒕 + 𝜶𝟑 𝑰𝒅𝒊𝒐𝒓𝒊𝒔𝒌𝒊𝒕 + 𝜶𝟒 𝑳𝒊𝒒𝒖𝒊𝒅𝒊𝒕 + 𝑲 𝒊𝒕 + 𝜶𝟓.𝟏 (𝑪𝑭𝑫𝒖𝒎𝑮𝒐𝒗)𝒊𝒕 +𝜶𝟓.𝟐 (𝑺𝒚𝒔𝑫𝒖𝒎𝑮𝒐𝒗)𝒊𝒕 + 𝜶𝟓.𝟑 (𝑰𝒅𝒊𝒐𝑫𝒖𝒎𝑮𝒐𝒗)𝒊𝒕 + 𝜶𝟓.𝟒 (𝑪𝑭𝑫𝒖𝒎𝑮𝒐𝒗)𝒊𝒕 + 𝜶𝟓.𝟓 (𝑪𝑭𝑹𝒂𝒕𝒆𝑮𝒐𝒗)𝒊𝒕 + 𝜶𝟓.𝟔 (𝑺𝒚𝒔𝑹𝒂𝒕𝒆𝑮𝒐𝒗)𝒊𝒕 + 𝜶𝟓.𝟕 (𝑰𝒅𝒊𝒐𝑹𝒂𝒕𝒆𝑮𝒐𝒗)𝒊𝒕 +𝜶𝟓.𝟖 (𝑳𝒊𝒒𝒖𝒊𝒅𝑹𝒂𝒕𝒆𝑮𝒐𝒗)𝒊𝒕 + 𝜶𝟔 𝑸𝒊𝒕 + 𝜶𝟕 𝑺𝒊𝒛𝒆𝒊𝒕 + 𝜶𝟖 𝑳𝒆𝒗𝒊𝒕 + 𝜶𝟗 𝑺𝒂𝒍𝒆𝒊𝒕 + 𝜶𝟏𝟎 𝑹𝒆𝒕𝒖𝒓𝒏𝒊𝒕 + 𝜶𝟏𝟏 𝑨𝒈𝒆𝒊𝒕 + 𝝁𝒊𝒕 (3) Which  is error term 2.5 Data research Data research were collected from the financial statements of companies listed on the stock market in Vietnam with the criteria of the largest observations and enough data to satisfy research model With this criterion, I used data of 211 firms from 2007 to 2013 The data is the form of unbalanced panel data 2.6 Method research The thesis use GARCH (p,q) (Generalized Autoregressive Conditional Heteroscedasticity) to estimate β from equation (1) and the standard deviation of the residuals from (1) model estimated Two proxies are systematic risk variable and idiosyncratic risk variable in (3) model For (3) model, the thesis use GMM (Generalized method of moments) GMM has two commonly estimates as Dif-GMM and Sys-GMM, I choice Sys-GMM estimate CHAPTER 3: OVERVIEW OF INVESTMENT, CASH FLOW, SYSTEMATIC RISK, IDIOSYNCRATIC RISK AND STOCK LIQUIDITY OF VIETNAM FIRMS FROM 2007 TO 2013 3.1 Investment of Vietnam firms is overinvestment or underinvestment?  Model identified overinvestment or underinvestment INEW,t =  + 1SaleGrt-1 + 2Leveraget-1 +  3Casht-1 + 4Aget + 5Sizet-1 + 6StockReturnst-1 +6INEW,t-1 + Year Indicator + Industry Indicator + i,t (3.1) i,t = INEW,t  ( + 1SaleGrt-1 +  2Leveraget-1 + 3Casht-1 + 4Aget + 5Sizet-1 + 6StockReturnst-1 + 6INEW,t-1 + Year Indicator + Industry Indicator) (3.2) Which, INEW is new investment; SaleGr is the proportion of change in sales; Leverage is debt ratio; Cash is casholding ratio; Age is the number of years since establishment of stock company; Size is scale of total assets; StockReturns is the stock price return of firm  Investment of Vietnam firms is overinvestment or underinvestment? After estimate (3.1) model, I analyze residual of model The residue analysis results have shown that in the year 1235 observers firms, 526 firms have overinvestment, overinvestment rate was 8.36% The number underinvestment firms were 709 firms, and underinvestment rate was 6.20% So, the number of overinvestment firms is less than the number of underinvestment firms, but overinvestment rate is more than underinvestment rate For this result, I note that, whole Viet Nam firms market, firms was overinvestment from 2008 to 2013 This characteristic will explain the research results in chapter 10 3.2 Characteristics of financially constraint firms - Operational efficiency of more financially constraint firms by ROE, EPS was lower than mean of sample, and much lower than less financially constraint firms - More financially constraint firms had low investment rate, weak cash flow, high debt ratio, the percentage revenue growth less - When the market go down, stock prices of more financially constraint firms decrease more than the ones of less financially constraint firms, leading market value of more financially constraint firms are below their book value - More financially constraint firms are more idosyncaratic than less financially constraint firms - More financially constraint firms are overinvesting 3.3 Characteristics of government controlled firms Compared non-government controlled firms, government controlled firms have characteristics as follows: - Highly investment, strong cashflow, high sales growth rate, big size, high performance - Easy to get bank loans, high debt, although internal funds are higher than investment - When the market goes down, stock prices of government controlled firms decrease a little - Overinvestment rate is higher 3.4 Volatility of investment, cash flow, systematic risk, idiosyncratic risk and stock liquidity - Figure 3.4A has shown that the rate of investment on net fixed assets tends to decrease from 2008 to 2013 as well as the decrease of internal funds However, internal funds are higher than investment It 12 Figure 3.4: Volatility investment, cash flow, systematic risk, idiosyncratic risk and liquidity 3.4A 3.4B 3.4C Source: Statistics from research data 3.4D 13 CHAPTER 4: RESEARCH FINDINGS 4.1 The effect of cash flow, systematic risk, idiosyncratic risk and stock liquidity on Vietnamese firms’ investment: The result (as table 4.3) has shown that:  Cash flow, stock liquidity and idiosyncratic risk have a positive impact on investment Idiosyncratic risk has a negative impact in investment  The strongest factor that affects investment is cash flow (0.88%), the second strongest one is stock liquidity (0.35%), the third one is idiosyncratic risk (0.29%) and the fourth one is systematic risk (0.16%) This results are appropriate to the order pecking theory: internal funds are used first, and then capital from issuing shares is used  The impact of systematic risk and idiosyncratic risk on investment are opposite, and the impact level of systematic risk is over the impact level of idiosyncratic risk The increase of systematic risk lead to reduce investment while investment increase when idiosyncratic risk goes up The impact of uncertainty on investment has shown that Vietnamese firms get growth investment opportunities and trade-off higher risk It is explained that these firms are overinvesting and use debt to invest 14 Table 4.3: Results estimate the impact of cash flow - systematic risk – idiosyncratic risk - stock liquidity to investment Dependent variable: I/K (1) (2) (3) (4) 0,0905*** 0,0993*** 0,1063*** 0,0462 L1.I/K (0,001) (0,002) (0,003) (0,139) 0,5797*** 0,5249*** 0,6732*** 0,4428*** CF/K (0,006) (0,003) (0,001) (0,001) 0,1751* 0,1806* -0,1795* Sysrisk (0,091) (0,097) (0,098) 1.9893** 0,9993* Idiorisk (0,036) (0,091) 28,6592*** Liquid (0,001) -0,1493 -0,2895 -0,0826 -0,0550 Q (0,453) (0,218) (0,652) 0,592 -0,3444* -0,3039** -0,0047 0,3020*** Size (0,066) (0,033) (0,973) (0,009) 1,9367*** 1,9390*** 1,8892** 0,7473* Lev (0,008) (0,002) (0,017) (0,063) 0,0003 0,0156 -0,0334 -0,0145 Sale (0,997) (0,853) (0,763) (0,835) 0,0004 0,0206 -0,1010 -0,1086** Return (0,994) (0,737) (0,123) (0,037) -0,0063 -0,1187 0,1541 -0,1196 Age (0,980) (0,605) (0,555) (0,561) 15 Table 4.5: Results estimate the impact of cash flow - systematic risk – idiosyncratic risk - stock liquidity to investment: More financially constraint firms vs less financially constraint firms More financially Less financially Dependent variable I/K Full sample constraint firms constraint firms FC (PFC+NFC) 0,0462 0,0706 0,1252** L1.I/K (0,139) (0,136) (0,049) 0,4428*** 0,4585** 0,0808* CF/K (0,001) (0,032) (0,053) -0,1795* -0,2646** -0,4608** Sysrisk (0,098) (0,041) (0,032) 0,9993* 0,8352* -1,5457** Idiorisk (0,091) (0,071) (0,039) 28,6592*** 36,4623** 25,2528* Liquid (0,001) (0,024) (0,064) -0,0550 -0,2640 -0,0018 Q (0,592) (0,317) (0,994) 0,3020*** 0,2726** -0,1284 Size (0,009) (0,037) (0,560) 0,7473* 0,6154* 1,6811** Lev (0,063) (0,053) (0,025) -0,0145 0,2491 0,9961*** Sale (0,835) (0,225) (0,003) -0,1086** -0,0759 0,1934 Return (0,037) (0,236) (0,319) -0,1196 -0,1008 -0,0391 Age (0,561) (0,627) (0,943) 16 4.2 The comparison between more financially constraint firms and less financially constraint firms The study made a comparison of the impact of cash flow, systematic risk, idiosyncratic risk and stock liquidity on investment between more financially constraint firms and less financially constraint firms from 2008 to 2013 (as the results of table 4.5 and table 4.7 shown) - When cash flow increase, investment of both groups increase too However, the level of impacts of cash flow on investment are different In other words, investment by more financially constraint firms is more sensitive to cash flow than investment by less financially constraint firms It is explained by the different characteristics of both groups  Systematic risk has an negative effect on investment of both groups When systematic risk increase, investment by more financially constraint firms are decrease less than investment by less financially constraint firms This result has proven that more financially constraint firms are ‘less afraid of’ risk than less financially constraint firms  The effect of idiosyncratic risk on investment in both groups is opposite Result of research showed that, when idiosyncratic risk increase, investment by more financially constraint firms increase too; While, investment by less financially constraint firms decrease when idiosyncratic risk increase The changes of investment by more/less financially constraint firms when systematic risk and idiosyncratic risk have volatilities showed that, more financially constraint firms are less afraid of risk than less financially constraint firms This is because more financially 17 constraint firms use debt to overinvest, and they choose projects with high return but high risk These decisions help them overcome their current financial distress  Stock liquidity affect investment both groups in a positive correlation Though investment by both groups increase, it seems that investment by more financially constraint firms is dominated In other words, investment by more financially constraint firms is more sensitive to stock liquidity than investment by less financially constraint firms  To less financially constraints firms, uncertainty is the strongest one factors affecting investment (0,37%+0.45%) It has proven that these firms are cautious about investment decisions When uncertainty increases, they cut down investment, and exercise waiting options  Investment by more financially constraints firms is strongly affected by financial funds more than uncertainty Because uncertainty is not as important as internal funds, they can choose growth opportunity investment and high risk Also, they continue to invest more even when idiosyncratic risk increases - To more financially constraint firms, cash flow is the strongest factor affecting their investment decisions, and stock liquidity is the second one Systematic risk and idiosyncratic risk are factors which affect less than the two previous ones While the former affect their investment in a negative way, the latter affect their investment in a positive way Additionally, the levels of the two affecting factors are nearly the same 18 - When it comes to less financially constraints firms, the result changes in a different way Specifically, uncertainty is the strongest affecting factor, and the second one is internal funds Therefore, investment decisions by less financially constraints firms are different from more financially constraints ones Table 4.7: Summary results estimate: More financially constraint firms vs Less financially constraint firms Changes in investment Volotilities Full sample More financially constraint firms Less financially constraint firms One standard deviation increase of cash flow volatility 0,88% 0,62% 0,19% One standard deviation increase of systematic volatility -0,16% -0,26% -0,37% One standard deviation increase of idiosyncratic volatility 0,29% 0,25% -0,45% One standard deviation increase of stock liquidity volatility 0,35% 0,48% 0,27% Conclusion of the thesis Investment by more financially constraint firms is more sensitive to cash flow than investment by less financially constraint firms The same level of increase systematic risk, investment by more financially constraint firms decrease less than investment by less financially constraint firms The same level of increaseidiosyncratic risk, investment by more financially constraint firms increase, but investment by less financially constraint firms decrease Investment by more financially constraint firms is more sensitive to stock liquidity than investment by less financially constraint firms 19 4.4 Comparison between non-government controlled firms and government controlled firms The study has resulted as below:  The affect of cash flow on investment by government controlled firms is stronger than investment by non-government controlled firms In other words, investment by government controlled firms is more sensitive to cash flow than investment by non-government controlled firms When government controlled firms have big funds, their investment decisions primarily depend on economic and social goals of the government They can so because agency cost of government controlled firms are much more than that one of nongovernment controlled firms Therefore, non-government controlled firms are more willing to complete the command of the government  Systematic risk affects investment decisions by government controlled firms in a positive way, but it affect investment decisions by non-government controlled firms in a negative way The reasons explaining the effect of systematic risk on government firms’ decisions is the same the ones the effect of cash flow on government firms’ decisions The negative correlation between systematic risk and investment decisions of non-government controlled firms has proven that they care much more about the fluctuation of markets Therefore, they cut down investment and wait for good news from markets in order to make informed decisions 20  Idiosyncratic risk affects government controlled firms’ investment decisions in a negative way, but it affects nongovernment controlled firms’s investment decisions in a positive way It is explained that with high performance, government controlled firms’ market value are much more than ones’ book value, therefore, they don’t choose to invest in projects which have idiosyncratic risk Conversely, like more financially constraints firms, non-government firms decide to choose growth opportunity investment and accept high risk  The effect of stock liquidity of investment decisions of government controlled firms is less than the one of nongovernment controlled firms In another words, investment by government controlled firms is less sensitive than one by nongovernment firms This is because government controlled firms with high productivity have strong cash flow and are easy to get bank loans  To non-government controlled firms, cash flow is the strongest factors affecting their investment decisions, and the second one is stock liquidity Systematic risk and idiosincratic risk are less affecting factors While the former affects their investment decisions in a negative way, the latter affects their investment decisions in a positive way To sum up, investment by non-government controlled firms is more sensitive to financial funds Additionally, they accept risk to choose growth opportunity investment Their decisions are nearly the same with the ones making by more financially contraints firms 21  Government controlled firms’ investment decisions are affected in a different way In particular, cash flow is the strongest affecting factor, the second one is systematic risk, the third one is idiosyncratic risk, and the fourth one is stock liquidity This has been explained that investment decions made by government controlled firms primarily depend on economic and social goal of the government * Robust check (Using RateGov variable) This section, I use interacting variables between the main independent variables with the proportion of shares owned by state shareholders variable (RateGov variable) as robust check for result estimates by using DumGov variable The study by testing of RateGov variable has the same result with one by testing with dummy variables, as table 4.13 22 Bảng 4.8: Results estimate the impact of cash flow - systematic risk – idiosyncratic risk - stock liquidity to investment: Research in government control firms Using dummy variable (The proportion of shares owned by state Dependent variable shareholders 35,15%33,15%) I/K (1) (2) (3) (4) (5) 0,0765*** 0,1245*** 0,0553* 0,0534* 0,0865*** L1.I/K (0,009) (0,001) (0,055) (0,074) (0,002) 0,3264* 0,2267* 0,5399*** 0,4481*** 0,3811** CF/K (0,094) (0,096) (0,000) (0,005) (0,031) CFDumGov Sysrisk 0,4690** (0,049) -0,1964* (0,080) 0,9455* (0,082) -0,4194** (0,013) 0,2821* (0,085) 0,7799* (0,076) 34.7963*** (0,003) 45.0035*** (0,004) SysDumGov Idiorisk IdioDumGov Liquid LiquidDumGov -0,2096** (0,047) -0,2514* (0,092) 0,9148* (0,098) -0,7036* (0,057) 17,4793* (0,069) 1,1089* (0,073) 49,8332*** (0,002) -47,4202* (0,088) 0,6194* (0,075) -0,3757* (0,078) 0,5785* (0,063) 1,0850* (0,077) -1,0272** (0,043) 42,5763** (0,014) -39,1304* (0,099) 23 Table 4.10: Results estimate the impact of cash flow - systematic risk – idiosyncratic risk - stock liquidity to investment: Research in government control firms (using dummy variables) The proportion of The proportion of The proportion of shares owned by shares owned by shares owned by Dependent variable I/K state shareholders state shareholders state shareholders 35,15% 42,25% 51% 0,0865*** 0,0650*** 0,0522* L1.I/K (0,002) (0,040) (0,098) 0,3811** 0,2783* 0,3063** CF/K (0,031) (0,093) (0,041) 0,6194* 0,5963* 0,7675* CFDumGov (0,075) (0,095) 0,095 -0,3757* -0,3129* -0,3030** Sysrisk (0,078) (0,062) (0,038) 0,5785* 0,5589** 0,3107* SysDumGov (0,063) (0,033) (0,098) 1,0850* 1,1394* 0,5779* Idiorisk (0,077) (0,098) (0,100) -1,0272** -1,2282*** -0,8969** IdioDumGov (0,043) (0,009) (0,029) 42,5763** 36,0285** 37,0487*** Liquid (0,014) (0,028) (0,007) -39,1304* -45,1944* -7,0526 LiquidDumGov (0,099) (0,095) (0,758) 24 Volatilities One standard deviation increase of cash flow volatility One standard deviation increase of systematic volatility One standard deviation increase of idiosyncratic volatility One standard deviation increase of stock liquidity volatility Bảng 4.11: Summary results estimate (using dummy variables) Changes in investment The proportion of shares The proportion of shares The proportion of shares owned by state owned by state owned by state shareholders 33,15% shareholders 42,25% shareholders 51% NonNonNonGovernment Government Government Government Government Government controlled controlled controlled controlled controlled controlled firms firms firms firms firms firms 0,76% 1,60% 0,55% 1,31% 0,61% 1,51% -0,34% 0,39% -0,29% 0,40% -0,28% 0,08% 0,32% -0,25% 0,34% -0,32% 0,17% -0,28% 0,53% 0,22% 0,44% 0,12% 0,46% 25 Table 4.13: Robust check for results estimate the impact of cash flow - systematic risk – idiosyncratic risk - stock liquidity to investment: Government control firms vs Government does not control firms Using RateGov variable Dependent variable I/K (1) (2) (3) (4) (5) 0,0538* 0,1318*** 0,0548* 0,0648** 0,0972*** L1.I/K (0,084) (0,001) (0,070) (0,023) (0,006) 0,2992* 0,2014* 0,5397*** 0,4267*** 0,2891* CF/K (0,082) (0,069) (0,000) 0,003 (0,094) 0,0084* 0,0121* CFRateGov (0,088) (0,091) Sysrisk -0,1788* (0,093) 0,8286* (0,094) -0,4652*** (0,019) 0,0070* (0,070) 0,9824** (0,041) 30.5126*** (0,003) 43,5996*** (0,003) SysRateGov Idiorisk IdioRateGov Liquid LiquidRateGov -0,2482** (0,033) -0,2528* 0,098 1,0602* (0,088) -0,0174* (0,065) 18,8998* (0,059) 1,0753* 0,100 50,0881*** 0,002 -0,6229* (0,070) -0,6724*** (0,009) 0,0177** (0,018) 1,7971** (0.011) -0,0358*** (0,002) 55,8534** (0,014) -1,0936* (0,091) 26 CHAPTER 5: RECOMMENDATIONS From the research results in chapter 4, I give some recommendations for company managers and strategic planners in order to improve the operational efficiency of company and reduce the risk for the firm and the economy 5.1 Promoting companies care more and perform well to risk management 5.2 Developing a mechanism monitoring investment decisions to reduce overinvestment 5.3 Creating flow for funds on capital market, more favorable conditions for company to approach bank credit, especially for small company 5.4 Making transparent information, good infrastructure, modern engineering for the stock market to increase stock liquidity ... NonNonNonGovernment Government Government Government Government Government controlled controlled controlled controlled controlled controlled firms firms firms firms firms firms 0,76% 1,60% 0,55% 1,31% 0,61%... government controlled firms Compared non-government controlled firms, government controlled firms have characteristics as follows: - Highly investment, strong cashflow, high sales growth rate, big... are different from each other, and depend on respect that proxy for financial constraints - The effect of cash flow on investment of government controlled firms versus privately controlled companies