The Impact of Macroeconomic and Political Uncertainty on Corporate Cash Holdings and The Value of Excess Cash: Evidence From an Emerging Market

This study examines how macroeconomic and political uncertainty influence corporate cash holdings and the valuation of excess cash in Vietnam, a transitional emerging market. Using panel data on 671 listed non-financial firms (7,909 firm-year observations) from 2012-2024, the analysis combines firm-level financial information with measures of macroeconomic uncertainty and changes in political leadership. The results show that both types of uncertainty are associated with higher corporate cash holdings, reflecting the precautionary motive in the face of persistent financing constraints. Macroeconomic uncertainty is negatively associated with firm value, whereas evidence that uncertainty alters the marginal value of excess cash is limited; on average, excess cash is positively valued, and this valuation varies with governance conditions. Additional analysis indicates that firms with stronger sustainability-related governance recognition exhibit a lower marginal value of excess cash, suggesting that investors may perceive well-governed firms as having a lower precautionary need to retain large internal liquidity buffers. By jointly examining corporate cash accumulation and the market valuation of excess cash under macroeconomic and political uncertainty, this study provides new evidence from a transitional economy. The findings enhance understanding of how uncertainty shapes financial decisions in emerging markets.