Firms’ investment – cash flow relationship in the context of state ownership and banking system reform in Vietnam

uded in the analysis due to its unavailability of data. Otherwise, listed companies are currently concentrated on some industries such as 137 constructions, real estates, commerce, plastic and chemicals, food processing and beverage, etc.. - In terms of methodology, the thesis mainly used the quantitative method and does not take into account the qualitative factors which may have impact on the investment – cash flow relations such as managerial attitudes (e.g. managerial optimistics/pessimistics). With these limitations, I expect that the future studies may have broader sample size, including variety of companies and length of time as well as including some qualitative method. 6.3. Firm’s investment – cash flow relationship in the context of banking system reform in Vietnam 6.3.1. Research findings Along with the world economic integration, according to WTO accession roadmap, Vietnam has to open the banking sector to foreign banks. This study aims to test whether the investment behaviors of Vietnamese listed companies is affected by banking reform, especially whether banking reform will help reduce the problems of political-oriented investment, which are listed by the state-controlled enterprises, and at the same time eliminate under-investment issues due to the financial constraint of the listed state-uncontrolled companies? Using an unbalanced panel of companies listing on HOSE and HNX from 2009 and 2014, I find evidence for U-shape relation between investment and cash flows, both state controlled and non state controlled firms. Banking system reform measured by presence of foreign banks has signigicant impact on investment behaviour of Vietnamese companies. Underinvestment problem of uncontrolled firms is mitigated by the reforms due to their better accessibility to external financing. Unlike my expectation, overinvestment problem of state controlled firms is almost not reduced which is different with findings by Tsai 138 et al. (2014)Tsai et al. (2014). It can be explained that foreign bank presence in Vietnam is still very limited while state owned banks are still playing dominating role on the credit market. Besides, both high and low growth state controlled firms seem do not change their investment behavior much after the reform. However, high growth uncontrolled firms signigicantly increase their investment after the reforms while low growth uncontrolled firms seems have to more rely on their cash flows in the post reform period. The results also shows a significant change from negative to positive investment – leverage relation from pre reform period to post reform period for both state and non state controlled firms, meaning that firm investments are less dependent on internal financing in the post reform period. This impact are especially significant for low growth opportunity firms. As a result, it can be concluded that banking system reform measured by presence of foreign banks has significant impact on both company’s investment and financing behaviors. The impacts are not the same for different group of companies. Therefore, the reform of the banking system has had a positive impact on corporate governance of Vietnamese listed companies. However, different groups have different effects. 6.3.2. Research contributions , implications and policy recommendations This study contributes additional empirical evidence to the financial literature on the topic of impact of banking system reform on investment – cash flow relation, especially in a context of small transition country. Most of my findings are similar to the previous study results except that overinvestment problem of state controlled firms is not mitigated in the post reform period. Perhaps, in the post reform period state controlled firms are still main customers of state-owned local banks who are dominating the credit market. Moreover, presence and operation of foreign banks in Vietnam is still limited. 139 The study contributed to existing theories as well as expanded previous studies on the impact of banking system reform on the relationship between cash flow and investment of listed companies in Vietnam. The study also brought about really useful results for policy makers as well as Vietnamese enterprises in managing and developing the banking system, creating a healthy capital mobilization channel for businesses as well as help businesses make financial decisions to add value to the business. Based on the above research results, I propose a few policy suggestions as follows: • Under the context of present international economic integration, the opening of the financial system is indispensable, which requires deep and broad reforms in the national financial system. However, in order to carry out the reforms proactively and effectively, it is necessary to improve the competitiveness of the banking system through the healthy banking operations and strict management of bad debts. • Step by step opening and liberalizing the financial sector to integrate deeply and broadly with the world, thereby making it more transparent and healthier for the national banking system. This opening also helps to reduce businesses to access funds more effectively, making better investment decisions. • For businesses, different growth opportunities may have different cash flow sensitivity of investment as well as leverage sensitivity of investment, so when there is a good investment opportunity in the future, businesses may choose a low level of financial leverage to avoid debt overhang, so that it cannot mobilize additional funding for financing the opportunities. 140 6.3.3. Research limitations and future research directions This study has several limitations in terms of its timeframe, sample sizes and methodology as below: - In term of time period, the study only covers for the period of 2008 – 2015, in a relatively short time due to the operation of the foreign banking system in Vietnam. not long period of time. It is because the study was conducted in 2015, so I use data upto 2014 and Vietnam has not actually opened its financial sector to the world until after joinint the WTO in 2007. - In term of sample size, the data used in this study are extracted from financial statements of listed companies. Many non-listed equitized firms have not been included in the analysis due to its unavailability of data. Otherwise, listed companies are currently concentrated on some industries such as constructions, real estates, commerce, plastic and chemicals, food processing and beverage, etc. In addition, the topic has only been studied for businesses in general, but there is no evaluation for each specific industry. - In terms of methodology, the thesis mainly used the quantitative method and does not take into account the qualitative factors which may have impact on the investment – cash flow relations such as managerial attitudes (e.g. managerial optimistics/pessimistics). Furthermore, variable proxies for banking system reform using foreign bank presence includes branches, outlets, representative offices may not cover the real pressures for local bank to reform their operations. Accordingly, presence and operations of foreign banks in Vietnam are still not widespread yet, mainly located in big cities and mainly serve for foreign clients. With these limitations, I expect that the future studies may have broader sample size, including variety of companies and length of time, as well as including some qualitative method and may be conducted for some specific industries. 141 THESIS-RELATED LIST OF AUTHOR’S PUBLICATIONS 1. Thoa, T. T. K., & Uyen, N. T. U. (2017). Banking system reform and investment– cash flow relation: Case of a small transition economy. Research in International Business and Finance, 41, 500-515, Doi: 10.1016/j.ribaf.2017.04.038. 2. Từ Thị Kim Thoa & Nguyễn Thị Uyên Uyên (2017). Kiểm định mối quan hệ giữa đầu tư và dòng tiền: Trường hợp Việt Nam. Tạp chí khoa học, 57 (6), 49-63. 3. Thoa, T. T. K., & Uyen, N. T. U. (2019). State Ownership and the Relationship between Investment and Cash Flow: The Case of Vietnamese Listed Firms. Emerging Markets Finance Trade, 1-23, Doi: 10.1080/1540496X.2019.1610874 142 REFERENCES Abel, A. B. (1980). Empirical investment equations: An integrative framework. Paper presented at the Carnegie-Rochester conference series on public policy. Abel, A. B., & Blanchard, O. J. (1986). The Present Value of Profits and Cyclical Movements in Investment. Econometrica, 54(2), 249-273. doi:10.2307/1913150 Ahn, S., Denis, D. J., & Denis, D. K. (2006). Leverage and investment in diversified firms. Journal of financial economics, 79(2), 317-337. Aivazian, V. A., Ge, Y., & Qiu, J. (2005). The impact of leverage on firm investment: Canadian evidence. Journal of Corporate Finance, 11(1), 277-291. Akerlof, G. A. (1970). 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The Review of Financial Studies, 19(2), 531-559. 148 APPENDIX Table A.1: Distribution of sample by exchange listed, 2008 - 2015 2009 2010 2011 2012 2013 2014 2015 HOSE 155 217 237 249 252 256 230 HNX 178 247 253 262 278 274 278 Results of study 1: Firm’s investment – cash flow relationship in the context of state-ownership in Vietnam Descriptive statistics .249256 .1926 0 .9672 .2470144 .6872852 .6286357 -.812584 2.563472 .5369431 4.288176 4 0 14 2.682421 .4683225 .4950439 0 .9673918 .2326286 13.14515 13.09501 9.211022 18.79565 1.461 1.115838 .862403 0 24.96242 1.007965 .2848621 .0951423 -1 102.1511 2.277554 .3291741 0 0 1 .4699831 1.610909 .0463943 -546.2458 2449.613 50.7206 Total .4117665 .0613529 -.9972563 72.87134 1.901333 .5686346 .5237 .5 .9672 .0868816 .7049496 .6518565 -.5645162 2.563472 .5398727 4.257053 4 0 14 2.493667 .5249629 .5683659 0 .9458926 .2370742 13.39007 13.39519 9.211022 17.85354 1.424266 1.073435 .8595031 0 8.980172 .8381049 .1147715 .0852457 -1 4.075042 .3602047 .2821317 0 0 1 .4502724 .2427256 .0722566 -53.58707 47.18148 2.954176 1 .3866601 .0709187 -.9330725 21.05208 1.28195 .1223795 0 0 .49996 .1600808 .6802679 .6201371 -.812584 2.243514 .5357256 4.30054 4 0 14 2.754218 .4458215 .4692345 0 .9673918 .2269979 13.04786 12.93289 9.514849 18.79565 1.464301 1.132683 .8648809 0 24.96242 1.067664 .3524324 .099277 -1 102.1511 2.679779 .3478622 0 0 1 .4763909 2.154434 .0364233 -546.2458 2449.613 59.92064 0 .4217402 .0577088 -.9972563 72.87134 2.097377 State_05 mean p50 min max sd 149 Correlations GOV 0.1230* 0.0140 -0.0219 0.8151* 1.0000 State_05 0.1535* -0.0073 0.0207 1.0000 BETA 0.1951* -0.0999* 1.0000 AGE -0.1792* 1.0000 LEV 1.0000 LEV AGE BETA State_05 GOV GOV -0.0188 -0.0155 0.0227 -0.0206 -0.0666* 0.0051 0.0206 State_05 -0.0083 -0.0170 0.0199 -0.0215 -0.0471* -0.0265 0.1057* BETA -0.0920* -0.0102 0.0456* -0.0199 0.0328 -0.0528* 0.3209* AGE 0.0224 -0.0140 -0.0339 -0.0073 -0.0285 -0.0001 0.0659* LEV -0.1506* -0.0584* 0.0455* -0.0691* -0.0025 -0.1563* 0.2930* SIZE -0.0491* -0.0219 0.0373 -0.0301 0.0336 0.1568* 1.0000 Q 0.0604* -0.0074 -0.0272 -0.0019 0.0115 1.0000 SG -0.0029 0.0036 0.0029 0.0030 1.0000 CFKPOS 0.6832* 0.9791* 0.0023 1.0000 CFKNEG -0.0264 0.2056* 1.0000 CFK 0.6632* 1.0000 IK 1.0000 IK CFK CFKNEG CFKPOS SG Q SIZE . pwcorr IK CFK CFKNEG CFKPOS SG Q SIZE LEV AGE BETA State_05 GOV,star(.01) . //Correlation GOV 0.0015 0.0656* 0.0613* 0.0770* -0.0418 0.0089 0.0109 0.1330* 0.0383 -0.0308 0.8043* 1.0000 State_05 0.0367 0.0502* 0.0628* 0.0547* -0.0256 -0.0074 0.1102* 0.1589* 0.0088 0.0206 1.0000 BETA -0.0571* -0.0886* -0.0629* -0.0886* 0.0543* -0.0714* 0.3267* 0.1856* -0.1032* 1.0000 AGE -0.1081* -0.0612* 0.0631* -0.0942* -0.1208* -0.0859* 0.0652* -0.1730* 1.0000 LEV -0.0919* -0.1405* -0.1377* -0.1143* 0.0692* -0.1677* 0.3086* 1.0000 SIZE 0.0810* -0.0768* 0.0026 -0.0834* 0.0771* 0.1074* 1.0000 Q 0.2265* 0.1225* 0.0751* 0.1298* 0.1661* 1.0000 SG 0.1225* 0.0169 -0.0198 0.0329 1.0000 CFKPOS 0.1025* 0.9740* 0.7622* 1.0000 CFKNEG -0.0095 0.8356* 1.0000 CFK 0.0885* 1.0000 IK 1.0000 IK CFK CFKNEG CFKPOS SG Q SIZE LEV AGE BETA State_05 GOV (obs=3366) . spearman IK CFK CFKNEG CFKPOS SG Q SIZE LEV AGE BETA State_05 GOV,star(.01) 150 Linear relationship between investment and cash flows (-3.33) (-0.44) (-2.79) BETA -0.0430*** -0.00956 -0.0404*** (1.05) (0.21) (0.62) AGE 0.00284 0.000888 0.00185 (-2.62) (-1.27) (-2.80) SIZE -0.0132*** -0.0112 -0.0159*** (1.13) (-0.33) (1.45) LEV 0.0335 -0.0167 0.0481 (-0.31) (4.21) (-0.40) L.SG -0.00204 0.120*** -0.00266 (14.80) (-1.59) (17.38) CFK 0.0209*** -0.00921 0.0224*** IK IK IK (1) (2) (3) * p<0.1, ** p<0.05, *** p<0.01 t statistics in parentheses R-sq N 2734 773 1961 (5.90) (4.11) (5.22) _cons 0.426*** 0.427*** 0.458*** 151 Non-linear relationship between investment and cash flow Approach 1: CFKSQR Approach 2: using CFKPOS vs CFKNEG (-4.24) (0.06) (-3.46) BETA -0.0574*** 0.00116 -0.0493*** (1.01) (-0.06) (-0.32) AGE 0.00255 -0.000244 -0.000868 (-2.79) (-0.94) (-3.39) SIZE -0.0135*** -0.00770 -0.0168*** (-0.22) (-0.18) (-0.59) LEV -0.00660 -0.00876 -0.0199 (-1.50) (4.61) (-1.62) L.SG -0.00818 0.126*** -0.00893 (34.72) (7.43) (34.06) CFKSQR 0.0000111*** 0.00185*** 0.0000111*** (2.69) (-0.64) (2.87) CFK 0.00207*** -0.00467 0.00224*** IK IK IK (1) (2) (3) R-sq N 2734 773 1961 (-3.48) (-0.02) (-0.95) BETA -0.0455*** -0.000394 -0.0121 (1.81) (0.89) (-0.67) AGE 0.00460* 0.00340 -0.00172 (-2.81) (-0.63) (-3.52) SIZE -0.0136*** -0.00482 -0.0185*** (0.62) (-0.27) (0.66) LEV 0.0184 -0.0124 0.0212 (-0.39) (5.74) (-0.91) L.SG -0.00238 0.145*** -0.00547 (-1.42) (-6.18) (0.64) CFKNEG -0.00149 -0.105*** 0.000485 (16.95) (15.00) (20.56) CFKPOS 0.0256*** 0.0674*** 0.0263*** IK IK IK (1) (2) (3) R-sq N 2734 773 1961 (6.41) (3.17) (5.97) _cons 0.439*** 0.281*** 0.494*** 152 Examining impact of state ownership on investment – cash flow relationship (-2.55) (-3.50) BETA -0.0316** -0.0448*** (0.89) (1.99) AGE 0.00218 0.00496** (-1.73) (-3.04) SIZE -0.00804* -0.0144*** (-0.16) (0.36) LEV -0.00465 0.0105 (-0.25) (-0.51) L.SG -0.00147 -0.00276 (1.21) State_05 0.0151 (-13.52) CFKNEGSTATE -0.119*** (7.28) CFKPOSSTATE 0.0478*** (0.07) (8.27) CFKNEG 0.0000523 0.00169*** (15.24) (24.47) CFKPOS 0.0234*** 0.0282*** IK IK (1) (2) R-sq N 2734 2734 (5.23) (6.54) _cons 0.343*** 0.441*** (1.36) GOV 0.0294 (-2.28) CFKNEGGOV -0.0389** (-7.63) CFKPOSGOV -0.0294*** 153 Examining impact of state ownership on investment – cash flow relationship at different investment oportunities (-1.81) (-1.18) (-1.64) (-3.11) (-2.22) (-2.67) BETA -0.0186* -0.0123 -0.0207 -0.0363*** -0.0229** -0.0279*** (-4.88) (-2.97) (-2.69) (0.70) (1.73) (-0.26) AGE -0.0102*** -0.00743*** -0.00565*** 0.00175 0.00385* -0.000604 (-0.85) (0.27) (-0.63) (-3.28) (-5.22) (-4.85) SIZE -0.00336 0.00126 -0.00229 -0.0153*** -0.0215*** -0.0209*** (5.50) (4.80) (6.74) (0.53) (-0.12) (0.68) LEV 0.105*** 0.109*** 0.119*** 0.0122 -0.00253 0.0154 (2.75) (2.05) (3.53) (-1.17) (-0.41) (-0.84) L.SG 0.0258*** 0.0190** 0.0322*** -0.00216 -0.000988 -0.00179 (-0.46) (-0.19) (-0.62) (-1.84) (0.44) (15.11) CFKNEG -0.00223 -0.00133 -0.00125 -0.00204* 0.000344 0.00187*** (28.41) (27.57) (27.47) (22.43) (21.33) (0.86) CFKPOS 0.0285*** 0.0283*** 0.0285*** 0.0190*** 0.0190*** 0.000612 IK IK IK IK IK IK (1) (2) (3) (4) (5) (6) R-sq N 665 665 665 2069 2069 2069 (6.79) (6.68) (10.51) (6.60) (7.16) (7.66) _cons 0.408*** 0.441*** 0.485*** 0.412*** 0.423*** 0.462*** (-8.89) (1.23) GOV -0.183*** 0.0247 (-0.88) (-2.24) CFKNEGGOV -0.0699 -0.0393** (13.04) (26.07) CFKPOSGOV 0.0655*** 0.0624*** (-11.57) (3.37) State_05 -0.0971*** 0.0382*** (2.54) (-21.92) CFKNEGSTATE 0.0189** -0.122*** (5.18) (7.48) CFKPOSSTATE 0.0538*** 0.0456*** 154 Robustness check - Endogeineity problem R-sq N 527 527 527 1637 527 527 (-1.29) (-1.29) GOV -2.483 -2.483 (-1.91) (-1.91) CFKNEGGOV -1.430* -1.430* (1.40) (1.40) CFKPOSGOV 0.278 0.278 (0.93) (0.93) State_05 3.879 3.879 (2.20) (2.20) CFKNEGSTATE 0.499** 0.499** (3.63) (3.63) CFKPOSSTATE 0.473*** 0.473*** (1.26) (1.17) (0.83) (-2.30) (1.17) (0.83) BETA 0.147 0.151 0.102 -0.122** 0.151 0.102 (-5.20) (-4.28) (-5.32) (-4.45) (-4.28) (-5.32) AGE -0.308*** -0.265*** -0.286*** -0.0834*** -0.265*** -0.286*** (6.37) (6.42) (6.91) (1.09) (6.42) (6.91) SIZE 1.817*** 2.121*** 1.810*** 0.169 2.121*** 1.810*** (-0.81) (-1.99) (-1.56) (-6.27) (-1.99) (-1.56) LEV -0.739 -1.605** -1.159 -2.582*** -1.605** -1.159 (-3.85) (-1.69) (-4.38) (-1.45) (-1.69) (-4.38) L.SG -0.00930*** -0.00929* -0.00874*** -0.0131 -0.00929* -0.00874*** (-0.21) (-4.88) (3.12) (-2.86) (-4.88) (3.12) CFKNEG -0.0184 -0.752*** 0.183*** -0.0603*** -0.752*** 0.183*** (3.14) (1.88) (3.90) (3.66) (1.88) (3.90) CFKPOS 0.0330*** 0.0280* 0.0234*** 0.0153*** 0.0280* 0.0234*** IK IK IK IK IK IK (1) (2) (3) (4) (5) (6) 155 - Classifying SOEs using the threshole of state ownership of 33.15% (-3.39) (-3.86) (-4.05) (-1.43) (-1.58) (-0.93) BETA -0.0406*** -0.0435*** -0.0458*** -0.0122 -0.0148 -0.00895 (1.62) (0.41) (1.32) (4.01) (2.65) (2.03) AGE 0.00397 0.000867 0.00291 0.00758*** 0.00559*** 0.00412** (-8.42) (-6.75) (-7.00) (-7.55) (-4.42) (-5.71) SIZE -0.0342*** -0.0275*** -0.0286*** -0.0254*** -0.0179*** -0.0223*** (5.17) (5.69) (6.39) (2.78) (0.32) (1.05) LEV 0.126*** 0.112*** 0.133*** 0.0400*** 0.00672 0.0217 (3.19) (4.24) (4.30) (-0.88) (-0.33) (-0.34) L.SG 0.0318*** 0.0411*** 0.0414*** -0.00210 -0.000833 -0.000864 (3.75) (6.19) (5.94) (-1.85) (-1.92) (0.61) CFKNEG 0.00172*** 0.00182*** 0.00185*** -0.00959* -0.00622* 0.00559 (30.29) (20.17) (20.12) (114.19) (120.54) (118.68) CFKPOS 0.0305*** 0.0272*** 0.0271*** 0.0193*** 0.0194*** 0.0194*** IK IK IK IK IK IK (1) (2) (3) (4) (5) (6) R-sq N 1350 1350 1350 1384 1384 1384 (12.17) (10.84) (11.25) (9.66) (7.04) (8.50) _cons 0.712*** 0.647*** 0.668*** 0.489*** 0.385*** 0.446*** (-5.09) (2.72) GOV -0.0883*** 0.0425*** (-2.76) (-2.28) CFKNEGGOV -0.138*** -0.0689** (3.71) (2.13) CFKPOSGOV 0.0172*** 0.0697** (-3.55) (2.23) State_03 -0.0351*** 0.0200** (-5.11) (-2.55) CFKNEGSTATE -0.115*** -0.0345** (1.89) (2.13) CFKPOSSTATE 0.00642* 0.0371** 156 - Classifying high or low investment opportunities using quartile (-1.81) (-1.18) (-1.64) (-9.48) (-12.79) (-8.01) BETA -0.0186* -0.0123 -0.0207 -0.0763*** -0.0987*** -0.0634*** (-4.88) (-2.97) (-2.69) (-13.97) (-34.28) (-16.11) AGE -0.0102*** -0.00743*** -0.00565*** -0.0200*** -0.0289*** -0.0187*** (-0.85) (0.27) (-0.63) (-14.40) (-18.88) (-12.11) SIZE -0.00336 0.00126 -0.00229 -0.0523*** -0.0563*** -0.0474*** (5.50) (4.80) (6.74) (-1.00) (-4.72) (-2.33) LEV 0.105*** 0.109*** 0.119*** -0.0133 -0.0724*** -0.0337** (2.75) (2.05) (3.53) (0.55) (1.43) (-0.07) L.SG 0.0258*** 0.0190** 0.0322*** 0.00103 0.00265 -0.000119 (-0.46) (-0.19) (-0.62) (-2.63) (-1.19) (1.35) CFKNEG -0.00223 -0.00133 -0.00125 -0.0217*** -0.00419 0.0131 (28.41) (27.57) (27.47) (-1.18) (-14.61) (-3.72) CFKPOS 0.0285*** 0.0283*** 0.0285*** -0.0148 -0.0749*** -0.0612*** IK IK IK IK IK IK (1) (2) (3) (4) (5) (6) R-sq N 665 665 665 693 693 693 (6.79) (6.68) (10.51) (19.26) (33.44) (17.48) _cons 0.408*** 0.441*** 0.485*** 1.013*** 1.100*** 0.935*** (-8.89) (-2.36) GOV -0.183*** -0.0293** (-0.88) (-4.98) CFKNEGGOV -0.0699 -0.150*** (13.04) (4.08) CFKPOSGOV 0.0655*** 0.225*** (-11.57) (6.00) State_05 -0.0971*** 0.0331*** (2.54) (-10.83) CFKNEGSTATE 0.0189** -0.113*** (5.18) (14.98) CFKPOSSTATE 0.0538*** 0.118*** 157 Results of study 2: Firm’s investment – cash flow relationship in the context of banking system reform in Vietnam Descriptive statistics Correlations BETA 3124 .6683068 .6016663 -4.16368 4.299188 AGE 3124 4.299296 2.659763 0 14 LEV 3124 .5125405 .2216628 .0019807 1.307401 A 3124 1641549 4854095 11665.52 9.05e+07 TOBINQ 3124 1.92319 8.520481 .0228228 231.905 CFK 3124 .1730158 3.887125 -122.0205 116.1839 IK 3124 .1682955 .7922232 -.9330725 24.67087 Variable Obs Mean Std. Dev. Min Max . sum IK CFK TOBINQ A LEV AGE BETA BETA -0.0250 -0.0418 0.0028 -0.0148 0.0316 -0.0550* 1.0000 AGE -0.0783* -0.0363 0.0066 -0.0175 -0.1341* 1.0000 LEV -0.0056 -0.0105 -0.0521* 0.0145 1.0000 SaleGrowth -0.0006 0.0017 0.0020 1.0000 CFKNEG -0.0970* 0.0136 1.0000 CFKPOS 0.1038* 1.0000 IK 1.0000 IK CFKPOS CFKNEG SaleGr~h LEV AGE BETA . pwcorr IK CFKPOS CFKNEG SaleGrowth LEV AGE BETA,star(.01) BETA -0.0250 -0.0418* 0.0028 -0.0148 0.0316 -0.0550* 1.0000 AGE -0.0783* -0.0363* 0.0066 -0.0175 -0.1341* 1.0000 LEV -0.0056 -0.0105 -0.0521* 0.0145 1.0000 SaleGrowth -0.0006 0.0017 0.0020 1.0000 CFKNEG -0.0970* 0.0136 1.0000 CFKPOS 0.1038* 1.0000 IK 1.0000 IK CFKPOS CFKNEG SaleGr~h LEV AGE BETA . pwcorr IK CFKPOS CFKNEG SaleGrowth LEV AGE BETA,star(.05) BETA -0.0250 -0.0418* 0.0028 -0.0148 0.0316* -0.0550* 1.0000 AGE -0.0783* -0.0363* 0.0066 -0.0175 -0.1341* 1.0000 LEV -0.0056 -0.0105 -0.0521* 0.0145 1.0000 SaleGrowth -0.0006 0.0017 0.0020 1.0000 CFKNEG -0.0970* 0.0136 1.0000 CFKPOS 0.1038* 1.0000 IK 1.0000 IK CFKPOS CFKNEG SaleGr~h LEV AGE BETA . pwcorr IK CFKPOS CFKNEG SaleGrowth LEV AGE BETA,star(.1) 158 Test to choose appropriate regression models BETA 0.0626* -0.0826* -0.0560* 0.0996* 0.0387 -0.0750* 1.0000 AGE -0.2137* -0.0617* 0.0927* -0.1051* -0.1199* 1.0000 LEV 0.0410 -0.1453* -0.1459* 0.0368 1.0000 SaleGrowth 0.1870* 0.0110 -0.0223 1.0000 CFKNEG -0.0096 0.8143* 1.0000 CFKPOS 0.1461* 1.0000 IK 1.0000 IK CFKPOS CFKNEG SaleGr~h LEV AGE BETA (obs=3124) . spearman IK CFKPOS CFKNEG SaleGrowth LEV AGE BETA,star(.01) BETA 0.0626* -0.0826* -0.0560* 0.0996* 0.0387* -0.0750* 1.0000 AGE -0.2137* -0.0617* 0.0927* -0.1051* -0.1199* 1.0000 LEV 0.0410* -0.1453* -0.1459* 0.0368* 1.0000 SaleGrowth 0.1870* 0.0110 -0.0223 1.0000 CFKNEG -0.0096 0.8143* 1.0000 CFKPOS 0.1461* 1.0000 IK 1.0000 IK CFKPOS CFKNEG SaleGr~h LEV AGE BETA (obs=3124) . spearman IK CFKPOS CFKNEG SaleGrowth LEV AGE BETA,star(.05) BETA 0.0626* -0.0826* -0.0560* 0.0996* 0.0387* -0.0750* 1.0000 AGE -0.2137* -0.0617* 0.0927* -0.1051* -0.1199* 1.0000 LEV 0.0410* -0.1453* -0.1459* 0.0368* 1.0000 SaleGrowth 0.1870* 0.0110 -0.0223 1.0000 CFKNEG -0.0096 0.8143* 1.0000 CFKPOS 0.1461* 1.0000 IK 1.0000 IK CFKPOS CFKNEG SaleGr~h LEV AGE BETA (obs=3124) . spearman IK CFKPOS CFKNEG SaleGrowth LEV AGE BETA,star(.1) . F test that all u_i=0: F(640, 1834) = 1.30 Prob > F = 0.0000 rho .30326317 (fraction of variance due to u_i) sigma_e .6422438 sigma_u .42371649 _cons .2008878 .1472872 1.36 0.173 -.0879804 .4897559 BETA -.0281792 .027172 -1.04 0.300 -.0814705 .0251122 AGE -.0245311 .0060154 -4.08 0.000 -.0363288 -.0127335 SIZE .0055252 .0116854 0.47 0.636 -.0173929 .0284433 LEV -.0226819 .0775927 -0.29 0.770 -.1748612 .1294973 L1. .0007502 .0014875 0.50 0.614 -.0021673 .0036676 SaleGrowth CFK .0070506 .0034768 2.03 0.043 .0002318 .0138694 IK Coef. Std. Err. t P>|t| [95% Conf. Interval] corr(u_i, Xb) = -0.0486 Prob > F = 0.0011 F(6,1834) = 3.74 overall = 0.0068 max = 5 between = 0.0001 avg = 3.9 R-sq: within = 0.0121 Obs per group: min = 1 Group variable: X_ID Number of groups = 641 Fixed-effects (within) regression Number of obs = 2481 . xtreg IK CFK l.SaleGrowth LEV SIZE AGE BETA,fe 159 Testing investment – cash flow relationship . Prob>chi2 = 0.0000 chi2 (641) = 7.5e+09 H0: sigma(i)^2 = sigma^2 for all i in fixed effect regression model Modified Wald test for groupwise heteroskedasticity . xttest3 F test that all u_i=0: F(640, 1833) = 1.30 Prob > F = 0.0000 rho .30332155 (fraction of variance due to u_i) sigma_e .64205246 sigma_u .42364878 _cons .2011257 .1472434 1.37 0.172 -.0876567 .4899081 BETA -.026626 .0271851 -0.98 0.327 -.0799431 .0266911 AGE -.0244476 .0060138 -4.07 0.000 -.0362423 -.0126529 SIZE .0056091 .0116821 0.48 0.631 -.0173025 .0285207 LEV -.0295671 .0777154 -0.38 0.704 -.1819871 .1228529 L1. .0007476 .0014871 0.50 0.615 -.0021689 .0036642 SaleGrowth CFKSQR .0000497 .0000344 1.45 0.148 -.0000177 .0001171 CFK .0063911 .0035055 1.82 0.068 -.0004841 .0132662 IK Coef. Std. Err. t P>|t| [95% Conf. Interval] corr(u_i, Xb) = -0.0472 Prob > F = 0.0010 F(7,1833) = 3.51 overall = 0.0076 max = 5 between = 0.0002 avg = 3.9 R-sq: within = 0.0132 Obs per group: min = 1 Group variable: X_ID Number of groups = 641 Fixed-effects (within) regression Number of obs = 2481 . xtreg IK CFK CFKSQR l.SaleGrowth LEV SIZE AGE BETA,fe 6 -.1859982 .1269743 -1.46 0.143 -.4348632 .0628667 5 -.171073 .0989869 -1.73 0.084 -.3650837 .0229377 4 -.2880367 .1093619 -2.63 0.008 -.5023821 -.0736913 3 -.3487145 .1096718 -3.18 0.001 -.5636673 -.1337616 2 -.3295833 .1005061 -3.28 0.001 -.5265716 -.132595 X_ID BETA -.0380689 .00255 -14.93 0.000 -.0430668 -.0330709 AGE .0012561 .0009879 1.27 0.204 -.0006802 .0031924 SIZE .0172359 .0013755 12.53 0.000 .0145399 .0199319 LEV -.0625214 .0083003 -7.53 0.000 -.0787897 -.046253 L1. .0006839 .0001478 4.63 0.000 .0003943 .0009735 SaleGrowth CFKNEG -.0049034 .0033463 -1.47 0.143 -.011462 .0016552 CFKPOS .0157487 .0027344 5.76 0.000 .0103894 .0211079 IK Coef. Std. Err. z P>|z| [95% Conf. Interval] Prob > chi2 = 0.0000 Wald chi2(638) = 6753.82 max = 5 avg = 3.870515 Estimated coefficients = 639 Obs per group: min = 1 Estimated autocorrelations = 0 Number of groups = 641 Estimated covariances = 641 Number of obs = 2481 Correlation: no autocorrelation Panels: heteroskedastic Coefficients: generalized least squares Cross-sectional time-series FGLS regression . xtgls IK CFKPOS CFKNEG l.SaleGrowth LEV SIZE AGE BETA i.X_ID i.T_ID, p(h) 160 (-15.43) (-15.80) (-13.93) (-3.37) (-7.30) (-6.26) BETA -0.0403*** -0.0392*** -0.111*** -0.0532*** -0.0278*** -0.0241*** (1.24) (0.59) (8.22) (7.36) (-5.03) (-4.54) AGE 0.00124 0.000582 0.0272*** 0.0277*** -0.00538*** -0.00487*** (-6.06) (-6.39) (-15.67) (-16.75) (6.81) (4.91) LEV -0.0508*** -0.0541*** -0.548*** -0.513*** 0.0672*** 0.0495*** (13.24) (13.40) (0.37) (-0.81) (2.67) (2.95) SIZE 0.0186*** 0.0186*** 0.00110 -0.00205 0.00366*** 0.00430*** (4.56) (4.49) (-0.76) (-4.42) (-0.61) (-0.70) L.SaleGrowth 0.000706*** 0.000695*** -0.00274 -0.0124*** -0.00108 -0.00127 (2.54) (3.17) (9.66) (13.50) (1.76) (2.02) CFK 0.00358** 0.00429*** 0.0512*** 0.163*** 0.00162* 0.00333** IK IK IK IK IK IK (1) (2) (3) (4) (5) (6) . esttab a b c d e f, star(* 0.1 ** 0.05 *** 0.01) . * p<0.1, ** p<0.05, *** p<0.01 t statistics in parentheses N 2481 2481 697 697 1784 1784 (2.79) (2.79) (3.73) (3.00) (5.06) (4.98) _cons 0.268*** 0.268*** 0.358*** 0.264*** 0.439*** 0.434*** (2.46) (-12.48) (0.65) CFKSQR 0.0000298** -0.00361*** 0.0000126 (-14.93) (-17.49) (-7.55) BETA -0.0381*** -0.116*** -0.0258*** (1.27) (14.77) (-3.05) AGE 0.00126 0.0334*** -0.00320*** (-7.53) (-19.97) (5.26) LEV -0.0625*** -0.622*** 0.0476*** (12.53) (1.84) (2.20) SIZE 0.0172*** 0.00842* 0.00314** (4.63) (-2.04) (-0.20) L.SaleGrowth 0.000684*** -0.00770** -0.000341 (-1.47) (0.78) (-1.27) CFKNEG -0.00490 0.0127 -0.00516 (5.76) (9.31) (3.66) CFKPOS 0.0157*** 0.0614*** 0.0110*** IK IK IK (1) (2) (3) . esttab g h i , star(* 0.1 ** 0.05 *** 0.01) * p<0.1, ** p<0.05, *** p<0.01 t statistics in parentheses N 2481 697 1784 (2.99) (2.79) (5.16) _cons 0.287*** 0.288*** 0.451*** 161 Testing impact of banking system reform on investment cash flow relationship (-14.93) (-10.55) (-17.49) (-12.78) (-7.55) (-3.71) BETA -0.0381*** -0.0311*** -0.116*** -0.113*** -0.0258*** -0.0122*** (1.27) (0.22) (14.77) (12.05) (-3.05) (-7.05) AGE 0.00126 0.000175 0.0334*** 0.0331*** -0.00320*** -0.00598*** (-7.53) (-4.72) (-19.97) (-16.08) (5.26) (5.60) LEV -0.0625*** -0.0376*** -0.622*** -0.533*** 0.0476*** 0.0375*** (12.53) (10.36) (1.84) (1.64) (2.20) (0.54) SIZE 0.0172*** 0.0134*** 0.00842* 0.00679 0.00314** 0.000628 (4.63) (5.06) (-2.04) (-0.32) (-0.20) (-1.06) L.SaleGrowth 0.000684*** 0.000684*** -0.00770** -0.00176 -0.000341 -0.00163 (-1.47) (-4.31) (0.78) (-3.34) (-1.27) (-9.73) CFKNEG -0.00490 -0.0962*** 0.0127 -0.0772*** -0.00516 -0.243*** (5.76) (2.00) (9.31) (-0.37) (3.66) (18.17) CFKPOS 0.0157*** 0.0239** 0.0614*** -0.0109 0.0110*** 0.226*** IK IK IK IK IK IK (1) (2) (3) (4) (5) (6) . esttab MH1 MH2 MH3 MH4 MH5 MH6, star(* 0.10 ** 0.05 *** 0.01) * p<0.10, ** p<0.05, *** p<0.01 t statistics in parentheses N 2481 2481 697 697 1784 1784 (2.99) (3.27) (2.79) (2.45) (5.16) (4.70) _cons 0.287*** 0.320*** 0.288*** 0.273** 0.451*** 0.435*** (-1.10) (-10.12) (14.79) BANK -0.00599 -0.226*** 0.0772*** (4.16) (3.75) (9.52) CFKNEGBANK 0.0934*** 0.106*** 0.239*** (-0.92) (1.38) (-16.90) CFKPOSBANK -0.0113 0.0432 -0.217*** 162 Impact of banking system reform on listed state controlled companies’ investment – cash flow relation (0.45) (5.10) (3.33) (4.43) BETA 0.0145 0.120*** 0.0384*** 0.0462*** (3.07) (7.26) (0.52) (0.95) AGE 0.0603*** 0.0318*** 0.00166 0.00301 (1.73) (5.33) (-0.75) (-0.26) LEV 0.242* 0.317*** -0.0292 -0.00988 (1.10) (2.96) (0.99) (2.05) SIZE 0.0158 0.0121*** 0.00399 0.00823** (1.56) (0.43) (-0.26) (-0.51) L.SaleGrowth 0.0165 0.00300 -0.00118 -0.00228 (-11.90) (-8.92) (-2.44) (2.85) CFKNEG -1.066*** -0.750*** -0.0320** 0.274*** (8.27) (54.49) (0.25) (0.40) CFKPOS 1.168*** 3.581*** 0.000882 0.00149 IK IK IK IK (1) (2) (3) (4) . esttab MH1 MH2 MH3 MH4,star(* 0.1 ** 0.05 *** 0.01) (11.38) (1.45) BANK 0.478*** 0.0230 (3.77) (-3.10) CFKNEGBANK 0.348*** -0.309*** (-48.12) (-1.79) CFKPOSBANK -3.408*** -0.0178* N 344 344 353 353 (1.32) (-2.42) (0.97) (0.18) _cons 4.761 -2.169** 0.0694 0.0136 163 Impact of banking system reform on listed state uncontrolled companies’ investment – cash flow relation (-13.53) (-15.32) (6.60) (8.99) BETA -0.0754*** -0.0627*** 0.0152*** 0.0298*** (-3.71) (-15.53) (-37.26) (-33.01) AGE -0.00377*** -0.0130*** -0.0164*** -0.0227*** (-0.77) (-22.51) (4.61) (-0.84) LEV -0.00967 -0.180*** 0.0254*** -0.00776 (5.06) (16.83) (0.52) (-0.01) SIZE 0.00972*** 0.0238*** 0.000553 -0.0000113 (-3.07) (-4.04) (2.26) (2.77) L.SaleGrowth -0.00140*** -0.00453*** 0.00343** 0.00652*** (-26.40) (-16.97) (-2.42) (9.17) CFKNEG -0.213*** -0.914*** -0.00982** 0.0337*** (9.69) (1.92) (0.39) (32.65) CFKPOS 0.0597*** 0.0603* 0.000452 0.337*** IK IK IK IK (1) (2) (3) (4) . esttab MH5 MH6 MH7 MH8,star(* 0.1 ** 0.05 *** 0.01) (17.40) (24.49) BANK 0.123*** 0.0916*** (14.15) (-6.94) CFKNEGBANK 0.777*** -0.0570*** (-0.26) (-32.56) CFKPOSBANK -0.00831 -0.336*** * p<0.1, ** p<0.05, *** p<0.01 t statistics in parentheses N 898 898 886 886 (3.81) (2.06) (2.78) (1.22) _cons 0.402*** 0.242** 0.177*** 0.0587 164 Testing impact of banking system reform on investment – leverage relation (11.12) (-22.19) (9.30) SIZE 0.00968*** -0.0668*** 0.00509*** (2.88) (-0.58) (-2.00) L.SaleGrowth 0.000549*** -0.00192 -0.00284** (4.16) (10.27) (-21.60) BANKLEV1 0.0795*** 1.177*** -0.161*** (-5.53) (-12.45) (16.07) BANK -0.0699*** -0.878*** 0.0819*** (-4.32) (-9.09) (29.79) L.LEV -0.0818*** -1.036*** 0.104*** (3.85) (5.60) (1.50) CFK 0.00431*** 0.0430*** 0.00156 IK IK IK (1) (2) (3) . esttab A B C, star (* 0.1 ** 0.05 *** 0.01) * p<0.1, ** p<0.05, *** p<0.01 t statistics in parentheses N 2481 697 1784 (72.68) (46.74) (62.44) _cons 126.6*** 265.8*** 137.3*** (-3.62) (3.98) (-20.10) (7.87) SIZE -0.0351*** 0.00986*** -0.0203*** 0.00982*** (-10.45) (-0.75) (-2.67) (-0.54) L.SaleGrowth -0.144*** -0.00302 -0.00420*** -0.000997 (4.60) (4.42) (-17.86) (0.28) BANKLEV1 1.656*** 0.173*** -0.326*** 0.00596 (-4.52) (-2.14) (16.01) (2.84) BANK -1.083*** -0.0493** 0.167*** 0.0322*** (-3.79) (10.19) (12.03) (1.20) L.LEV -1.352*** 0.173*** 0.187*** 0.0251 (9.10) (0.23) (-27.39) (-0.32) CFK 0.855*** 0.000558 -0.0755*** -0.000418 IK IK IK IK (1) (2) (3) (4) . esttab D E F G, star(* 0.1 ** 0.05 *** 0.01) * p<0.1, ** p<0.05, *** p<0.01 t statistics in parentheses N 344 353 898 886 (7.33) (9.58) (80.42) (45.27) _cons 177.3*** 88.32*** 158.2*** 131.6***