Negative net leverage policy and cash-holding policy

BỘ GIÁO DỤC VÀ ĐÀO TẠO

TRƯỜNG ĐẠI HỌC MỞ THÀNH PHỐ HỒ CHÍ MINH

BÁO CÁO TỔNG KẾT

ĐỀ TÀI KHOA HỌC VÀ CÔNG NGHỆ CẤP TRƯỜNG

NEGATIVE NET LEVERAGE POLICY AND

CASH-HOLDING POLICY: EVIDENCE

FROM JAPAN

Mã số: E2019.12.1

Chủ nhiệm đề tài: Lý Kim Cương

Tháng 4/2022

TÓM TẮT

A negative net leverage firm can immediately become a zero-leverage firm by repay￾ing their outstanding debt; however, the majority of negative net leverage firms in Japan

still have positive gross debt. This paper investigates the determinants of a negative net

leverage policy. Previous literature argues that zero-leverage is the result of high growth

opportunity. However, by using a sample of Japanese non-financial firms over the period

1991-2015, we find that the driving forces of negative net leverage policy are low growth

opportunity, low default possibility, and high cash holdings. Furthermore, a lower risk￾free rate induces firms to increase cash holding, and therefore decrease net leverage. As

time goes by, negative net leverage firms cease to accumulate cash and gradually repay

debt. We suggest that policymakers improve the investment environment and enhance

the effective allocation of firm funding, especially during a period of low risk-free rates.

Bank health affects a firm’s cash holding - a healthy bank can result in either more (be￾cause of the influential bank power) or less (because of precautionary motive) firm-level

cash holding. Motivated by the contrasting views in the existing literature, this paper in￾vestigates whether bank policy determines firm-level cash policy. Using Japanese firm

data over 2000-2014, we find that the difference in bank health effects stems from the

firm’s investment status. We find that healthy banks induce growing firms to hold more

cash while declining firms hold more cash when borrowing from unhealthy banks. Fur￾thermore, we find that banks with more liquidity also induce their growing borrowers

to have more cash. Our results are robust to the endogeneity of bank selection and new

to the literature that explains the cash holding puzzle. Our study indicates that bank￾firm relationship can serve as an advance-signalling device for a firm’s shareholder￾wealthmaximizing investments

Keywords: net debt, zero leverage, leverage, cash, investment, cash policy, bank-firm

relationship, financial constraint, Japanese banks, bank capital, bank liquidity

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LỜI CẢM ƠN

Để thực hiện thành công đề tài nghiên cứu này, chúng tôi xin chân thành cám ơn các tổ

chúc và cá nhân có liên quan, bao gồm:

- Trường Đại học Mở Tp.HCM, là đơn vị tài trợ tài chính cho đề tài.

- BGH, Phòng Hợp tác-Quản lý khoa học, các đơn vị và các cá nhân trong trường đã tạo

điều kiện cho chúng tôi hoàn thành đề tài nghiên cứu này.

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Mục lục

TÓM TẮT i

LỜI CÁM ƠN ii

THÔNG TIN KẾT QUẢ NGHIÊN CỨU 1

0.1 Thông tin chung . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

0.2 Mục tiêu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

0.3 Tính mới và sáng tạo . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

0.4 Nội dung nghiên cứu . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

0.5 Sản phẩm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

0.6 Phương thức chuyển giao, địa chỉ ứng dụng, tác động và lợi ích mang lại

của kết quả nghiên cứu . . . . . . . . . . . . . . . . . . . . . . . . . . 5

1 Introduction 7

1.1 Motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

1.2 Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

1.2.1 The determinants of negative net leverage policy: New evidence

from Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

1.2.2 Cash policy and the bank-firm relationship . . . . . . . . . . . 11

1.3 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

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MỤC LỤC iv

1.3.1 The determinants of negative net leverage policy: New evidence

from Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

1.3.2 Cash policy and the bank-firm relationship . . . . . . . . . . . 13

2 Back ground of study 15

2.1 Net debt in a bank-finance-oriented civil law country . . . . . . . . . . 15

2.2 A brief description of Japanese main banks . . . . . . . . . . . . . . . 18

3 The determinants of negative net leverage policy: New evidence from Japan 20

3.1 Hypothesis development . . . . . . . . . . . . . . . . . . . . . . . . . 20

3.2 Data and empirical strategy . . . . . . . . . . . . . . . . . . . . . . . . 23

3.2.1 Data and summary statistics . . . . . . . . . . . . . . . . . . . 23

3.2.2 Empirical strategy . . . . . . . . . . . . . . . . . . . . . . . . 27

3.2.2.1 A firm behavior under negative investment environment 27

3.2.2.2 The minimum cash estimation . . . . . . . . . . . . . 28

3.2.2.3 Estimation of negative net debt . . . . . . . . . . . . 29

3.2.2.4 Estimation of debt reduction . . . . . . . . . . . . . 29

3.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

3.3.1 The determinants of NNL and zero-leverage: Single probit esti￾mations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

3.3.2 Endogeneity issues surrounding Table 3.3 . . . . . . . . . . . . 34

3.3.3 Robustness check: Bi-probit estimations . . . . . . . . . . . . . 37

3.3.4 Strategies of NNL firms: How do they behave? . . . . . . . . . 42

4 Cash policy and the bank-firm relationship 44

4.1 Hypothesis development . . . . . . . . . . . . . . . . . . . . . . . . . 44

4.2 Data and identification strategy . . . . . . . . . . . . . . . . . . . . . . 46

4.2.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

4.2.2 Identification strategy . . . . . . . . . . . . . . . . . . . . . . 47

4.2.3 Descriptive statistics . . . . . . . . . . . . . . . . . . . . . . . 48

4.3 Empirical model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

4.4 Empirical analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

4.4.1 Preliminary regression analysis . . . . . . . . . . . . . . . . . 55

4.4.2 Main results: The bank health effect on firms’ cash policy . . . 60

5 Conclusion 65

5.1 Summary of findings . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

5.2 Regulation implication . . . . . . . . . . . . . . . . . . . . . . . . . . 66

5.3 Managerial and institutional implications . . . . . . . . . . . . . . . . 66

Tài liệu tham khảo 68

Phụ lục 79

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Danh sách bảng

3.1 Frequency distributions of leverage status . . . . . . . . . . . . . . . . 25

3.2 Summary statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

3.3 The determinants of negative net leverage and zero leverage . . . . . . . 33

3.4 Robustness check (IV estimation): The determinants of negative net lever￾age and zero leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

3.5 Robustness check (Propensity Score Matching estimation): The determi￾nants of negative net leverage and zero leverage . . . . . . . . . . . . . 39

3.6 Descriptive statistics: Comparison between treated and matching groups 39

3.7 Determinants of negative net leverage: Biprobit estimation . . . . . . . 41

3.8 The behaviors of NNL firms . . . . . . . . . . . . . . . . . . . . . . . 43

4.1 Summary statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

4.2 Summary statistics by growing/declining firms . . . . . . . . . . . . . 52

4.3 Bank effects on cash policy of nonfinancial firms: Preliminary regres￾sion analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

4.4 Bank effects on cash policy of nonfinancial firms: IV-GMM estimation

with sample splitting . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

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Danh sách hình vẽ

2.1 Negative net leverage and zero gross leverage . . . . . . . . . . . . . . 16

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