The impact of geopolitical risks and economic policy uncertainty on the cash holdings of listed securities and insurance companies in Vietnam’s stock market

Abstract

This study focuses on evaluating the impact of geopolitical risk (GPR) and economic policy uncertainty (EPU) on the cash holdings of listed securities and insurance companies in Vietnam's stock market during the period 2014–2023. To clarify the relationship between macroeconomic factors and corporate cash holding strategies (CASH), the study employs panel data regression models (Pooled OLS, FEM, REM) and applies the Generalized Least Squares (GLS) model to address potential deficiencies. Control variables include firm size (SIZE), return on assets (ROA), net working capital (NWC), tangible assets (TANG), and economic growth (GDP).” “The research findings indicate that economic policy uncertainty (EPU) has a positive impact on cash holdings, implying that in an unstable economic policy environment, businesses tend to increase cash reserves to maintain liquidity. However, geopolitical risk (GPR) does not show statistically significant evidence of directly influencing cash holdings. Meanwhile, factors such as firm size (SIZE), net working capital (NWC), and tangible assets (TANG) have a negative relationship with cash holdings, whereas economic growth (GDP) has a positive impact. Return on assets (ROA), however, is not statistically significant.” “Based on these findings, the study offers recommendations for relevant stakeholders. Government authorities should establish stable foreign policies, strengthen international cooperation, and improve a transparent legal framework to mitigate geopolitical risks and economic uncertainty. At the same time, businesses should focus on risk management and adjust financial strategies accordingly to cope with an increasingly volatile economic environment. Investors should diversify their portfolios and equip themselves with in-depth knowledge to minimize risks and optimize returns in an uncertain market landscape.”