Cash conversion cycles and financial flexibility under economic shocks: evidence from emerging markets

The disappearance of investment-cash flow sensitivity under monetary policy surprises: evidence from an emerging market

This paper examines how monetary policy surprises (MPS) affect investment–cash flow sensitivity (ICF) among Vietnamese listed firms during 2010–2023, with a particular focus on ownership-based heterogeneity in monetary policy transmission. Vietnam provides a unique setting due to its bank-based financial system, dominant state ownership, and transitional market structure, which together generate heterogeneous financing responses to MPS. We employ firm-level panel regressions with multiple fixed effects and interaction terms to examine how MPS affect ICF across ownership structures. To address endogeneity concerns, the study applies instrumental-variable techniques to identify exogenous MPS. The results suggest that increases in MPS weaken, and in some specifications eliminate, ICF at the aggregate level. However, state-owned enterprises (SOEs) remain dependent on internal funds, indicating persistent financing rigidities and the continued presence of ICF, consistent with the pecking order theory. In contrast, foreign-owned firms exhibit no significant ICF, suggesting that non-state and foreign firms are better able to leverage lower interest rates to obtain external capital. Additional analysis shows that firms increase cash holdings and reduce financial investments following MPS, reflecting a short-term “wait-and-see” response, whereas SOEs and foreign firms do not. The findings suggest that policymakers should maintain a balanced and transparent monetary policy stance to improve the effectiveness of liquidity transmission and reduce financing frictions among non-state firms. For corporate managers, the results highlight the importance of liquidity management and flexible financing strategies when responding to unexpected monetary shocks. This study extends the traditional investment–cash flow sensitivity (ICF) framework by treating monetary policy surprises as exogenous liquidity shocks and provides new firm-level evidence on how ownership structure shapes monetary policy transmission in an emerging market context.

Cash holdings in an emerging market technology sector: evidence from BIST firms within the trade-off and pecking order frameworks

Shocks and stability: structural break analysis of non-performing assets and profitability in Indian banking

The present paper aims to investigate the relationship between non-performing assets (NPAs) and profitability in Indian commercial banks. Focusing on the major economic disruptions, namely, the global financial crisis, demonetization and the COVID-19 pandemic, it examines their role in structurally reshaping the NPA-profitability nexus. Our dataset comprised a balanced panel of 30 public and private sector commercial banks in India covering the period from 2004 to 2024. We applied Bai–Perron multiple breakpoint tests and Chow tests to identify regime shifts. Static panel regressions with Heteroskedasticity and Autocorrelation Consistent-corrected ordinary least squares and dynamic system generalized method of moments (GMM) estimations are employed to address heteroskedasticity, autocorrelation and endogeneity. The model incorporates bank-specific factors, market concentration indicators, macroeconomic variables and an interaction term between inflation and broad money (BM). The findings reveal multiple statistically significant structural breaks corresponding to major economic shocks. NPAs consistently exert a significant negative impact on profitability across all regimes, while bank size positively influences return on assets, particularly during crisis periods. Market concentration yields mixed and regime-dependent effects. The interaction between inflation and BM significantly moderates profitability during transitional phases, highlighting the role of inflation-adjusted liquidity conditions in shaping bank performance. The findings suggest that bank managers should strengthen credit risk monitoring and adopt proactive asset quality management, especially during periods of inflationary liquidity expansion. The policymakers and regulators can benefit from implementing countercyclical capital buffers and dynamic stress-testing frameworks tailored to structural shocks. However, our results should be interpreted with caution as we excluded foreign banks from our dataset and focused solely on Indian commercial banks, which may limit cross-country generalizability. Future research could extend the framework to comparative emerging-market settings. To the best of our knowledge, this study is the first attempt to integrate structural break analysis with dynamic GMM estimation and to introduce inflation-adjusted liquidity as a moderating mechanism in the NPA-profitability relationship in an emerging economy context.

Discussion Papers In Economics And Business

Dynamic Decision-Making on Trade Receivables under COVID-19: Moderating Roles of Firm Characteristics in an Emerging Market

Trade credit management is a critical financial decision that firms must continuously recalibrate in response to systemic risk. This study examines how the COVID-19 pandemic altered this decision process by analyzing its impact on the speed at which firms adjust trade receivables toward their target level. Using the Dynamic Panel Fractional estimator on an unbalanced panel of 583 non-financial firms listed on the Vietnamese stock market over 2015–2024, the study documents that the COVID-19 pandemic significantly increases the speed of trade receivables adjustment. This acceleration reflects stronger credit risk avoidance incentives and intensified liquidity pressures during periods of severe macroeconomic uncertainty. Furthermore, the analysis shows that financial leverage and state ownership mitigate the COVID-19-induced increase in adjustment speed, whereas board size amplifies it. These findings provide evidence that capital structure and ownership act as structural buffers that dampen crisis period adjustment while board governance serves as an enabling mechanism that strengthens firms’ capacity to respond to heightened credit risk. Overall, the results extend the dynamic trade-off theory of trade receivables to the context of systemic shocks and offer practical implications for designing more flexible and risk-aware trade credit policies in emerging markets.

Revenue Diversification Through Non-Interest Income and Bank Performance in European Banking

This paper examines the relationship between revenue diversification, profitability, and risk in European banks, with particular emphasis on the structural break induced by the COVID-19 shock. Using quarterly supervisory data from the European Banking Authority (EBA) over the period 2016Q1–2024Q4, we distinguish between pre- and post-pandemic regimes and estimate dynamic fixed-effects models that account for unobserved heterogeneity and persistence in bank performance. The results reveal a pattern consistent with regime dependence. Descriptive (quintile-based) comparisons suggest that banks with greater reliance on non-interest income tended to report higher profitability prior to COVID-19, although data limitations prevent us from confirming this pattern in a full multivariate regression for the pre-COVID subsample. In the post-COVID period, once bank and time fixed effects, persistence, and balance-sheet characteristics are properly controlled for, revenue diversification does not exert a statistically significant effect on either profitability or earnings volatility; this result is robust across bank fixed effects only, two-way (bank and time) clustered, and one-way (bank) clustered specifications. We show that diversification is systematically associated with differences in bank size, capitalization, and lending intensity, indicating that income structure is closely linked to underlying business model characteristics. These findings suggest that the observed diversification–performance relationship largely reflects cross-sectional heterogeneity rather than a stable causal effect. Overall, the evidence indicates that revenue diversification does not provide a consistent improvement in risk-adjusted performance in European banking. Instead, performance and risk dynamics are primarily driven by balance-sheet composition and persistence. The results highlight the importance of accounting for structural heterogeneity and macroeconomic regimes when evaluating the role of non-interest income in bank performance.