The impact of corporate investment on stock liquidity: Evidence on Viet Nam

Corporate investment affects stock liquidity in the Viet Nam stock market, the distinction between different measures of corporate investment and liquidity, financial comprehension with reference to the variables of stock liquidity, association of corporate investment on stock liquidity

This dissertation aims to explore the impact of corporate investment on stockliquidity in the context of Viet Nam, conducted with a sample of Ho Chi Minh listedcompanies during the period 2006-2017 The results show that there is a positiverelationship between stock liquidity and corporate investment I also find the strongpositive impact on stock liquidity Specifically, a 71.1% or 57,8% growth in corporateinvestment (CAP or CRD) proposes a 100% growth in stock liquidity In reference tothis outcome, one can conclude that corporate investment influences strongly on stockliquidity on Ho Chi Minh stock exchange Undoubtedly, there is a different reaction ofcorporate investment on stock liquidity between various businesses And hopefully thisfinding will be attributable to other studies about the effect of corporate investment onstock liquidity from now and in the future

TABLE OF CONTENTS

LIST OF TABLES

CHAPTER 1 INTRODUCTION1.1 Study overview

Following the fast-paced expansion of the world’s economy, public companies ingeneral and listed companies in the stock market notably in Viet Nam have beenaffirming their role in the worldwide market After approximately 20 years

of operating, the Vietnam stock market has around 1500 listed companies, registered

on Ha Noi and Ho Chi Minh stock exchange Above 1000 different types of publicbusiness that have not been listed; Over 2 million transaction accounts of small and bigtraders That is the reason stock liquidity becomes a considerable concern forinvestors Many surveys propose that the liquidity of stock market can build up thedevelopment of the economy Levine and Zervos (1998) shows that the liquidity ofstock market and banking development have a positive impact on GDP growth Thisstudy aims for discovering the impact of corporate investment on stock liquidity in thecontext of Viet Nam, the degree of its influence How investment decision can affectstock liquidity Therefrom, hopefully we can boost the liquidity of stocks by investing

in assets properly

Liquidity is one of the most essential proportions of the ideal slice of resources.The liquidity capability refers to how quickly can the financial assets be transferredinto cash at anytime without loss of profit Convertible securities can be modified intocash in the stock market at any time traders want, but there is no assurance againstloss The conversion of assets into cash is one of the most fundamental affairs offinancial markets and then boosting liquidity ability at the same time controllingliquidity risk At the present day, given the economic circumstances and inconstancy ofthe stock market indication Components that affect suitable performance of liquidity

in financial markets deserve such consideration Elements like the numbers of stocktraders, the number of days that a particular stock has been traded, and mean dailyvolume of transaction to total stocks issues affect the degree of liquidity

The role of liquidity in micro and macro levels is unquestionable The stockmarket affects economic activities through liquidity Investors always desire a stockthat can be traded at the lowest possible cost (Saeedi and Dadar, 2009) Theconstitutional risk of investment makes investors skeptical Hence, awareness of riskand earnings is highly important for investors Many lucrative investment projectsdemand a long-term commitment to capital, but investors often weigh the pros andcons of losing control to their savings over the long term The absence of liquidity of afinancial asset would be treated as a risk The liquidity market makes the investment

less risky and more appealing, because it grants investors to sell shares comfortably atlow cost when they need cash or want to change their portfolios Simultaneously,companies that like sustainability can raise capital by issuing equity By having theadvantage of the long-term course, investments will be more profitable, marketliquidity improves capital allocation and enhances the prospects for long-term growth

of the economy Moreover, when investments are less risky and more profitable, theliquidity of the stock market will attract more investment Therefore, the relationshipbetween stock liquidity on the stock market and investment in the company is worthtaking into consideration

Strengthening and improving corporate investment plays a major factor inexpanding and shaping businesses, contributing positively to enhancing enterprisevalue Furthermore, most studies have shown that changes in corporate investmentactivities in each country have a strong effect on liquidity (Moonsoo, Wei &Chanyuong Eom, 2015), (Moonsoo, Khaksari & Kiseok, 2018) Liquidity measuresthe length to which any asset can be bought or sold in the market without affecting themarket price of that asset When an investor makes a choice to buy an asset, he or sheneeds to evaluate the possibility of reselling the asset in order to make a profit Thisinfluences the free cash flow that can be received from asset sales, so liquidity is acritical factor used to appraise assets Liquidity covers not only financial assets such assecurities but also the prices of many other assets

Liquid securities are those that are available in the market for easy resale,relatively stable prices over time and high ability to recover the original investment.Thanks to the stock market, investors can transform their own securities into cash asthey want and liquidity is one of the appealing characteristics that dominates theprocurement of investors of a particular stock, and of course it is the bet that they have

to confront as well Liquidity shows that the flexibility and safety of investment capitaland operating market are more dynamic and effective Investors or traders alwaysdemand high liquidity due to the intrinsic risk of investment Thus, insight of risk andalso return on investment has to be really important for investors So the tendency toassess this tricky problem is one of the major concerns for investors

Most of the previous research, using growth in fixed assets and capitalexpenditure (Capex) or growth in total assets and increases in inventory Muñoz(2012), as measures of investment The author also provides stock liquidity measure astrading volume (this measure uses the number of shares traded daily and the totalnumber of outstanding shares of the company) and the volume of transactionsmodified by industry This study is built on the research of Kang et al (2015),concentrating on the impact of corporate investment has on stock liquidity incompanies in the context of Vietnam market by methods of measurement ofinvestment and stock liquidity will be indicated below, conducted with the sample ofcompanies listed on the Ho Chi Minh Stock Exchange from 2006 to 2017, this paperaims for figuring out the connection of two elements in Viet Nam, a developingcountry and the market is less exploited by researchers However, along with theflourishing economy, the advent of listed companies has also escalated immensely

over the years, causing the market’s activities fluctuate constantly Therefore, I chosethis topic to employ and also I have a singular interest in the theme of investmentliterature As far as I comprehend, in Viet Nam, there has not been any related researchdocumented.This study also examines what influence that abnormal corporateinvestment has on stock liquidity and considering this relationship in the condition thatthe company has issued shares and has other financial biding status

1.2 Study goals and questions:

This dissertation inspects and mainly focuses on the relationship of corporateinvestment and stock liquidity At the same time, examine the implication of corporateinvestment along with correlative variables to stock liquidity Thereby, finding outwhich transmission channel in the Vietnamese market that corporate investment has animpact on stock liquidity This study is conducted to provide an appropriate model toexamine the association between these two variables, because it is one of themanagement challenges in the current stock market In order to achieve the aboveresearch goal, the questions need to be justified:

« How does corporate investment affect stock liquidity in the Viet Nam stock market? If

It does, how is the distinction between different measures of corporate investment andliquidity?

« How does stock liquidity change when considering the impact of abnormal corporateinvestment on stock liquidity plus financial constraints?

1.3 Objectives and scope.

• Objective: The impact of corporate investment on stock liquidity in companieslisted on Vietnam’s stock market

• Scope: Companies listed on Ho Chi Minh Stock Exchange (Hose) in the periodfrom 2006 – 2017

1.4 Research method.

Conducting synthesis from reports, scientific papers, scientific journals, andprocessing data through quantitative methods The paper uses a table data regressionmethod with fixed effect control and interactive variables using regression method Inaddition, the research uses interactive variables that represent the interaction betweenstock liquidity on the stock market and company characteristics such as stock issuanceand financial binding

The contents of this study are as the followings:

© Chapter 1 suggests the outlook and introduction of this study and an overall viewpoint

of the thesis

© Chapter 2 presents previous theoretical and research plus empirical evidence about theimpact of corporate investment on stock liquidity And Hypothesize different channelsthrough which investment affects on stock liquidity and the influence of other factors

on stock liquidity

© Chapter 3 introduces research methods, models and data sources used

© Chapter 4 depicts the results of empirical research in Viet Nam from 2006 – 2017

© Chapter 5 demonstrates limitations and relevant debates of the study in Vietnammarket

© Chapter 6 shows conclusion of the study

CHAPTER 2 LITERATURE REVIEW

2.1 Empirical studies on the relationship between liquidity and

corporate investment.

Previous studies have resulted in a heterogeneous relationship between stockmarket liquidity and investment decisions, but this relationship can be interpreted intothree different degrees: neutral, positive and negative relationships

After all of the findings and researches, one can conclude that corporateinvestment contributes to stock liquidity dramatically As I know thus far, thecorrelation between them is an important topic in finance In their seminal paper,Kang, M., et al., (2017) motivate the relation between the two by providing empiricalevidence on the role corporate investment in shaping stock liquidity This analysis

proposes that corporate investment reduces the risk of a firm and that a change in the risk influences the behaviour of a market maker and that leads to an increase in stock

liquidity This paper depicts the association between corporate investment and stockliquidity in the context of Viet Nam over the period 2006-2017

The main idea is to see how a change in the risk of a stock influences stockliquidity I chose only the Ho Chi Minh city stock exchange because I think it couldrepresent well enough the Vietnam current market in some specific ways

The current paper surely offers several contributions to the current literature.Firstly, this should add to the ongoing argument on whether corporate investmentdecision affects stock liquidity This is crucial for understanding on the researchquestion to see if Vietnam’s market is in line with previous studies Secondly, the studyprovide an empirical analysis in the context of emerging markets This is an importantcontribution because it is commonly known that the findings from the context ofadvanced countries might not be able to fulfil for the context of emerging markets.Moreover, since investment decision affects strongly on stock liquidity in the realworld of incomplete market, empirical studies are critical to support this proposition

Some recent literature documents studies specifically the physical link on thesesubjects For staters, (Berk, Green, & Naik, 1999) argued that, businesses that wellfunction tend to be those that have discovered specifically valuable investmentopportunities As they utilized those opportunities, their systematic risk modifies,having said that we can assume optimal corporate investment changes the risk of astock, the link of the risk of a stock and its liquidity also need to be evaluated Kyle(1985) structured a research to explore the informational content of prices, theliquidity characteristics of a theoretical market, and trade motives of insiders Hisresearch addresses that a change in the risk influences the pricing strategy of marketmakers, which leads to a change in the price impact and liquidity of a stock Liquidity

is also a trade motive, which influences stock liquididity (Admati, A R., & Pfleiderer,P., 1988) In their paper, they concluded that both trade motives endogenously aresubject to the risk of a stock, a change in the risk leads market makers to change thestrategy of pricing and this affects the price impact, imposing stock liquidity On top

of that, Kyle (1985) proposes that at the equilibrium, the risk of a stock demonstrates anegative relationship with stock liquidity Furthermore, the recent liquidity literatureprovides evidences on a negative link between the systematic component of the riskand stock liquidity Gotten it all together, without considering the risk of the source orstructure, a change in the risk of a stock negatively co-varies with stock liquidity.

Particularly, this hypothesis comes from this theory: corporate investmentdecisions can be evaluated in a real options context because the decision of how-tocorporate investment changes growth options into assets in place (Berk, et al., 1999)

So, if growth opportunities are finite, corporate investment decision modifies the ratio

of growth options to assets in place that leads to a change in the asset risk of a firm Inaddition, corporate investment decreases the risk of a stock since the new assets areless risky than the options they replace (Carlson et al., 2004) Combining stockliquidity with the risk change affecting corporate investment leads to the assumptionthat corporate investment decisions contribute to stock liquidity through the risk of astock

Also (Kang, M.,et al,2017) depicts a positive relationship between abnormalcorporate investment and stock liquidity They established a link between corporateinvestment and stock liquidity by combining this line of corporate investment study tothe market micro-structure literature and providing empirical evidence on the role ofcorporate investment in shaping stock liquidity and argue that this risk contributes tostock liquidity

2.2 Corporate investment

Corporate investments come in many variations, and they can be classified intoseveral elements They have a huge impact on economic growth and expansion.Literally, investment has always been addressed as a major affair, because it is one ofthe most economically critical variables When we discuss about investing, it isdescribed as a way of using funds or leverage and utilise capital that maybe lyingredundant in bank or to seek a better return on their business money Based upon thisconcept, every utilization of funds for assets or manufacturing exercises will bedeemed as investment All things considered, if there is an investment venture withreturns that exceed their required expenditure, the company would utilize its redundantrevenues to subsidize it If the investment events have taken a lot more than thecompany ‘s revenues, there would be no other way for the company but it has to issuenew stocks or take in more loans For the time being, with the scope of businessactivities and economic affairs grows larger and larger, financial decisions includeinvestment of businesses are at the top of vital and sophisticated topic for the ambition

of gaining the highest returns possible In this interest, all executives seek to find therelationship among those key factors in the companies (Aon & Huang, 2008) Thelevel and degree of investment to distinctive projects are examined as well, withrestricted resources of the company, a good manager should appraise the scale inwhich the company should finance to gain the maximum profit and produce value forthe company (Verdi, 2006)

Carlos et al (2014) analyzed the influence of financial distress on the investmentbahavior of businesses They figured out that the impact of financial distress oninvestment is distinctive in accordance with the investment opportunities available tobusinesses That companies in adversities with fewer investments have the greatestinclination to under invest, while firms in adversities with better circumstances do notshow different investment behavior than healthy companies And the explaination isbased upon the investment opportunities accessible to the company In this manner,firms with excellent opportunities assume that the extra investment can subsidize them

to overcome their adversities, hence they have taken in investment behavior with nodifference corresponding to healthy firms when it comes to having an opportunity toinvest And the reason why businesses with fewer invesetment opportunities have atendency to stay in distress is that the managers only tend to take advantage of projectsthat they deem may prevent the bankruptcy of the company, so they would miss thereal profitable opportunies helping to overcome adversities

The level of investment calculates as follows:

Investment is measured as fixed assets variation between period t and t – 1, the

following:

- NFA: net fixed assets

- D: depreciation expenses

- K: replacement value of capital

According to Lyandres et al (2008), in their seminar paper, they have used a moreextended idea to estimate investment They calculate investment-to-assets as theannual change in gross property, plant, and equipment (item 7) surplus the annualchange in inventories (item 3) divided by beginning-of-year book assets (Item 6) inyear t-1 They used property, plant, and equipment to appraise investment in long-termassets used in facilities over many years such as buildings, machinery, and otherequipment They use inventories to measure real investment in short-term assets used

in a traditional running cycle such as merchandise, raw materials, and work inprogress

In fact, the optimal level of investment has been an argumentative subject amongeconomists

the significance of stock liquidity is positively and substantially correlated withtransactional costs and rewards of traders’ view Robin (2007) expressed transparently,the liquidity of an asset is the ability to sell and obtain that asset in the time andpayment desirable Athough these terms observable and comprehensible, in financialliterature, marketability or liquidity is indicated as a simple but inspicuous concept thatmeans while grasping it is effortless, analyzing and estimating it is really sophisticated.The simplest way to comprehending stock liquidity is the ease of trading a particularstock A more realistic understanding would be when every corresponding transactioncost are minimized that is how the market is considered liquidity In fact, secondarymarket minimizes the cost of capital through the exploration of price and the capacity

to allocate risk while maintaining marketability Liquidity is a intergral matter inpricing assets, which has a significant influence on their prices Liquidity implies thespeed of conversion of assets to cash is fast and the expense of that is at a minimum,which acts as a major role in the captivation of investment The absence of liquiditymeans liquidity risk, this event should have a unfavorable impact on stock prices Asthe majority are risk averters, they prefer a more certain return to an alternative with anequal return but is risky They enjoy investing in securities which possess higherliquidity It really is a main paradigm of financial market (Safari, 2010) also declaredthat for investors to maximize their prosperity, they also have to look over it Inaccordance with Amihud and Mendelssohn (1988), an increase in stock liquidity isfirmly correlated with the increasing of investment in the stock trading market asfinancial assets of the businesses are weaken at a lower cost of capital when theliquidity of the capital market upturns The components that construct liquidityinclude: the cost of finding a partner for doing business with, the risk of residual riskbecause of transaction delay, risk of opposing selection and risks of marketprecariousness Kyle (1985)

Coming from this controversy, many authors have formulated different liquiditymeasurements Each measure focuses on utilizing on aspect of liquidity definition.Liquidity is estimated in numerous countries and all kinds of markets In his paperLesmond (2005) evaluated the impact of legal source and political institutions onliquidity levels shows that countries with unsteady political and legal establishmentshave significantly higher liquidity costs than do countries with healthy political andlegal facilities, even to the prevention of legal origin or insider trading enforcement

He used five commonly known liquidity measures to analyze the effectiveness of theseestimators in computing firm-degree liquidity across countries, employing 31emerging markets The liquidity estimators regarded are Roll’s measure (Roll, 1984),the Amivest measure (Amihud et al., 1997), Amihud’s measure (Amihud, 2002),turnover, and the LOT measure (Lesmond et al., 1999) In general, the resultsrepresents that each measure has their own advantages and disadvantages whenutilized to assess cross-country or within-country liquidity The discovery pointed outthat the LOT measure and Amihud’s measure monopolize Roll’s measure and turnover.Factor analysis reveals that in about half of the 31 markets, there is a single factorwhich speak for the familiar variation in all of the liquidity measures evaluated Thisfactor seem to be most tied in with the Lesmond et al (1999) measure and, to a minorextent, Amihud’s estimate

Specifically, Amihud (2002) measures stock liquidity by price sensitivity Hispaper have shown that past trading volume can provide crucial information about adistinctive stock The larger the ratio of trading volume of a particular stock, Theestimation utilized in his paper is ILLIQ, the percentage of daily return of a particularstock to its dollar trading volume, averaged over a period of time There are of coursefitter and better measurement of illiquidity, using the bid ask spread is an instance, itwould be more effective, but these measure, require microctructure data which are notalways accessible in many stock markets (Amihud, 2012) Trading at a rate profit of 0

is employed by Lesmond et al (1999) or Roll (1984) measures liquidity based on bidand ask price However, as pointed out above, the gap measured between the ask priceand bid price is not fully available So, to appraise stock liquidity in these markets,many researchers have manufactured peculiar measures In that matter, the mostcommonly used measure is to use the trading volume of a stock and consider thisfactor to serve as stock liquidity on the market

The estimations of stock liquidity are as follows:

According to Francisco Muñoz (2012), the author used daily data on thenumber of shares traded and the total number of outstanding shares of the company toestimate liquidity:

Liquidityit =

In which: DQ is the number of trading days quarterly

Siniša Bogdan et al (2012) calculated liquidity by daily trading volume Turnover (VK), by taking stock prices amplified by the daily trading volume of stocks:

-Turnover can also be measured as the total number of trading shares divided bythe total number of outstanding shares, which called the total trading volume(aggregate turnover - AT, Lo et al (2000)) The higher the liquidity, the higher thestock liquidity:

In which: Vit the trading volume of shares of stock i at time t; It is the totalvolume of shares issued by stock i

Ranaldo (2000) uses liquidity ratio (LR2) to estimate liquidity by the marketvalue of stocks and the number of shares that are owned by the company, with (I - Ic)

is the difference between the total number of shares and the number of shares held bythe company:

Amihud (2002) on the other hand uses ILLIQ - the absolute value of the stockreturn on the daily trading volume of that stock, averaged over a period of time:

Where: Ridy is the stock return i on day d of year y, VKidy is the daily tradingvolume, Diy is the number of days that data is available for stock i in year y

This study estimates stocks in the Vietnamese’s market based upon the methodthat Amihud (2002) has used in his research

Table 1 - Summary of the relationship between liquidity and investment according totransmission channels based on previous studies:

Tranmission channels Authors Connection between stock

liquidity and corporate invesment.

Theory related to assets,

pricing, growth options. Gilchrist et al (2005)Polk and Sapienza (2009)

Banerjee and Kremer (2010, 2009)

Francisco Muñoz (2012)Kang,M.,etal., (2017)

A positive relationship (positive)

Theory related to issuance

CHAPTER 3 METHODOLOGY

3.1 Model

Studies and surveys on the stock market have drawn much attention inexperimental and theoretical context over the years In recent times, the interest in thestudy of relationships may exist between liquidity on the stock market and otherfactors in real economy is growing more and more On a macroscopic degree, studies

of Kaul and Kayacetin (2009), Beber et al (2010), and Naes et al (2011) provideevidence of a positive relationship between market liquidity stock market and realeconomy expressed through GDP and investment On a microscopic level, the impact

of liquidity on investment decisions of businesses has been studied by using severalfactors such as stock issuance (Butler et al., 2005; Gilchrist et al., 2005; Lipson andMortal, 2009), leverage (Bharath et al., 2009; Lesmond et al., 2008), and firmperformance (Fang et al., 2009) However, studies focus on the influence of corporateinvestment on stock liquidity are not that many

This study is built upon research by Kang,M.,et al., (2015) aiming to provide anevidence of the relationship between corporate investment and stock liquidity.Specifically, I study this connection by employing panel data of listed companies on

Ho Chi Minh stock exchange, using annual data from 2006 to 2017

Models for estimation the correlation of stock liquidity and corporate investment is

as follows:

γ4TNVi,t-1 + γ5VOLi,t-1 + γ6RETi,t-1 + γ7CBi,t-1 + ηi,t (1)

In that respect:

- i represents the company, t represents the time (year) of measuring

- The variables of stock liquidity (AMH) and investment (INV) are calculated according

to the measurement of Kang,M.,etal., (2018)

- AMH is the average Amihud’s (2002) illiquidity measure, which is the logarithm of anabsolute daily return scaled by daily dollar trade volume along with corporateinvestment as a main independent variable along with several stock liquiditydeterminants such as past stock liquidity and stock characteristics

Amihud (2002) = (1/ Didy ) * ∑ (Ridy / VOLDidy)

Where Riyd is the absolute stock return of firm i on day d of year y; VOLDiyd is thetrading volume of firm i on day d of year y and Diy is the number of days withavailable data for firm i in year y.

- The variables of investment (INV) and the variables that show the liquidity ofcorporate stocks (Liquidity) are calculated according to the measure approach ofKang,M.,et al., (2017)

- INV can be CAP (or CRD) is capital expenditure (plus R&D), scaled by year assets

beginning-of-According to the literature, corporate investment and stock liquidity (Kang,M.,etal.,2015) LAMH, SIZE, PRC, TNV, VOL, RET,CB is the control variables of themodel, specifically as the followings:

© LAMH is past AMH measured over one year after the previous fiscal year ends

© SIZE is the logarithm of market capitalization in the month that the fiscal year ends

© PRC is the logarithm of a stock price in the year that the fiscal year ends

© TNV is the average of the logarithm of daily turnover in the year that the fiscal yearends

© VOL is the logarithm of the standard deviation of daily stock return in the year that thefiscal year ends

© RET is a stock return in the fiscal year

© CB is cash balance, scaled by beginning-of-year assets

3.2 Developing research data and research variables:

3.2.1 Research data

Data collection criteria used are the number of years of observation for eachcompany at least 5 years This criterion comes from a requirement about the timeseries in a table data structure

Observation sample includes yearly data of 270 listed companies on Ho Chi Minhstock exchange (HOSE) Financial data was collected on a yearly basis according tostoxplus data of listed companies during the 2007-2016 period Data was obtainedaccording to the method of sampling all listed companies on HOSE, excluding somenewly listed companies or data not fully provided and some companies are delisted oracquired

3.2.2 Method of measuring investment

CAP is my main explanatory variable and represents corporate investment It iscommonly used in the corporate investment literature As an alternative measure, Iemploy a broaden definition for corporate investment, CRD, which is Capitalexpenditure (plus R&D), as used by Kang, M., et al (2017) Both measures are scaled

by beginning-of-year book assets (Item 6) in year t-1

3.2.3 Method of measuring stock liquidity

As indicated above, there are numerous ways of computing stock liquidity, Inwhich the popular method is to use the trading volume (trading volume) and considerthis factor to be a representative of the liquidity of stocks (Lesmond, 2005)

This paper uses Amihud (2002) because which is easily obtained from daily stockdata for long time series in most stock markets

Where: Ridy is the stock return i on day d of year y, VKidy is the daily tradingvolume, Diy is the number of days that data is available for stock i in year y

3.3 Expected trend of independent variables and control variables:

Independent

and control

variables

CAP (-) Corporate investment has a positive correlation

with stock liquidity, depicting the higher corporateinvestment is, the higher stock liquidity

CRD (-) A more broaden definition of corporate

investment It is expected to have a positivecorrelation with stock liquidity, the higher it is, thehigher stock liquidity

CHAPTER 4 RESULTS4.1 Descriptive statistics and correlation matrix

Table 1 presents descriptive summary statistics for the dataset A measure of stockliquidity is AMH, the logarithm of the Amihud (2002) daily illiquidity measure which

is an absolute daily return scaled by daily dollar trade volume measured over one yearafter the fiscal year ends AMH varies from -11.99319 to 3.989574 CAP (or CRD) is

my main explanatory variable for corporate investment It is widely employed in theinvestment literature To be clearer, CAP (or CRD) is capital expenditures Item 128

(plus R&D, item 46), scaled by beginning-of-year book assets (Item 6) in year t-1.

Corporate investment has a mean of 0667036 for CAP (and 0.1375123 for CRD)which fluctuates from -.7188937 to 8.155383 (from -.6905475 to 8.254021 for CRD) I

use several control variables following Kang, M., et al (2017) such as TNV, VOL, PRC, and past AMH, measured in year t-1 TNV is the logarithm of yearly turnover, defined

as the ratio of trade volume to a number of outstanding shares VOL is the logarithm of the standard deviation of daily stock returns PRC is the logarithm of a stock price.

SIZE is the firm size defined as the logarithm of capitalization in the fiscal year RET

is a stock return over the fiscal year We also add CB to capture the effect of assetliquidity, as shown in Gopalan et al (2012) CB is cash balance (Item1), scaled bybeginning-of year assets

Table 2 presents correlations among variables AMH is fairly consistent with anassociation of 0.6818 with past AMH Although it was not as high as expected,because based upon the previous study, it has about 0.919 but considering this studyusing panel data over 1 year It is not so far-fetched that it only has a correlation of0.6818 Both CAP and CRD is weakly correlated with AMH, CAP shows an

association of -0.0229 while CRD depicts a correlation of -0.0281 CAP and CRD are

firmly correlated with each other with an association of 0.9008 Next, the corporateinvestment measures show a positive relation with SIZE and CB This is highlypersistent with the corporate investment literature Finally, CAP as well as CRD arepositively correlated with PRC, while demonstrating a negative correlation with TNVand VOL

4.2 Empirical results

4.2.1 Main results

Table 3 displays the interaction between corporate investment and stock

liquidity examined based upon model (1) The results show that there is a persistence

between the results according to 2 methods of measurement of corporate investmentwhich is negative with AMH, this result is showing that corporate investment is infavour of stock liquidity in the Viet Nam stock market This is exhibited by corporateinvestment variable coefficients, showing CAP -0.711 and CRD -0.578 with the