**5. Conclusions and Recommendations**

The decision on the cash holding ratio could have a significant impact on firm's performance and value. This study used the threshold regression model of Hansen (1999) to examine the threshold effect of cash holding ratio on the performance of 306 listed non-financial companies in the Vietnam stock exchange market during the period of 2008–2017. ROA was used to represent company performance, and the ratio of money and cash equivalents on total assets (CASH) was used to represent the company's cash holding ratio.

Experimental results showed that the single-threshold effect exists between the ratio of cash holding and company's performance. In addition, the coefficient is positive when the cash holding ratio is less than 9.93%, which means a proportion of cash holding within this threshold could contribute to improvement of company's efficiency. The coefficient is positive but tends to decrease when the ratio of cash holdings is higher than 9.93%, implying that an increase in cash holdings ratio beyond this threshold will further reduce the company's performance. Therefore, this result might conclude that the relationship between cash holding ratio and firm's performance is a nonlinear relationship. These results are consistent with the trade-off theory, in that the optimal cash holding ratio is determined by a trade-off between marginal cost and profit margin of cash holdings (Opler et al. 1999). At the same time, this result is also consistent with some previous empirical research (Azmat 2014; Martínez-Sola et al. 2013; Nguyen et al. 2016). Among the control variables, firm size and leverage have a significant negative effect on company's performance whereas market-to-book value ratio of stocks has a significant positive effect on company's performance.

From the research results above, this study suggested a few recommendations for non-financial companies listed on the Vietnam stock exchange market in deciding the cash holding ratio as follows: Firstly, companies should not hold cash more than 9.93% of total assets. To ensure and improve the company's performance, the optimal range of cash holding ratio should be below 9.93%. Secondly, for companies that currently have a cash holding ratio higher than 9.93%, it is necessary to reduce the cash holding ratio to approach the optimal ratio as discussed above. In order to accomplish this task, it is necessary to identify the factors that affect the motive of holding cash, thereby having specific policies to adjust the cash holding ratio more suitable for each specific group of companies. From this idea, we will conduct research on the factors that affect the cash holding motive for each group of companies at each specific cash holding rate threshold. Hopefully, our next research results will provide practical suggestions in determining the optimal percentage of cash holdings to improve firm's performance and value.

This study has used panel threshold regression by Hansen (1999), that is, for non-dynamic panels, studies can be conducted by using extended threshold panels (for dynamic panels and considering the issue of endogeneity) and for more rigorous results. This would be a worthwhile subject for future research.

**Funding:** This research received no external funding.

**Acknowledgments:** We are grateful to the anonymous reviewers for their very helpful comments and suggestions. **Conflicts of Interest:** The author declares no conflicts of interest.

#### **References**


Harford, Jarrad. 1999. Corporate cash reserves and acquisitions. *The Journal of Finance* 54: 1969–97. [CrossRef]


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