Cash Flow and External Financing in The Covid Pandemic Context and Financial Constraints

Abstract

The article examines the impact of cash flow on the need to increase funding in the Covid pandemic context and the financial constraints of listed companies in Vietnam. We build hypotheses based on the self-ranking match theory framework and research overview. We use data from 5894 observations for 2010-2020 and the general regression model - GLS to test the expected hypotheses. The research results show that cash flow significantly influences the external financing needs of the business. In particular, the cash flow impact and increased need for external financing are more evident in financial constraints and the context of the covid pandemic. The study also shows that the group of companies with financial constraints moved to increase funding when cash flow was in short supply during the Covid pandemic. Besides, the high financial leverage ratio in the previous year can be one of the barriers for businesses that want to access a variety of external financing. The study contributes to the analysis and assessment of the problematic situation of listed companies. In the future, this study can be extended when approaching businesses in the financial sector and evaluating other macro factors that can affect the capital sources of enterprises.